Monday, December 20, 2004

Living Wage: Job Gentrification

The problem with “Living Wage” proposals is not that they are immoral. They are illogical! See for example, this, or this, which points to living wages that exceed $20/hour.

Government cannot mandate some prices in a market; it’s all or nothing.

Prices have two functions:
· they tell us how much things are worth (static)
· they give signals about the value of investment, effort, and entrepreneurship (dynamic).

The proposal of "living wage" zealots is this: governments, or corporation, would be forced to pay a “living wage,” based on a Living Income Standard, or LIS.

The problem is that economic forces are like hydraulic pressures: you can redirect them, but you can’t make them go away.

There are really two kinds of difficulties--
1. job gentrification
2. budget pressures

1. “Gentrification” happens in poor neighborhoods when an area is more attractive, because of location or amenities. Middle-class people move in, rents are driven up, and poor people have to move out. Demand effect.

Flip side, just as bad, on the supply side for marginal laborers. If you raise pay from $6.00 / hour to $14.00 / hour or more (why not abolish gravity, while we are at it?), poor people are going to be driven out. Right now, if a job opening is announced at a university for housekeepers, there are 10 or more applicants, and that is for a very low rate of pay.

But everyone who applies is economically marginal. History of firings, periods out of the work force, little relevant experience, that sort of thing. How about if the job paid $14 / hour? Hundreds of applicants, and many of them are NOT economically marginal. Over time, all of the economically marginal people, with problems with absenteeism, punctuality, health difficulties, will be squeezed out. “Living Wage” will not be enjoyed by those now working at minimum wage, but by those whose skills can command that wage in the marketplace.

So, if "gentrification" is so bad, for buildings, why is it okay for workers?

2. Budget pressures: schools, universities, local governments all want to provide better services that cost less. Pressures to contract out, substitute away from expensive labor. Problem with contracting out is that it substitutes a temp worker, with no benefits, for a full time worker with decent benefits. Much cheaper to the employer, and they can fire them anytime and sign a new contract.

If Things are so Bad, Why is Everyone Trying to Move Here?

North Carolina has experienced the largest population growth, largely as a result of immigration, legal and illegal. Since 1994, the state population increased 74 percent; Nevada, 60 percent; and Kansas, 54 percent.

Six of the 10 fastest-growing Hispanic populations in the United States are in North Carolina, including Hickory at No. 1. Charlotte is fourth, Rocky Mount sixth, Greenville seventh and the Triangle eighth. Those regions offer jobs in furniture factories, textile mills and farms that immigrants can step right into. ``I think it's just a very opportune place and word has gotten out,'' said Claudia Main, who helps run Hickory's Community Relations Council. Pouring a foundation or working a loom in the Triad is better than selling coffee beans for 15 cents a pound or working for a fruit company making a dime an hour somewhere in Latin America, said Rafael Ruano, who moved to High Point from Costa Rica four years ago. ``The growers live in poverty in those countries,'' Ruano said. ``The life expectancy is very low.''

Not true that we need to pay more because we have so many poor people. In fact, we pay so well that poor people come here from all over the world!


Anonymous said...

What's wrong with gentrification exactly? I followed the link you provided, so I have now brushed up on my pseudo-marxist-bullshit patois, but I still don't see what's wrong with gentrification. As far as I can tell, it was a Bad Thing for affluent people to move to the suburbs in the '50s, and it's a Very Bad Thing for their grandkids to move to the cities now.

The only lesson I can discern is that the middle class just sucks, perhaps because it annoyingly keeps getting in the way of the great class war between the revolutionary vanguard and the forces of reaction.

The rest of your post is darn good. But I do think you ought not to compare a pure market force like gentrification to the latest bit of policy sludge from the social-planning crockpot.

Mungowitz said...

Sure. I should try to be clearer.

1. I *like* gentrification. A lot. It means that property is going up in value, and that can only mean that entrepreneurial activity is creating value in the economy. Someone is getting wealthier, wanting to buy property, and someone else is building, or creating, local assets that make property worth buying. Good all around.

2. But the bedwetset who whine about living wages are exactly those who mostly whine about real estate gentrification. Why don't they see that the same thing is going to happen? So, *IF* you think gentrification is bad, you should think that living wages are bad, and for the same reason.

3. I don't mean to say that if you think gentrification is good, then you should like living wages, of course. Gentrification is the product of market forces, and creating actual value. Living wages are a draconian, foolish, and ultimately self-defeating attempt to suppress those same market forces.

Anonymous said...

ugh..."Market Forces". Haven't we done away with that canard yet? It's at the same level of explanatory helpfulness as "act of God" was for people in the dark ages (which itself apparently still has force). Both require an equal amount of faith in mystical forces (not that I'm against mystical forces, but why pick some that unequally distribute goodies and power?). Bottom line is that it's a way to avoid responsibility for the world and its inhabitants. People want to kick the poor out of their neighborhoods and into more dangerous slums? Market forces, obviously - must be a good thing. People want to increase the standard of living for a few (obviously not all, since the living wage campaign is still a basic acceptance of a competition-based economy) people at the lower end of the job spectrum by giving them enough to live on and be reasonably healthy? Oops, interruption of market forces--must be a bad thing.

In a way, you must believe in the market forces in order to stay a Libertarian. Otherwise you're just a jerk content to let power operate in the world unchallenged. The more dogmatic the faith, the less cognitive dissonance—and personal suffering—you'll have when you see the miserable conditions under which the majority of the world's population lives. They just haven't been converted, you'll say.

Anonymous said...

Why waste your time railing against those evil market forces when what's really keeping people down everywhere is the much more insidious unseen "force" called gravity?

But you're right--we members of the VRWC really do propagate the myth of "market forces" not because we use the term as a shorthand for "the results of voluntary exchange among independently acting individuals each seeking his own betterment" but because it's a useful way to enrich ourselves at the expense of the world's poor. Gadzooks but you're a clever person to have found us out!!