5 ms·

Rent prices in the Bay Area, Seattle, LA, NYC, and other high minimum wage cities beg to differ. As a percentage of monthly minimum wage earnings I'd bet rent c

Rent prices in the Bay Area, Seattle, LA, NYC, and other high minimum wage cities beg to differ. As a percentage of monthly minimum wage earnings I'd bet rent comes out as higher in high minimum wage cities than low wage cities.

stormbrew 4y ago
Now control for median wage (which is pretty much completely unaffected by a $5-10 spread of minimum wage but is drastically affected by high wage earners) and land use policies, see if the correlation holds.
lesuorac 4y ago
An x% increase in minimum wage is correlated with an <x% inflation [1]. This is also trivial to show as the cost of a good is rarely majority labor (even trucking is majority diesel) so if a $9 shipment is $1 profit, $4 gas, $2 labor, $2 depreciation a 10% increase in labor (to $2.2) only moves the overall cost to $9.2 is a 2% increase. But even if a good was majority labor, a total cost of $9 with $8 labor becomes $9.8 which is still less than 10%. Obviously also goods produced by labor above the minimum wage (ex. plumbers) isn't affected by a change in the minimum wage. [1]: https://ftp.iza.org/dp1072.pdf https://ftp.iza.org/dp1072.pdf
somethoughts 4y ago
Its been my tangential and perhaps unpopular observation that in high COL areas where there's a high minimum wage/high salaries - there's an increasing benefit to RV/apartment arbitrage. Basically take benefits of the high minimum wage that was meant to address housing costs/RV camping but live in an RV/couch surf/double up a single family during the week anyways. There are stories/Youtube videos of of techies living the RV life or multiple roommates to benefit from this arbitrage. To be honest if you are single maybe the tradeoffs aren't that bad. Also there's also these challenges apply to "self-employed contractors" as well. https://www.theguardian.com/technology/2019/may/07/the-uber-drivers-forced-to-sleep-in-parking-lots-to-make-a-decent-living https://www.theguardian.com/technology/2019/may/07/the-uber-...
- gbronner 4y ago
  The big arb is living with your parents. Bank high salaries and pay little or nothing in rent. Great way for coastal elites to effectively pass money to their kids
dredmorbius 4y ago
At least as indicated by homelessness rates, this appears to be the case. https://homelessnesshousingproblem.com/images/rent.png https://homelessnesshousingproblem.com/images/rent.png From: https://homelessnesshousingproblem.com/ https://homelessnesshousingproblem.com/ Recent HN discussion: https://news.ycombinator.com/item?id=30708256 https://news.ycombinator.com/item?id=30708256
klyrs 4y ago
Is the rent a function of minimum wage, or is it a function of land prices? Because it's homeowners, landlords, and firms who use real estate as an investment vehicle who are driving up the land prices and also setting rents. You and I can negotiate a higher wage based on cost of living, and then participate in that bubble. Somebody making minimum wage, not so much.
- dcolkitt 4y ago
  They’re both a function of general anti-market policies of their local government. The City government of San Francisco opposes free markets in both labor and housing. Therefore it has a gigantic housing shortage because developers are shackled from meeting demand. That same anti-market outlook also leads lawmakers to thinking workers are incapable of negotiating their own fair wages, and hence they set very high minimum wages. Homeowners and landlords in Houston also use housing as an investment. However the cost is not nearly anywhere as high because the local government in Houston is much more friendly to free market policies towards property developers.

stormbrew 4y ago

Now control for median wage (which is pretty much completely unaffected by a $5-10 spread of minimum wage but is drastically affected by high wage earners) and land use policies, see if the correlation holds.

lesuorac 4y ago

An x% increase in minimum wage is correlated with an <x% inflation [1]. This is also trivial to show as the cost of a good is rarely majority labor (even trucking is majority diesel) so if a $9 shipment is $1 profit, $4 gas, $2 labor, $2 depreciation a 10% increase in labor (to $2.2) only moves the overall cost to $9.2 is a 2% increase. But even if a good was majority labor, a total cost of $9 with $8 labor becomes $9.8 which is still less than 10%. Obviously also goods produced by labor above the minimum wage (ex. plumbers) isn't affected by a change in the minimum wage. [1]: https://ftp.iza.org/dp1072.pdf https://ftp.iza.org/dp1072.pdf

somethoughts 4y ago

Its been my tangential and perhaps unpopular observation that in high COL areas where there's a high minimum wage/high salaries - there's an increasing benefit to RV/apartment arbitrage. Basically take benefits of the high minimum wage that was meant to address housing costs/RV camping but live in an RV/couch surf/double up a single family during the week anyways. There are stories/Youtube videos of of techies living the RV life or multiple roommates to benefit from this arbitrage. To be honest if you are single maybe the tradeoffs aren't that bad. Also there's also these challenges apply to "self-employed contractors" as well. https://www.theguardian.com/technology/2019/may/07/the-uber-drivers-forced-to-sleep-in-parking-lots-to-make-a-decent-living https://www.theguardian.com/technology/2019/may/07/the-uber-...

gbronner 4y ago
The big arb is living with your parents. Bank high salaries and pay little or nothing in rent. Great way for coastal elites to effectively pass money to their kids

dredmorbius 4y ago

At least as indicated by homelessness rates, this appears to be the case. https://homelessnesshousingproblem.com/images/rent.png https://homelessnesshousingproblem.com/images/rent.png From: https://homelessnesshousingproblem.com/ https://homelessnesshousingproblem.com/ Recent HN discussion: https://news.ycombinator.com/item?id=30708256 https://news.ycombinator.com/item?id=30708256

klyrs 4y ago

Is the rent a function of minimum wage, or is it a function of land prices? Because it's homeowners, landlords, and firms who use real estate as an investment vehicle who are driving up the land prices and also setting rents. You and I can negotiate a higher wage based on cost of living, and then participate in that bubble. Somebody making minimum wage, not so much.

dcolkitt 4y ago
They’re both a function of general anti-market policies of their local government. The City government of San Francisco opposes free markets in both labor and housing. Therefore it has a gigantic housing shortage because developers are shackled from meeting demand. That same anti-market outlook also leads lawmakers to thinking workers are incapable of negotiating their own fair wages, and hence they set very high minimum wages. Homeowners and landlords in Houston also use housing as an investment. However the cost is not nearly anywhere as high because the local government in Houston is much more friendly to free market policies towards property developers.