Adam Ozimek outlines some early research about the minimum wage hike in Seattle. There is some evidence of unemployment and of workers shifting to other nearby jurisdictions in order to work.
Normally, I take a position against minimum wages, in general. But, Closed Access housing sort of tweaks normal economic intuitions, so sometimes, I wonder if the implications are a bit different there. And, it is generally the Closed Access cities who are imposing high minimum wages. Unfortunately, New York and California are imposing higher minimum wages even in their inland cities and rural areas, many of which have very low wage levels or long term issues of economic stagnation. Those areas will probably be especially hurt by the wage floor.
But, what about the Closed Access cities? Access to our most productive labor markets is sort of the critical path for economic growth now. Economic growth and economic dislocation are inseparable as long as our cities are incapable of increasing residential density. In the 2000s, economic growth led to dislocation, and millions of low income households were passively relocated through economic stress.
Monetary and credit asphyxiation have cut down on migration related to economic growth so that, now, low income households get to suffer under rising rents wherever they are.
But, if high minimum wages in the Closed Access cities are able to create a subclass of haves and have nots, where many low wage workers get a little boost that helps them make rent, and a small portion of low wage workers get a pink slip, maybe this will lead to economic growth by reversing the causation. Maybe those unemployed workers will migrate away from the Closed Access cities to move to a city that is willing to let them work, leaving a housing unit behind to be filled by an aspirational, high skilled worker.
In the 2000s, demand for housing from aspirational workers caused rents to rise, but in this minimum wage case, it is a decline in demand for housing from out-migrating workers that would lead to the migration cycle, so rents should remain moderate, and the strangled mortgage market will keep home prices down. Since that will make the cost of moving into the Closed Access city lower, there will be less pressure to increase the already high incomes of the highly skilled workers moving in. That means that less of our economic growth will be flowing as economic rents to Closed Access landlords, workers, and firms.
Closed Access cities create a slow-motion segregation by income in a country. That is a powerful governor on economic growth. What if we jacked this into high gear. Maybe the Closed Access cities should raise their minimum wages to $25 or $30 per hour. It would be terrible for the low income households that still live there, but it would really only speed the inevitable outcome that is doomed to meet them anyway. They might as well start their new life in Phoenix or Atlanta now, rather than 10 or 20 years from now. This is cruel, but it's a necessary evil in a Closed Access economy. And, in the meantime, the Closed Access cities will fill up with workers that can really leverage the benefits of a highly networked, highly skilled pool of creative workers.
Might this have a positive effect on the national economy? The rest of us will enjoy the multiplied fruits of the labor of new workers in telecommunications, biotech, and finance. And, we will retain more of the consumer surplus instead of sending it to Closed Access landlords via the firms that are protected from competition by locating where labor access is constrained.