Inside Financial Services

This Is No Way To Fix A Housing Shortage

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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!

7 Responses to “This Is No Way To Fix A Housing Shortage”

  1. Doug

    I agree. Companies that can move outside of the city limits, will. Some retail will close, creating empty real estate. The ones that have to stay will cut staff to keep prices low.

  2. Bill Dunnell

    Totally agree! Upping the minimum wage hurts the middle class. From what I read, rules, regs, welfare, college financial assistance,
    etc all conspire to disproportionately to hurt the middle class since they have to pay a bigger percentage of their wages in taxes to support these do-gooder efforts. The recent Atlantic article on housing affordability in blue cities vs red cities is very revealing.

  3. david

    Perhaps, if a large number of minimum-wage workers in L.A. pool their earnings, the would have the funds to buy a very small place. It would be a tiny place. That’s all they could afford, but maybe it would be just large enough to allow them set up bunk beds and sleep in shifts, sharing bunks as ship-board Navy personnel do.

  4. dcam

    gas in southern ca is $3.25 plus

    just across the border in Az you can buy gas for $2.79

    So California is one screwed up mess!

    High taxes

    Lots of regulation

    and a lousy atmosphere for creativity

  5. Bruce

    Those who espouse minimum wage hikes rarely go all in. I don’t understand why they don’t advocate wage rates of 50-100 bucks an hour if they truly believe that which they try to sell. I suspect that deep down they understand the laws of economics and realize that a good or service totally and artificially overpriced relative to true market value will see utilization rates plummet. Those who argue for a minimum wage hike are either intellectually or morally disingenuous, more interested in scoring cheap political points than actually helping lower-income people.

  6. Bill Demmin

    Great comments – also have noted that McDs and others like Panera Bread will replace workers with automation and this is coming sooner than later. This will kill off many of the hourly and minimum wage jobs. Why do politicians have one dimensional tunnel vision when it comes to economic issues???? You are so correct the house problem will not be solved by changing minimum wages.

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