Access News Service: ANS -- Conversation about economics

This is part of a discussion about economics and housing. It started from a comment about Bob Cratchett and what his wages would be in today's world. I didn't include all of that -- the original post said $13.50 an hour, the economist said about $3 an hour. But I thought this discussion was interesting because it's about how to fix problems.

--Kim

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Amy Zucker Morgenstern
It is, in any case, the truth that millions of people living on or above minimum wage in the United States today suffer Dickensian conditions:
-frequently unable to afford rent, much less a mortgage
-dying for lack of health care
-lacking the most basic worker protections, such as safety, sick leave, freedom from retaliation
-breathing air that causes respiratory disease and drinking water that causes brain damage.
I would like to know how conservative economists plan to change this.
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- Tim Bartik
  I am not a conservative economist, so you'd have to ask them.
  My responses, as a reasonably conventional liberal economist:
  For housing, we need to YIMBY housing code regulations and zoning to make it a lot easier to build denser housing, particularly in places like where you live. That deals with the overall housing supply problem. That is a pretty universal position among economists, liberal and conservative. The Bay Area's housing policies are extremely regressive.
  To help those who are too poor to pay for the cost of providing decent housing, even with increased housing supply from changing housing regulations, rent subsidy programs should be made an entitlement, where people are guaranteed to pay no more than some set percent of income for rent.
  We need to continue making health care more universal, whether through Medicare for All or expanded Obamacare, while cutting health care prices, or more feasibly restricting their increase over time.
  For increased worker protection, we need to make it easier to organize unions and have them recognized, and more difficult to illegally block them through firing workers. We should also consider sectoral wages standards. And we need to keep the labor market relatively tight (low unemployment), not only nationally, but also in distressed local labor markets through "place-based policies" (my area of specialty).
  In general, we've made a lot of progress improving air quality and water quality in the United States, and we need to continue the pressure to improve regulations of air and water quality .
  Beyond all this, we need to see if we can revive the BBB act, and in particular need to make permanent the refundable Child Credit, which will help reduce child poverty.
  I also think the U.S. needs to seriously consider a program of fiscal equalization across states and extending to localities, which equalizes fiscal conditions, and in particular school funding, thereby reducing the incentives for localities to seek to zone out poor people, while also improving public services in low income places.
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- Tim Bartik
  But I don't think the cause of further improvements in equity and better living standards for all is furthered by ignoring improvements over time. A short summary of human history is that living standards were generally low up until the Industrial Revolution, and then began to generally increase. See this for the UK for example. https://ourworldindata.org/economic-growth...
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- Tim Bartik
  And at a global scale, there have been considerable reductions in poverty, and improvements in various living standards: https://ourworldindata.org/a-history-of-global-living...
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- Tim Bartik
  Or see the late Hans Rosling's little four minute visualization, which looks at changes in income and increases in life expectancy over time in the world. https://www.youtube.com/watch?v=jbkSRLYSojo
  YOUTUBE.COM
  Hans Rosling's 200 Countries, 200 Years, 4 Minutes - The Joy of Stats - BBC Four
  Hans Rosling's 200 Countries, 200 Years, 4 Minutes - The Joy of Stats - BBC Four
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- Amy Zucker Morgenstern
  It's hard to compare metro areas because they are so often apples and oranges. However, from what I can discover, and contrary to myth, San Francisco has quite dense housing, comparable to NYC's for example. Furthermore, Increasing the density will not make much difference in affordability unless we: have publicly funded transit on a par with comparable European cities' (i.e., you don't need a schedule because another train or bus comes along every ten minutes); put strict limits on turning housing into lodging (Air BnB successfully fought off the last attempt); crack down on absentee landlordism (thousands of units stand empty because they are now purely investments); and have an enforcement body that cracks down on illegal evictions. (Landlords can evict tenants in order to occupy the space themselves, not in order to bring in a new tenant under higher rent. However, they frequently do the latter under the guise of the former and no one follows up.) If we have these, increasing density makes sense as part of housing reform.
  However, I would also:
  impose a minimum wage that is a living wage and yoke it to the CPI or other cost of living index
  fully fund OSHA and the EPA so that inspection is a real possibility, and ensure that employers are not given advance warning of inspections
  revoke the charters of corporations that violate these standards instead of making charters a rubber stamp process
  join the rest of the industrialized world and have single payer healthcare.
  What do you think of those proposals?
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- Tim Bartik
  Amy Zucker Morgenstern On housing supply, I would simply say: the vast majority of economists think that more housing supply and density, including in the San Francisco area (the housing market is the metro area, not just the city) would drive down housing prices. Housing prices in the Bay Area exceed over twice the pure production costs of housing, which indicates very stringent regulations restricting housing supply. https://pubs.aeaweb.org/doi/pdf/10.1257/jep.32.1.3
  Adding more housing to gentrifying neighborhoods in San Francisco and other large cities LOWERS housing prices compared to what they otherwise would be: https://research.upjohn.org/up_workingpapers/316/
  New York is hardly an exemplar, as it also severely restricts housing supply. The East Coast and West Coast cities are bad models.
  Jenny Schuetz at Brookings has some good ideas on how states can improve things: https://www.brookings.edu/.../states-can-improve-housing.../
  As for minimum wage: it all depends on degree. I think you can increase the minimum wage to some extent without too much adverse employment effect, but at some point, it will have an effect. Probably $15 is OK right now in most areas of the country, but I don't know if the minimum wage by itself will get us to a living wage. Probably also need other policeis: the EITC, unions, sectoral wage bargaining as in many European countries https://equitablegrowth.org/wp.../uploads/2020/02/Dube.pdf
  Also need better job training policies, both in high school, community college, and for older folks than that, to improve productivity and help people upgrade to better-paying jobs.
  In other words, the minimum wage by itself is too narrow and too blunt an instrument to do enough.
  As for environmental issues, I'm more concerned about climate change than anything else in the environmental area. I don't really have enough knowledge about your proposals on OSHA and EPA to offer an informed comment.
  As for corporate finance and governance: that is a complex issue -- I would encourage B corporations ("benefit corporations"), encourage more competition, and seek to restrain the financialiation of the economy via a transactions tax. In thinking about corporate governance, I'm more concerned about short-term thinking in corporations than anything else. I think Warren had some good proposals on these issues.
  As for health care: there are a lot of ways to get there. It is not true that the whole industrialized world has single payer health care. https://www.vox.com/.../medicare-for-all-what-countries...
  What they do have is (1) a committment to universal coverage; (2) a committment to controlling costs. This is connected. It would be far easier to get to universal coverage if we controlled costs, which primarily means controlling PRICES, not QUANTITIES, of health care used: https://www.healthaffairs.org/.../10.1377/hlthaff.22.3.89...
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- Amy Zucker Morgenstern
  "very stringent regulations restricting housing supply."
  I missed a couple of steps in there. Why do you think the mismatch between supply and demand is about overly stringent regulations? If the problem were insufficient supply, would we have three times as many empty units as we have homeless residents? The Ellis Act didn't add regulations; it removed them, and sent evictions soaring.
  " the vast majority of economists think that more housing supply and density, including in the San Francisco area would drive down housing prices"
  That has made sense in most places I have lived, and probably in most circumstances out of which economists build their models. I just don't know if economists have ever seen something like what is operating in the Bay Area now, with a local industry in which even entry-level employees are often paid enough to buy a home at more than asking price. Most of the incentives are stacked against anyone selling or renting housing to as many middle-income people as want them. Why sell a 3 BR house for $400k when you can ask $1 million for the same house and get people offering more than that?
  Furthermore, there is a virtually bottomless supply of investors. A piece of property in SF is a good investment. Why mess it up by renting it to someone?
  You'll pardon my skepticism that an increase in housing stock will make a difference to anyone who isn't rich. San Francisco has one of the most stringent BMR requirements in the region, ensuring that 12.5% of new units built are below market rate. I don't know what percentage of residents are non-wealthy, but I am positive it's far, far higher than 12.5%.
  However, I haven't tried reading the articles you link to. I'll have a go and see what I learn.\