Los Angeles mayor Eric Garcetti seems to think L.A.’s housing shortage can be solved by raising the minimum wage. The logic (if I understand it right) is that if workers’ hourly pay is increased by legislative fiat, more workers will earn enough to be able to afford to live in the city’s famously high-priced housing.
Which is of course nonsense. What I am about to tell you, you know already, but humor me anyway: If you raise the minimum wage, formerly economic workers will suddenly become uneconomic and will get fired, and employers will flee the jurisdiction. I suppose this means (in theory anyway) that aggregate demand for housing would then fall, so that rents and home prices would fall too. But I somehow doubt that’s the dynamic Mayor Garcetti has in mind.
The way to reduce housing costs (and you already know this, too) is to increase housing supply, and the best way to do that is to get rid of misguided local restrictions on construction. Red-state voters seem to understand this. But in deep-blue L.A., they apparently haven’t gotten the memo yet, the result being that low-income earners—the very people blue-state types insist they want to help—end up getting shafted. To his credit, Garcetti apparently sees the need for accelerated construction, and has promised to “cut red tape” to make it happen. Good for him. In the meantime, his plan to increase L.A.’s minimum wage as a way to make housing more affordable will end up benefiting virtually no one.
What do you think? Let me know!