Uncomfortable Truths Behind California’s Economic Surge | Hacker News Reader

Uncomfortable Truths Behind California’s Economic Surge

wsj.com

19 pointsdwynings48 comments

Comparing minimum wage and median housing prices doesn't make sense. The author claims a person making $15/hour couldn't afford to live one San Jose given its $1000 median rent. The right comparison would be take a look at what percentage of people make that much money and whether there is enough housing for them.

What % of journalists possess basic statistical literacy and are willing + able to use it in their line of work?

EDIT: The more competitive journalism becomes, the more it's a game of only writing what readers want to see. If readers don't have the sophistication to discern good data + interpretation from bad, then news orgs have no incentive to go the extra mile to get to the actual truth.

Median, 2-bedroom rent in San Jose is $2,289. That is $27,468 annually. $15/hour wages is $31,200 annually.

After paying income taxes, there's nothing left. Even 2 minimum wage earners sharing a median priced one bedroom apartment would be hard pressed to also own cars and feed and insure themselves.

http://www.zilpy.com/rentalmarket/San_Jose,_CA_metro

And by "own cars" you mean "have freedom of movement" as Silicon Valley (like most of the US) has incredibly poor public transport.

And CA doesn't have $15/hr wages (yet). $15/hr is above minimum wage of $10.50. That's $21,840 annual gross.

I guess you can afford to live here with a lower income if a) you room (or even share a room), b) you live with parents or c) you got section-8 or something a lot less than market rate rents.

You don't need to have a car to have freedom of movement. Maybe you're used to a car for comfortable movement. But there are bikes, there are busses. Sure Silicon Valley isn't the best, but if you don't have a car, you just live somewhere that's convenient to public transit.

If you have a disability that prevents biking, etc, you should be able to get some level of assistance.

Comparing median rent price to the lowest income earners is not relevant. Looking at the 1st percentile of rent prices would be appropriate.

I just checked San Jose, with my theory that market prices are really compressed at the lower end so as to make the median a relevant figure even for low-income people.

The cheapest I could find for a 2-bedroom is 1,800, which is not far of from the 2,280 median: http://www.zillow.com/homes/for_rent/San-Jose-CA/house,condo...

Why would folks making at or near the minimum wage live in median housing?

Isn't the variability of housing prices – especially on the lower end – rather small? Whenever I was looking, it seemed as if there was a sort of generally-agreed-upon price (per sqr ft), that was a hard lower bound, with significantly higher prices only for certain "special" features (seaside, top floor with roof access...)

I'm always amused when people write that middle-class people cannot afford to live in California. It's just not true.

Almost everyone I know is middle class. Only a few of my friends are in the tech industry -- most of my friends make incomes that are well below what a developer makes, and are fairly average for middle-class Americans. Yet, they all live in Silicon Valley and none of them are starving or at any risk of becoming homeless. They live about as well as their parents did, if not better.

Even people on minimum wage can afford to live here. There is clearly no shortage of gas station workers, retail workers, warehouse workers, restaurant workers, etc. They certainly aren't commuting from Arizona. In fact, I know a number of people making close to minimum wage who live in the Bay Area, have very short commutes to work, and live in perfectly safe neighborhoods. They don't own their own homes, but they live here (not with their parents), so by definition they can afford to live here. If they wanted to make more money, this is one of the best places in the world for them to develop marketable skills and climb the income ladder.

I think most of these articles assume that everyone lives in San Francisco, which is a small part of the Bay Area and far more expensive than the rest of it, or that everyone deserves a house on an acre of land in order to avoid suffering. Middle-class people live here. People on low incomes live here.

This seems extremely inconsistent with the numerous stories I've heard of crazy rent prices in Silicon Valley. Are a big chunk of some of these people commuting in on transit maybe?

Most of the people I know drive their cars to work. I live in Santa Clara. I know there are people who commute from places like Tracy, but I don't know any -- I know plenty of people who live near me who don't make a lot of money and manage to live here just fine.

Outside of San Francisco, rent prices are only crazy if you want your own place. Single people can easily rent with roommates, and couples usually have two incomes. Two people making an average wage can afford a place to live -- maybe not a luxury apartment, but a decent place in a safe area.

I know people who commute from Tracy to Hayward just to attend community college.

So what? I know people who commute within the same Silicon Valley city to do the same thing.

Just corroborating your story.

So how much does daycare cost? Or do none of the couples have kids?

People still do live in the Valley on non-developer incomes, but it's getting harder. I know a couple of people who have moved to the East Bay for this reason.

Although technically east bay is not in the actual geographic valley, for all intents and purposes in discussing the tech industry, it is part of the metaphorical Silicon Valley - lots of people live in Oakland and commute to SF tech companies (or work at tech companies in Oakland).

By the original definition, San Francisco is not part of Silicon Valley either.

Yes.

The startup ecosystem & consumer property are driven by 0% interest rates; the investment property economy is driven by 0% interest rates & overseas money laundering. Agriculture relies on illegally imported labor & perpetual groundwater reserves.

All of these things add up to a "thriving" economy, but none of these things are perpetuities, especially when the state government is determined to Venezuelify at all costs.

False. If that were true, that interest rates were the only driver of this real estate increase, we should expect similar increases in other areas. Texas, Florida, and countless other states have had more inward migration with no increase.

The guest worker program for migrant farm labor is not illegal neither is NAFTAs integrated North American market.

Finally California has depended on agriculture for a long time, well before the current drought.

The article fails to make any point. Weird.

Totally agree.

It doesn't, to appeal to prejudice. It just has to give people something to worked up about.

The truth is that California has great weather and a non compete clause law. What else do you need?

Low cost of living would be nice...

Supply & Demand. Demand is high and supply doesn't meet it? Prices go up.

Why is demand high? Nice year round weather, Hollywood, large military presence, etc.

Why doesn't supply meet demand? Restrictive policies, companies taking options that have more profit, demand increases faster than supply, etc.

Any which way you look at it... You have a nice area and tons of people want to live there? Things are going to cost more.

On top of that, increasing wages won't really solve everything as costs will go up (Businesses have to increase costs to make up for increased paychecks. Example: http://townhall.com/tipsheet/erikahaas/2016/11/16/child-care... ) negating the extra money you make.

You want a low cost of living? Move further inland. Move to Arizona or the mid-west. Much cheaper to live.

That is all painfully obvious. What Velodrome is saying is not out of reach in the slightest. State and local governments could take plenty of steps to lower the cost of living.

Which would just make more people want to live there, and ... make supply lower, and make the cost go up.

California has a finite people carrying capacity. You can remove all the cars, build sky scrapers to the stratosphere, etc, etc.

It's like arguing that all the people in the world who want to live in hawaii should be able to live in hawaii.

California isn't very densely populated. It's much less populated than UK, Switzerland, Italy, Germany etc.

Large swathes of the coastline are protected. That's not a particularly bad thing. But also, development in general is really wasteful of space. Spending time in California as a European was an object lesson in scale: everything is bigger than it needs to be, everything is spread out, walking places takes ages, roads are far wider than necessary, parking lots take up loads of space (legally mandated!), etc.

California's urban planning has long been guided by the assumption that everyone owns an automobile:

http://www.autolife.umd.umich.edu/Environment/E_Casestudy/E_...

As vigorously promoted by the automobile industry:

https://en.m.wikipedia.org/wiki/General_Motors_streetcar_con...

State and Local governments COULD take steps to provide affordable housing... but that would ruin San Francisco!

http://www.sfchronicle.com/bayarea/article/In-a-wealthy-SF-n...

It won't match the Church! My kid(s) won't be safe! People with Mental Illness and Drug Addiction will end up there!!!

This is just one example I found for San Francisco... expand this example to any other town in California - Hollywood, The Valley... any part of town with wealthy people or people who don't want to lose their identity.

And THESE situations - in addition to basic Supply & Demand - are why housing costs are even WORSE in these areas. Demand alone causes the coastal areas to cost more - people want to live close to the ocean. This fight against affordable options cause the situation to be even worse.

Good luck solving it in California. I pick on CA, but CA isn't alone in these issues.

If that is true, why don't all areas with the same income average have the same home prices? Look at this data: http://ritholtz.com/2017/01/least-affordable-housing-u-s/

Because the same income average is one of a "bazillion" things that affect home prices.

Pick a town with an average income in California compared to a town in Utah or Texas with the same average income.

What's different?

* Supply and Demand. Average income does not mean supply and demand are equal.

* Area (Coastal Desert vs inland desert... beach front property in California vs... Utah...)

* regulations (try to build stuff in San Francisco vs Dallas or Salt Lake City)

* available area to build (density of San Fran vs Utah)

* City/County/State Taxes (Compare property taxes for those locations)

* etc, etc, etc.

Hell... supply & demand ALONE would account for the difference price between California and Utah. THEN Add all the other bazillion differences...

Seems like you can write this article, but you could easily write the opposite. I'm always puzzled why conservatives are so sure that taxation suppresses growth. I get that there are models that show that this can happen at some level of taxation, but there are two issues. One, model parameters need to be discovered. Second, we just don't seem to see the effect very much in real life. So you have to write articles like this that are really . . . speculative . . . in observing whether policies are having an effect in one direction or the other.

The people who financially back conservatives are mostly in extractive industries (i.e. Koch brothers), they see any government regulation or taxation as a skim.

Higher taxes hurt only in comparison to other locales.

The people who financially back conservatives are mostly in extractive industries (i.e. Koch brothers),

That's interesting. I haven't heard this before. Would you share data to back this up?

they see any government regulation or taxation as a skim.

It's not clear to me why this statement can't be true of non-extractive industries as well.

Look up the financial backers of Cato institute or heritage foundation and review their published work and you should have a clear picture.

You're best bet at understanding is to read "Master of the Senate" by Robert Caro.

The book is about LBJ, but goes into detail about how the civil rights legislation caused the "conservative democrats" (aka segregationists) to join up with Western conservatives, who are the extractive people tha I mentioned.

> I'm always puzzled why conservatives are so sure that taxation suppresses growth.

https://en.wikipedia.org/wiki/Laffer_curve

Do you think this is valid analysis? Or are you citing the reason for the belief?

I agree, this is the primary argument used to justify lowering taxes.

Hasn't that been disproven? Even George Bush called it "voodoo economics".

The Laffer Curve is very much real. The question is what the real shape of the curve is. Do we have optimal government revenues at 10% average taxation, or 90%? The answer probably lies between these numbers. There's also the question, after deciding this, of how much revenue the government needs to accomplish each marginal goal, and how much utility that revenue has compared to leaving the revenue in the hands of taxpayers.

A lot of cherry picked single point numbers in this op-ed. Not very informative.

tl;dr Economy is booming but living here is expensive. Also, gas prices are cheap right now so... that helps.

Typical WSJ garbage - "It's so crowded no one goes there anymore"

It's so crowded nobody goes there anymore. Typical WSJ FUD.

Reply on news.ycombinator.com