The parents of a prospective student came into my office just before the pandemic hit. They were on a tour and had been to the financial aid office. I work in the academic area her kid wanted to major in and they decided to wait there until our department chair got out of class. The mom was incensed that the financial aid rep told them they’d be full pay. She said they were being “punished” for living in a nice area and couldn’t understand why the college thought they could be full pay given the high cost of living in their zip code. She went on for half an hour before my department chair got out of class and hustled her out of my office. I can’t afford to eat lunch in our dining hall, so the top 10% can spare me their diatribes about how unfair their lives are.
One of the basic weaknesses of capitalism is that it’s based of the POV of - well, - the rational capitalist. Generations of economists have tried to create a model for the rational worker and it nearly always involves some form of collective action (e.g., union organizing, government intervention, revolution, etc.)
It’s my understanding that the concept of a minimum wage is linked to the idea of a living wage and people’s dignity (ie., you can’t pay people whatever number you feel they’re worth, there has to be a limit below which you can’t go), which in turn is profitable because it means more disposable income to buy the things they stock/sell/manufacture but also increases wages overall, which creates a virtuous circle. Isn’t it what Henry Ford put into motion, what the whole 1945-1975 period is based on as well as a whole lot of modern economics? Basically, growing disposable income = growing prosperity.
That is how I understood “rational capitalism”.
Consumption is profit.
$15 wasn’t really a random number, but back when that number was chosen it was an average of various living wages ($11-12 to $22.) I suppose the calculation today would make it much higher.
Housing is a huge issue that indeed is very complex.
But if people don’t make enough to rent an apartment, the issue is both wages and housing.
Shantytowns aren’t a solution, nor is placing anyone who’s working class in a shelter the way NYC does it.
If you make 300K and it’s not enough, since an easy change is the minimum wage, “a rising tide lifts all boats”, increasing minimum wage will increase other wages which in turn will
That’s the whole idea of labor laws from the 1880s to the 1940s because it’s a rational, capitalist decision: if people live in their car, have to drive to work (with gas paid off their wages) and can’t afford child care, they don’t have much reason to go out and work at a job that doesn’t allow them to pay for child care and live in an apartment. If there’s a caregiver onsite and the wage pays for the apartment&gas, it makes sense to go to work. If there’s extra money you can then spend it on Walmart stuff and Walmart makes more money. It sure isn’t making money from people who make 300K a year.
So how did we end up with people working a full time job and unable to afford to rent an apartment, college graduates making good money but unable to buy a condo?
A living wage in what locales? I mean, a living wage for Manhattan is very different from that of Hazard, KY. If you impose a $15 minimum wage in the latter, tell me what you think will happen to employment there.
Eventually the market adjusts. There is a reason why there is a flight of tech companies from Silicon Valley to places like Austin. Now it is true that of the ones leaving, most are no longer the most innovative and therefore unable to pay the highest wages (Tesla being the one notable exception to most innovative). So perhaps that’s a good measure of where California pricing is–only affordable by employees working at the highest comp companies.
There’s no fundamental right to live in Silicon Valley, even if you really want to. The same is true of Manhattan/Boston/{other desirable area}. Most of the population in the country understands this just fine.
That is a recent development. As I mentioned, it was originally to keep minorities “in their place”. Essentially, it says “if your work isn’t worth $15, it’s worth zero.”
What would that well-known right wing economist, Karl Marx, have to say about this? He would say that the basic economic unit was the hour of labor. If you have a minimum wage of $10/hour, that defines the dollar as six minutes work. If you raise the minimum wage to $15, all that does is redefine a dollar to be four minutes work.
I think this is worth considering as a limit - there are well-known and long-discussed problems with this thinking, for example we all know that some people do more (or to be even more problematic, better) work in that hour than others - but I don’t want to turn this down that path.
In the Marxian Limit, a Big Mac costs $4, or 24 minutes work. That’s not just grilling the burger. It’s raising the cow and the veggies, transporting them to market, chopping them up, mining the iron that made the steel for the grill, etc. If I increase the minimum wage to $15, it still takes the same 24 minutes, so now the Big Mac costs $6. But - and this is the key point: I have not actually increased the purchasing power of my minimum wage worker.
I would say that the second biggest correction to this is the fact that it’s not instantaneous: the grill is already bought and the miners of the iron paid. But the bigger issue is savings. If I saved, say twelve thousand of hours or work to retire on, now it’s only worth eight thousand hours. So what this actually does is transfer wealth from savers (like retirees) to workers (and debtors).
Whether this is a good thing or not depends on your point of view. There certainly are winners and losers. But they aren’t always the people being put forth as the winners.
In talking about living wage in addition to location, you also need to talk about household composition. Living wage for a single person? Two people both working? One person with kids? And if so, how many kids? Two people (with one or both working) and how many kids?
Personally, I don’t find anything intrinsically desirable about a crowded island, a crowded seaport city or a techno ghetto subject to severe climate change. But, they’re major population centers and that’s where the work is - that’s what makes them desirable.
When I hear quibbles from parents or students about how unfair need based scholarships - or even free/reduced lunch is (pre-Covid, now all lunches are free), I remind them they are welcome to take on a lower paying job and give up some of their assets so they too can qualify for assistance. There’s no law at all saying they have to make as much money as they do.
Not one single person has taken me up on that offer yet. When push comes to shove the freebies don’t appear to balance out their discretionary money. They just want their discretionary money to spend on things they like or feel are necessities (including a nice home in a nice area, nice wardrobe, etc) AND get the freebies. For whatever reason they feel they’re being cheated - but they can change positions if they want to. They just won’t.
I feel for the kids who are in true low socio-economic situations. Even when they have good parents (more often than one thinks), they still get far less than their privileged peers, and they can be stigmatized by having to apply for the freebies or having to wear clothes that are free/cheap which often aren’t the current styles their peers have. They often end up working jobs as soon as they’re old enough rather than being able to play in the band (with a free school provided instrument if they’re fortunate enough to get one) or on sports teams (some of these aren’t free anyway).
There are lazy or otherwise bad parents out there too. It still doesn’t mean their kids should suffer IMO. We’re trying to break the cycle, right?
The thread has focused on a wide variation in cost of living in different areas of the country. If anything, this a good argument why a flat blanket (relatively) high national minimum wage is not an appropriate solution for high cost of living areas. Instead the high cost of living in specific areas sounds like a more local problem that should have more local solutions. For example, the minimum wage in San Francisco , San Jose, and all of the Bay Area locations I checked is already more than $15 per hour. Increasing the national minimum wage from $7 to $15 is not going to have much impact on affordability of the Bay area. Instead it will primarily impact relatively lower cost of living areas.
One should also should consider that market forces naturally influence wage and make wages higher in higher cost of living areas, and lower in lower cost of living areas. A particular business is probably going to have trouble hiring quality employees, if they are offering a wage that is too low for employees to afford housing. Instead they need to offer higher wages to cover the higher cost of living and/or make various non-wage allowances. Over time this can lead to businesses and people leaving higher cost of living areas and moving to lower cost of living areas, which naturally improves the high cost of housing. Having the same high minimum wage everywhere that is determined by government legislatures rather than market forces distorts these effects.
Techno ghetto- good one. I’ll have to keep repeating that in my head next time I’m driving around Palo Alto.
This made me lol. I have no desire to live in a large city anywhere. Which was why I didn’t answer the query on the thread about what, “city,” would I live in if money were no object.
I agree. I mean, ask me where I would live if I didn’t have to worry about changing a half-dozen different health providers in order to do so! I think every retired person has made that calculus at some point.
“A particular business is probably going to have trouble hiring quality employees, if they are offering a wage that is too low for employees to afford housing.”
Well, there’s been little impact on employers in high cost of living areas, in the Bay Area people live in their cars, in NYC they just expect the City to pay for shelters to house their poorly paid employees 
(and the city does it poorly and at high cost to boot 
) I’m not sure what “consequences” there could be.
I agree with you, $15/hour (or, if you will, $12 in rural Arkansas…) needs to be increased to reflect cost of living, but there’d need to be a specific calculation from economists and labor specialists – what is the ideal balance point, $30 an hour in the Bay Area or NYC, $26, $34?
The sad fact is that in the U.S. at this point in time, that would be what is called, a “lagging indicator”. IOW, people will live in cars, if it means keeping their jobs.
I guess it depends how much you are trying to increase unemployment. At $30 per hour, I suspect it will increase a great deal.
In February 2021, the non-partisan Congressional Budget Office predicted that transitioning to a $15 national minimum wage would increase unemployment by 1.4M workers:
Now, much has changed since then, and in particular the Great Resignation is driving wages up without an increased national minimum wage. There is a realignment happening, and it’s hard to know how this will shake out even a year from now.
“Semi Rich” is a bit hard to define. How much income a person has vs how they actually live are two very different things. Here’s a hilarious classic commercial that put’s it in perspective:
Most working poor people who can’t afford rent choose a shelter because they don’t have cars in NYC. Minimum car insurance on a very basic level is $3k/year. And it’s in the 40s at night now in the middle of October, with much colder days to come.
Government intervention comes in all different forms.
Yes, and food pantry use is up in all five boros.
And, of course, the solution to the debt is from a lending company.
But yes, I suspect some of the folks who lament about others getting the freebies include people like these who had it all (whether they could afford it or not).
Top kids can get significant merit aid, but at “those” colleges, not ones in line with their pictured life.
Kids who aren’t top for their respective college have a much tougher time if they don’t live in a state with good financial options college-wise. If the parents already have a lot of debt, one wonders if they even qualify for Parent Plus loans, esp after freshman year or the first kid finishes college.