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February 23, 2012

How to Kill a City

Officials in New York want to raise the minimum wage:

The State Assembly speaker, Sheldon Silver, and Mayor Michael R. Bloomberg recently announced that they wanted to raise the state’s minimum wage to $8.50 an hour, or roughly $17,000 a year. It would be a 17 percent increase, and the first since the previous federal increase, three years ago. “People who work full time should not be poor,” Mr. Silver said, arguing that the current minimum wage was too low for survival.

There is little doubt about what this measure will do. It will kill jobs, and it will raise operating costs, which will be passed onto consumers. That will then raise the threshold of what constitutes a living wage, which will lead to renewed calls to raise the minimum wage. Meanwhile, as low-wage jobs disappear, more and more people will come to rely on public assistance, and fewer immigrants will take those crucial first steps on the jobs ladder. New York City will become ever more dependent on Wall Street, whose outsize fees and salaries will be the only possible source of revenue to underwrite an increasingly creaky and fragile economy.

Via Meadia has a suggestion: The city, and the state, could get a lot more done if it spent time thinking about how to cut the costs that the poor have to pay to survive, and about how to facilitate job growth by cutting regulatory red tape. (Consider Texas, where workers making the minimum wage—roughly $14,500 per year—live as well as New Yorkers making double that.)

True, if politicians took our suggestion, they wouldn’t be able to bask in the warm glow that comes from raising the minimum wage. But they would put the state on a more sustainable footing and do a lot more for the poor.

 

Posted in Blue Social Model, Economics & Business, Politics, Quick Takes
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  • Jim.

    One thing that’s always baffled me…

    If cities are so much more “efficient” than the suburbs, why do urban residents have to pay so much more, to get so much less of basics like shelter, food, clothing, and the rest?

    If someone’s seeing economic advantage from a city, it’s certainly no one in the 99%.

  • BigFire

    Your suggestion is too sensible. No where for the plutocrats to plunder.

  • LarryD

    Jim, cities used to offer a big advantage in communication and transportation, as well as having a large customer market close to businesses. Nowdays, not so much, and the urban elite want all those dirty jobs banished, the city should be only for them and the people who serve them.

  • Anthony

    There is little doubt….In economics it’s called the multiplier effect. Also, local market factors as well as low-cost Sunbelt nonunionized commercial activities vis-a-vis unionized Northeast mitigates comparative costs – yet living costs for working poor, a policy discussion warranted (then perhaps we can move the 49.5% – 2009 data – of Americans unable to pay federal income taxes back onto the rolls).

  • Jacksonian Libertarian

    Minimum wage laws are blatant interference into the labor market, by the Government Monopoly which has already proven that it is incompetent to pick winners and losers. The Government Monopoly should be limited, and absolutely prevented from mucking about with the efficient operation of ANY market.

  • Jim.

    LarryD-

    Honestly, I suspect that with the Internet, ultra-dense urban centers are becoming obselete. Living there will be more a matter of taste than necessity, driving people to leave. Suburbs, on the other hand, will probably continue to expand, with regions dense enough to hit “critical mass” of local customers flourishing.

    Rural areas in previously rural economies will continue to shed population as farms continue to automate, but counterpressure in the form of people who prefer rural surroundings may actually increase their population, especially in advanced countries whose agriculture is already massively automated.

    That’s just my prediction, anyway

  • LarryD

    The strongest thing driving people away from urban centers is bad government.

    Silver and Bloomberg are either deluded or lying, it’s long been established that minimum wage laws abolish the jobs below the minimum, not raise wages paid. IIRC, they minimum wage laws were first demanded by unions to outlaw their cheaper competition. Which were usually minorities. I believe MW laws still have a disproportionate impact, but no one has dared to call them racist. But they are.

  • Wayne Lusvardi

    Contrary to half-truths by both liberals who believe the minimum wage is a poverty wage or conservatives who believe it creates more unemployment and sends jobs overseas, at least in California minimum wage is a ticket to enjoying more disposable income than the median wage earning family — not through the mandated boost in wages, but because the minimum wage opens the door to myriad welfare programs paid for by tax dollars. Minimum wage is a ticket to qualifying for a number of aid programs that boosts a family’s expendable income to almost 25 percent more than a California family earning the median income who do not qualify for any income assistance or tax credits.

    A working family of four with one wage earner at $8 per
    hour in California has 23 percent more expendable income, after receiving an earned income tax credit, food stamps, free school lunches, Medicaid and Section 8 housing assistance, than the same family earning the median income of $61,154 ($28 per hour) where an employer pays for the majority of medical insurance costs.

    A provisional conclusion is that minimum wage in California is an annual winning lottery ticket not only into the middle class but a big leap-frog over the working class one earner family.

    Source:
    http://www.calwatchdog.com/2010/11/29/ca-freebies-enrich-low-wage-workers/

  • La Marque

    Jim, it is the cost of real estate that makes very dense cities expensive along with local social policies. Suburbanites pay in time and transport expense to work in the city.

  • http://facingzionwards.blogspot.com/ Luke Lea

    A wage subsidy paid by the government would be much better than a minimum wage legislated by the government. The first does not change the market wage nor penalize the employer. The second does and causes unemployment among the least productive members of society.

    Of course wage subsidies have to be financed. That is what progressive taxation is for. If we treated all income the same — no breaks for “unearned” income — and made savings tax exempt, that would open the way to a graduated expenditure tax, which is the fairest and most efficient tax possible –assuming that, other things equal, a dollar is always worth more to a poor man than a rich one.

    But, sadly, no one seems to care about promoting the general welfare anymore. I was raised to believe we the people was what America was all about. Will we ever get back there? I hope so, and it has nothing necessarily to do with supporting “the blue model.”

  • http://facingzionwards.blogspot.com/ Luke Lea

    Maybe I should have written that wage subsidies “do not interfere with the labor market” instead of saying they “do not change the market wage.” Or is that just two ways of saying the same thing?

  • http://facingzionwards.blogspot.com/ Luke Lea

    What Wayne Lusvardi says about the California minimum wage is pretty amazing if true.

  • Jim.

    @La Marque:

    So if industry can be organized such that jobs can be had outside of a city — and the Internet can make this happen — that would remove the compelling reason for cities.

    @Wayne:

    Scary. Even if it isn’t as bad as you way, training people to milk the state can’t be good for them or the country long-term, it just can’t.

  • Eurydice

    If the point is to make people able to survive in NYC they should raise the minimum wage to $50 an hour.

  • Mark in Texas

    I disagree, Dr.Mead. while your common sense suggestion would actually improve the economic health of New York City and make better the lives of the people who live there, it is absolutely impossible for the people who live in New York to admit that the basic rules of economics work for them just like every place else. “New York is different” they will tell you. I would not be surprised to learn that the normal laws of physics don’t apply in their city.

    Apparently one Detroit is not enough to convince people with a blue state head to reexamine their policies. I would suggest just getting out of their way while they adopt policies that will inevitably drive business and people away. If they propose an $8 minimum wage, insist on $12. Either they will pass it and the results will be obvious or they will have to make the arguments as to why the minimum wage should not be raised too high.

  • EvilBuzzard

    If Keynesian Economics is accurate, I fail to understand why I have been denied the $100/ hour minimum wage that is my human right!