“Inequality has risen across America. Once high-paying middle class jobs have disappeared, as the job market has cleaved into high-wage knowledge and professional jobs and an even larger number of low-pay, low skill service positions. The result of this cleaving has been increasingly unaffordable housing, especially in the high-priced cities supposedly suffering least in the wake of the recession,” writes Richard Florida in The Atlantic Cities.
This is the orthodox view of the economy, if you’re a 10 second sound bite on MSNBC, the president trying to score political points or Paul Krugman. For one thing, there are plenty of high-paying middle class jobs — what Florida means is that the kind of jobs that were available to young men during the Eisenhower Administration, where they could buy a house and send one or more kids to college all while working a low-skill 9-5 job in a factory.
Well, it’s bullshit. Yes, the post-war years were pretty good to a lot of Americans, but the prosperity wasn’t anything special. Boomers have fond memories of it, though, and nostalgia is clearly the most important thing in determing the facts of history. Televisions, the killer app of the age, cost much more as a portion of a family’s income, than computers or iPhones today, things were less well-made and more inefficient (cars for example, got horrible gas mileage even when ignoring their massive weight) and the brand new houses were small on small lots (not neccesarrily a bad thing, but it means they weren’t yet the subdivisions of McMansions we know and hate today).
If there is one key difference, it’s that people in the 1950s didn’t spend to their maximum capabilities. Having grown up with the Depression, they saved a lot and they avoided debt. But the jobs they got coming from World War Two were comparatively high paying because they were not low-skilled — people who served in the Armed Services were highly trained on a variety of tasks; because the entire rest of the industrialized world had just been bombed out or taken over by hostile Communists; because non-white men and women of any color were largely denied the ability to freely compete for jobs and housing; and because union thugs had been allowed to dictate labor policy under Roosevelt and Truman.
Prosperity is not the norm of the human condition, poverty is. To think otherwise is foolish, prideful and wasteful.
Another lesson of Econ 101 that Florida has missed is quite literaly the foundation of economics: supply and demand.
Using the misleading metric of a market rate two bedroom apartment — misleading because there aren’t many and few people live in them — Florida calculates how many full-time minimum wage jobs a person would need to work to rent one and for some cities it’s as high as three. I say this choice is misleading because most of the young professionals I know, who are making more than minimum wage, live in shared apartments. The ones who don’t live in shared apartments are living with their parents.
Nevertheless, it is true that rents are rising and people are having difficulty keeping up with the rises. But are low wages to blame and can raising the minimum wage do any good?
No. The fact is, the supply simply isn’t there. We do not build enough new, urban housing or build it fast enough. Rents keep rising because the demand increases and people with money can bid prices up. Similarly, the demand is such that landlords can get away with charging very high rents for apartments they do not take very good care of. Raising the minimum wage, even if it wouldn’t result in a decline in employment, would very likely cause rents to be raised more because of the increase in buying power. The solution to unaffordable housing begins with building more housing.