Minimum wage: how much is too much?

[steve-in-kville]

When is minimum wage too much ? When it is paid and the receiver gives some of it back and says it is too much. Seems quite simple to me.

I shall tell a story...

A local company was having staff shortages over the pandemic. Couldn't get entry-level people to start, such positions went unfilled while people rode out the unemployment and the extra $300/week incentive. Company raises wages for entry-level positions by multiple dollars an hour, but no one else. Someone who worked there six months now made almost as much as someone who worked there six years.

Those seasoned workers (who didn't get the raise) left for other companies or got themselves fired to take advantage of the unemployment. Due to the vacancy of those seasoned workers, the supervisors had to drop back and fill those tasks. Supervisors weren't able to do their job and morale tanked (as if it hadn't already) and soon most of the supervisors quit.

So now, that company has several open positions that they're struggling to fill, entry-level positions pay too much, no one wants to move up, and there are no supervisors. Advanced level positions are now being filled from the outside. Finally, after all this, the company gave everyone else a raise to stop the bleeding.

Maybe not a case of too much money, but an imbalance.

[mike]

The idea that we should all be able to live very cheaply near the places where all the highest paying jobs are seems to ignore basic economic realities that none of us can change.

I think the working class should be able to live near jobs that pay them a living wage, enough to afford to own their own home, and still have time to see their families.

An environment like in L.A. where the average apartment is $2,600/mo means most people are going to live in grinding poverty, and can barely afford rent, let alone to own a home or condo. Living near any job would be a luxury, let alone a "highest paying job".

I don't think it's good or healthy for families to have their breadwinner making 1 or 2 hour commutes each way every day.

I agree; it's not. But yet it is done all the time, for example by folks who do construction and have food markets in cities. Particularly among the Amish I know, who will not live in urban areas, period. Very few of them can make a living farming any more, and some of the more common occupations these days are construction (often in suburban areas or other well-to-do situations) and going to market (again, often in cities and well-to-do suburbs where they can make good money). I grew up with my parents commuting from Lancaster, PA to Philadelphia to go to market in the 1980s.

These people have decided that it's better for their family/community life to commute an hour or two to where they can make a living than it is to live closer where their family/community life would be completely untenable.

What kinds of solutions would you advocate for that could fix the problems you are complaining about, such as the grinding poverty of LA?

[Sudsy]

The idea that we should all be able to live very cheaply near the places where all the highest paying jobs are seems to ignore basic economic realities that none of us can change.

I think the working class should be able to live near jobs that pay them a living wage, enough to afford to own their own home, and still have time to see their families.

An environment like in L.A. where the average apartment is $2,600/mo means most people are going to live in grinding poverty, and can barely afford rent, let alone to own a home or condo. Living near any job would be a luxury, let alone a "highest paying job".

I don't think it's good or healthy for families to have their breadwinner making 1 or 2 hour commutes each way every day

Would this apply also to farms where some put in a 10 or often more hours a day away from their families. I think the argument might be that this is a necessity for a living wage but a 'living wage' means something quite different to some folks than to others, right ?

[Josh]

My suspicion is that markets where real estate values jump by those kinds of percentages are markets where they can drop quickly as well. For example there are real estate developers that lost everything in California during the crisis of 2008. Or people who got mortgages during the peak ahead of that collapse and then afterward were completely underwater.

Regional Ohio isn't California in 2008. We never had those kind of peaks and valleys here either.

In my rural area, we never saw the extremes peaks and valleys of that crisis. We were never extremely overvalued, and so never had a crash. Wanting to live in areas where you can make the big bucks often comes with that kind of risk.

I live in a rural area roughly analogous to yours. Somehow, it is becoming flooded with out-of-state money from people who want to own property in a "rural area". So we're getting the extreme peaks and valleys. But our area isn't becoming a place you can make the "big bucks".

Kiko's Auctions now takes online bidding for real estate and it's not uncommon for properties to be getting bid up by out of state, sight-unseen bidders. Recently I went to an auction for a house that was not move in ready (bad septic, leaky roof, etc.) on 5 acres that had had an oil spill from an oil well in recent history. The high bidder was from PA. The auctioneer went, "And the winning bidder is so-and-so Zimmerman.... from Pennsylvania". It went for about 40% over what I would have expected two years ago.

[Signtist]

If house prices go up $100,000 a year (which is what they did in the last year here), how can a family making $50,000 a year afford to ever buy a house?

What price range of houses jumped by $100,000 in value? Are you saying that $75,000 houses are now worth $175,000? Or was it more like $500,000 houses that became worth $600,000?

What is a $75,000 house? I havent seen such a thing here in years. I don't think you will find a house for less than $500,000 in the town I live in. And that will not get you anything resembling a fancy house.

[mike]

I live in a rural area roughly analogous to yours. Somehow, it is becoming flooded with out-of-state money from people who want to own property in a "rural area". So we're getting the extreme peaks and valleys. But our area isn't becoming a place you can make the "big bucks".

Well, what can we really do about this?

An area where this has been happening for years is the Shippensburg/Chambersburg area of PA. It's a formerly rural within 1-2 hours of Harrisburg, Washington DC, and Baltimore. Beautiful area, and the prices are much cheaper than in the cities. So for locals, prices have become more and more unaffordable. Farms are insanely expensive. I'm most familiar with the Mennonites in this area, and what they do about it is move away. Old order Mennonites from Franklin county have been moving west to Missouri, Kentucky, and western Ohio where they can afford to buy land. Others that I know have moved to West Virginia and other places where there are better opportunities, including opportunities to spread the gospel. Economic realities like what you describe are really beyond everyone's control, including the government unless we want to live in some kind of totalitarian society. Much as we may want to live in beautiful Holmes County or Lancaster County, we may just not be able to do that, or at least our children won't.

All this is not to say that you can't find any affordable housing in these areas. You really can, often, even if it's just harder than it used to be. You just have to be content with what you find, and work to improve it, save money, and move up when you can.

[mike]

If house prices go up $100,000 a year (which is what they did in the last year here), how can a family making $50,000 a year afford to ever buy a house?

What price range of houses jumped by $100,000 in value? Are you saying that $75,000 houses are now worth $175,000? Or was it more like $500,000 houses that became worth $600,000?

What is a $75,000 house? I havent seen such a thing here in years. I don't think you will find a house for less than $500,000 in the town I live in. And that will not get you anything resembling a fancy house.

Click here for homes for sale in Altoona, PA, about 30 min from where I live, for between $60,000-80,000. There are currently 16 to choose from.

In my smaller town, the lowest price home I saw was $105,000.

If you're OK with manufactured homes, the prices are really reasonable. Here's one that's selling for $45K. 2 bed 1.5 bath 1,296 sqft 0.91
acre lot.

[Josh]

What is a $75,000 house? I havent seen such a thing here in years. I don't think you will find a house for less than $500,000 in the town I live in. And that will not get you anything resembling a fancy house.

Used to be quite common here. About 4-5 years ago, a youth guy at church spend around $70k (USD) on a house sitting on an acre. Not a fancy house, but a 3 bedroom 1 bath sort of deal. That kind of thing simply doesn't exist anymore, at least not here.

[Ken]

I live in a rural area roughly analogous to yours. Somehow, it is becoming flooded with out-of-state money from people who want to own property in a "rural area". So we're getting the extreme peaks and valleys. But our area isn't becoming a place you can make the "big bucks".

Well, what can we really do about this?

An area where this has been happening for years is the Shippensburg/Chambersburg area of PA. It's a formerly rural within 1-2 hours of Harrisburg, Washington DC, and Baltimore. Beautiful area, and the prices are much cheaper than in the cities. So for locals, prices have become more and more unaffordable. Farms are insanely expensive. I'm most familiar with the Mennonites in this area, and what they do about it is move away. Old order Mennonites from Franklin county have been moving west to Missouri, Kentucky, and western Ohio where they can afford to buy land. Others that I know have moved to West Virginia and other places where there are better opportunities, including opportunities to spread the gospel. Economic realities like what you describe are really beyond everyone's control, including the government unless we want to live in some kind of totalitarian society. Much as we may want to live in beautiful Holmes County or Lancaster County, we may just not be able to do that, or at least our children won't.

All this is not to say that you can't find any affordable housing in these areas. You really can, often, even if it's just harder than it used to be. You just have to be content with what you find, and work to improve it, save money, and move up when you can.

One thing you could do is tilt the property tax structure in favor of permanent residents rather than 2nd home and AirB&B types.

Double the property tax rate in the area and then grant a 50% "homestead exemption" for all those who actually live in their homes x-number of months per year. And then use the proceeds for affordable housing or some such.

Locals who live in their own homes would be unaffected. Out-of-towners who are buying weekend homes or AirB&B type rentals would face a serious tax incentive to look elsewhere. Of course some ordinary people and landlords would be affected as well. It is very difficult to surgically tailor these sorts of measures to have the exact effect that you want without any spillover effects.

Farmland is a different issue and more complicated.

The real issue is that capital really knows no boundaries. So wealth generated in affluent parts of the country can flow wherever it wants which creates these sorts of distortions between property values and local wages.

[Josh]

Well, what can we really do about this?

That's a good question, and one believers should be thinking about. It does us no good if we have our own homes and property if our brother and our neighbour have to live in grinding poverty because housing sucks up 1/2 their income, and leaves them in debt they can never hope to repay.

I'm most familiar with the Mennonites in this area, and what they do about it is move away.

This option is rapidly disappearing. There isn't somewhere to "move away" to. Your own area seems to be cheap - for now - I would not count on that lasting in the long term. I live currently in one of those "we could move there if we had to go try to move away to someplace cheap" areas.

All this is not to say that you can't find any affordable housing in these areas. You really can, often, even if it's just harder than it used to be. You just have to be content with what you find, and work to improve it, save money, and move up when you can.

I think this is a bit specious. If we want to welcome newcomers into our communities who aren't wealthy, we will have to face the reality that they will be very, very poor, particularly in terms of housing and land. I really don't see a Christian church can sustain itself when it thinks it's OK for 1 person to be sitting on what is now a $500,000 or million dollar house and land, whilst another brother has nothing.

It's time to rethink our relationship to wealth, and that relationship cannot be "well, the poor should just work harder and pull themselves up by their bootstraps". Ken documented in another thread that wages have remained flat for decades. There isn't some option for the poor and working class to just magically make more money, and everything they need to buy is becoming more expensive.