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>If you believe that labor is not an exception to the law of supply and demand

You seem to imply that it's obvious that labor is subject to the law of supply and demand, but I think the reality is much more complicated than that - especially in rural america.

Ask the following questions:

- How many people could be making more money by working another job somewhere else, but do not, for non-money related reasons?

- How many people could be making more money by moving somewhere else, but do not, again for non-money related reasons.

I know people who have stayed in really shitty jobs, only because a side benefit of that job meant that their kid can go to college much more cheaply.

I know people who have stayed in really shitty jobs, because that's the only job they can find in their small town, and they need to stay in that town in order to care for family members.

I know people who have stayed in really shitty jobs because they have health problems and cannot risk a change to their health insurance.

I could go on and on.

Labor only works by supply and demand if workers have perfect freedom to move between jobs. That is rarely true. Wages are as likely to be mandated by the hierarchy in the organization than they are to be dictated by fair negotiation between the employer and employee.

I'm sure your theory for how this all works makes perfect sense in your head, but when looking at real world examples, I don't see it at all.

You are allowing anecdotal evidence to replace statistical analysis. There are lots of people who stay in a job when they could theoretically move up. But overall the labor market is subject to the law of supply and demand.

If what you say is true, and they aren't strongly correlated with supply and demand and the health of the economy, then why do we even report labor statistics?

>they aren't strongly correlated with supply and demand and the health of the economy, then why do we even report labor statistics

You're making the assumption that the only reason labor statistics would be useful is if employment is subject complete to supply and demand.

Consider the possibility that labor statistics could be useful simply because they are an aspect of the health of the economy, and it doesn't necessarily matter if they are a result of supply and demand, or has a more complex causality.

Trying to reduce labor to supply and demand only makes things very nice for theoretical considerations, but it doesn't force reality to match theory. Supply and Demand is the same thing as a spherical cow in physics. A useful simplification sometimes, but if you take it literally, you're going to go wrong.

Straw man. I never remotely suggested that employment is only based on supply and demand. You're suggesting that it's not.

No, I'm suggesting that it's a lot more complicated than supply and demand. I don't think it's even the dominating force. People do not try to optimize money earned. Supply and Demand is a factor. My point is if you try to understand the employment market based only on supply and demand, your models are crap because they are leaving out lots and lots of other factors.

Making assertions about the labor market based solely on an analysis of supply and demand is not useful at all unless your goal is to argue ideology and not reality.

We have seen demonstrable evidence throughout history that "regulation" alone does not constitute the competitiveness of the market or the cost of housing. It is in large part a straw man formulated by the GoP to deregulate megacorps for increased quarterlies wearing the shawl of improving the market for the everman. It is why, in large part, almost all regulation that would be decried as noncompetitive is propped up by special interest lobbies because it enables regulatory capture by monopolists.

Not to say there is no bad regulation, or that we are in a good state of regulation today, but thinking sliding this "regulation" bar up or down does anything but make the rich richer is naive as all hell. The first people to capitalize on new markets opened up by deregulation will be those with the most resources to exploit it, and there are infinite scenarios and influencers that impact business or housing that can drive prices up or down way more dramatically than contemporary regulation:

* The availability of credit to start business * The demand for whatever your new business would provide * The variables burdened upon employers to provide for their workers in the US that aren't levied upon them elsewhere (mostly healthcare) * The culture and climate of the area in regards to new business. Some parts of the country are so startup / business hostile local NIMBYs would protest a non-accredited business startup. * For real estate, its not just the draconian zoning and NIMBYism that drives prices, its the rampant use of it as an investment by the rich. * That is in large part caused by gross wealth inequality giving the rich so much money they cannot reasonably invest it in productive business so they hoard it in housing. * Developers will cater to the largest market of capital for housing, and right now - and for the better part of a decade, and to lesser degrees more further back than that - that has been the ultrarich who want properties that accrue value.

And infinite numbers more than that. Nothing, especially the equilibrium of necessities and the general labor market, is as one dimensional as "we need less regulation and everything would be better!"

Agreed. Two things can be true:

1. Regulation generally causes inefficiencies.

2. Markets tend towards market failure in the absence of regulation.

> For real estate, its not just the draconian zoning and NIMBYism that drives prices, its the rampant use of it as an investment by the rich.

These go together though. The reason we have draconian zoning is to keep real estate prices high, because the rich want them that way when their money is invested in real estate. And the reason the rich speculate on real estate is that we have restrictive zoning that keeps the price going up.

If we fixed the zoning so that it was easier to build smaller units with more density and less parking etc. then construction companies would build those. Then the rich would have to buy twice as many units. But they don't suddenly have twice as much money, so the cost per housing unit comes down. The units would be smaller, but at least people could afford them. And then the fact that people don't have to buy more than they need would reduce the demand for larger units and generally make housing less of a worthwhile investment vehicle, deterring continued speculation.

> That is in large part caused by gross wealth inequality giving the rich so much money they cannot reasonably invest it in productive business so they hoard it in housing.

This is caused by the combination of low interest rates and low inflation. Money is cheap, so borrowing it to speculate with is profitable. But we can't raise interest rates because that's deflationary and there is already less than the optimal amount of inflation.

In principle we could fix this rather quickly by just printing a giant pile of money and giving it out to everybody at the same time as we raise interest rates. People would use the new money to pay back their loans and avoid the new higher interest rates, so you get neither inflation nor deflation (since the two forces cancel), just a return to sane interest rates and a major reduction in total outstanding debt.

> Nothing, especially the equilibrium of necessities and the general labor market, is as one dimensional as "we need less regulation and everything would be better!"

No, but there is a hierarchy. Good regulation > no regulation > bad regulation.

And good regulation is really hard, and bad regulation is a lot of what we have right now.

It would be great to have some real geniuses at the helm who can make everything better, but given that we don't, we're still better off to at least stop having the things that are actively making it worse.

Supply and demand are not linearly correlated even if you do subscribe to this "law", so increasing the minimum wage may have a disproportionately small impact on overall job numbers, meaning greater total wealth held by minimum wage workers in aggregate. Do you really think Subway franchises are running on such razor thin margins that they'd be forced to shutter stores if they had to pay their workforce marginally more?

> Do you really think Subway franchises are running on such razor thin margins that they'd be forced to shutter stores if they had to pay their workforce marginally more?

No.

However, individuals are not entitled to a job. Take it the low hourly wage, or leave it.

Same thing: not everyone is entitled to live in the bay area. Pay the rent, or move elsewhere.

> Supply and demand are not linearly correlated even if you do subscribe to this "law", so increasing the minimum wage may have a disproportionately small impact on overall job numbers, meaning greater total wealth held by minimum wage workers in aggregate.

The effect of not ever getting into the workforce at all is devastating to those few that don't make the cut. Meanwhile, the effect of a couple of dollars extra to those already in the workforce is comparably small.

Consider that minimum wage could be raised arbitrarily. If 10$ is too low and 15$ is better why isn't 20$ even better? Why not 30$? The argument for which cutoff to choose can't be based on some basket on what people need to live a certain standard (i.e. a one-bedroom apartment in some urban area).

> Do you really think Subway franchises are running on such razor thin margins that they'd be forced to shutter stores if they had to pay their workforce marginally more?

Some of them certainly do. Subway is in decline:

https://www.businessinsider.de/subway-closes-over-900-us-loc...

Lots of low to minimum wage employers indeed do have razor thin margins. For example, Wal-Mart only has about 4000$ of profit per employee. Companies like Amazon only lose money on their fulfillment centers.

> The effect of not ever getting into the workforce at all is devastating to those few that don't make the cut.

This devistation is a societal choice made by having a non-existent social safety net in the US. In other countries it's less devastating due to government programs and universal healthcare that protect people while still incentivising them to search for work.

You are using the lack of protections and support for the poorest in our society as an argument against paying them more.

> This devistation is a societal choice made by having a non-existent social safety net in the US. In other countries it's less devastating due to government programs and universal healthcare that protect people while still incentivising them to search for work.

First of all, I agree that raising minimum wage without a proper social safety net is completely irresponsible.

However, if you look at countries like France with "free" education, relatively high minimum wage, lots of labor protection and a strong social safety net, you will find massive youth unemployment. The social safety net is supposed to catch you from falling off the rope. If you're never allowed to get on that rope because you're not employable even at minimum wage, you're likely to stay in the net forever. Soon enough most people around you rely on the safety net and it becomes the social norm.

The US is so far away from that I wouldn't worry too much. See original article. People often seem to hypothesise and focus on bad things that could happen at the expense of bad things that are happening. The is plenty of room in between the two extremes of US and France.

Most retail and fast food businesses are running on razor thin margins, especially when the economy starts to weaken. There are a few exceptions.

There was a lawsuit in the last few years between Burger King and its franchisees because Burger King required them to sell the double cheeseburger for $1. The franchisees could not afford the extra slice of cheese on the burger or they would lose money on it. This was the reason McDonald's created the McDouble which was two patties and one slice of cheese.

McDouble Story: https://abcnews.go.com/Business/Economy/story?id=6803935

Your theories about cheap housing being a boon for everyone is hardly a thorough, long-term analysis. Plenty of history shows that constructors will cut corners for profit and build unsafe and/or unattractive housing that is ultimately a negative impact on an area. There are also other problems with lack of restrictions, like how it is easier to tear up and build over virgin land than pave over old developments. This is the reason the industry is regulated. There’s no need to prove that to ourselves here on once more - has that theory worked recently in other countries?

Do you have any evidence or logic to demonstrate that people are inadequately houses currently due to over-regulation and not one of the other dozen factors? Such as (germane to the topic...) low wages relative to high prices, which can result from many economic causes such as interest rates, immigration and income disparity. For example, there’s plenty of housing being built in Denver right now, for people who can afford $2000 a month for a small apartment. The only factor stopping them from building apartments for $1000 a month is a profit motive, in that upscale developments have a higher margin. How would you propose to change that by deregulation?

> The only factor stopping them from building apartments for $1000 a month is a profit motive

At least in the Bay Area the high cost of housing is partially caused by construction labor costs, that are driven by the high cost of housing. There’s also a problem where an entire region generally has the same construction costs, but certain areas can command higher rents... Of course the developers are going to build where the most profits are.

While I don’t believe deregulation is a panacea, reducing regulations to make lower cost areas more competitive with the higher profit areas could be beneficial. For example development impact fees could be reduced, smaller unit sizes could be legalized and the legal process could be streamlined to reduce legal costs and uncertainty. That could in theory make projects in cheaper areas more competive with “upscale” neighborhoods.

Of course my analysis ignores the impacts that building in cheaper areas can have on the existing residents in terms of displacement, which is why deregulation is only part of the solution. Tenant rights and subsidized housing are equally important.

The main problem with regulation is zoning and NIMBY-driven development. Building codes drive up costs but zoning makes building impossible.

I agree that interest rates have a huge impact on overpriced houses, but it's not such a direct correlation to rent prices. In SF there basically is no construction but there is huge demand for rent. In other areas there is demand for expensive construction for "investment", but nobody actually rents there. In China this has led to entire ghost cities full of empty highrises. Investors are speculating that rising prices will take care of the missing rent income - and they will, at least until the next bust comes.

The situation where rent competition exists alongside building investment can only exist when both of these factors are eliminated. Interests rates need to rates. Zoning and NIMBY must go.

If you believe in supply and demand, minimum wage increases increase spending power in a group of people that tend to spend all of their money. This increases aggregate demand, leading to more jobs.

I'm not saying you can increase minimum wage as high as you like with no downsides, but it's more complicated than you're making it out to be.

That's the thing I hate about trickle down. Proponents argue that the increased savings will mean they'll hire more people, but they're not going to hire if there's no reason to. Instead, we just have less tax revenue overall. If you want more people hired, give tax cuts solely to the middle and lower classes. Give them more money to spend, and they'll spend it, unlike the rich. This then drives a need for more workers, creating a nice positive feedback loop.

If you treat people as commodity then I guess this kind of reasoning might work.

We've had multiple minimum wage increases throughout history. Many states are going through increases now of up to $5 over 4 years. So rather than hypotheticals there is ample evidence that you could use to prove your theories. Can you do that?

> If you believe that labor is not an exception to the law of supply and demand...

It's not an exception, but there are other concepts in economics that apply as well, like the multiplier effect.

This.

If we just look at supply and demand, it's a model where a business has one pool of humans for labour, and another pool for customers.

In reality, it's an incredibly complicated web where the labour associated with one business are the customers of another.

Changing the way the money is distributed within that web does not necessarily follow simple laws of supply and demand.

---

Update: I actually explain this to my kids. The money a barista earns making me a coffee goes to Netflix, or Uber, or Apple. They in turn buy PagerDuty. PagerDuty pays me. And they pay taxes. Which pays for our education.

Raising their income doesn't mean that the money just disappears from the economy, to everyone's detriment. That's actually the great thing about giving more money to labour. The amount of that money that goes to offshore tax havens is negligible.

Compare and contrast to Corporate Welfare.

The idea that regulation is the primary constraint on housing supply seems at odds with the fundamental assumption regarding real-estate markets: land owners seek the 'highest and best' use of their holdings. In the US, housing is generally a 'lower and worser' use. Usually above agriculture and often below transportation infrastructure. Hence, housing was never on the table for the HP campus that became Apple's spaceship.

Even where housing is the highest and best use, affordable housing is a 'lower and worser' use when 'affordable' means below market rate. 300 units of luxury housing requires about the same resources as 300 units of 'affordable' housing. And more work to secure financing (e.g. tax credit syndication and competitive application processes), more entitlement work in NIMBY local politics, and results in lower gross revenue with which developer fees are often correlated.

To put it another way, the rational economic model dictates that a 0.10 probability/year of selling a parcel for $10 million based on commercial use trumps a 0.13 probability/year for $5 million sale based on residential use. Of course the model needs to be more nuanced. With commercial uses the sky is the limit. There's some probability of a commercial sale at $50 million, e.g. when part of a multi-parcel acquisition or in other circumstances where the value of the parcel is determined by economic activity rather than resale.

The rational actor economic model implies that converting undeveloped or obsolescent commercial property to residential use is always unlikely. It's only a no-brainer the extreme obsolescence and high residential prices of lower Manhattan that industrial buildings get downgraded to residential lofts. At the other end, money parked in agricultural land is likely to have higher returns when the land use is upgraded to a commercial or industrial use than to a residential use. Even land upgraded to a residential use, is likely to provide higher returns from an upgrade to high end dwellings than affordable housing.

Since we’re theorizing here I’ll take a stab. A 2.5X increase will hit a lot of jobs that we don’t think of as minimum wage today. That will cause more automation in many professions, which in theory should drive down costs. This could mean it becomes cheaper to do things like construct housing, making it easier for the government to build affordable housing.

The alternative to automation is to just eliminate jobs and shut down shop. For instance, if it's unprofitable to pay someone to bag customer's items, you're not going to invest into building some advanced bagging machine. You're going to have the customer do it themselves. Now the guy that used to be able to earn at least some income bagging items is out of a job.

If by "law of supply and demand" you mean the postulate that supply is monotonically increasing and demand is monotonically decreasing with price, then you'll have a hard time finding any product that strictly adheres to it.

What economists call by that name is just a notation that carries no predictive power.

If minimum wage gets raised by 2.5 and it creates job loss wouldn’t that have to potential to still not effect people because they would only need one job instead of 2.5?

It's a bullshit calculation. It's putting federal minimum wage against the latest rents in urban areas, while maintaining the "you should only spend 30% of your income on rent" mantra.

In reality, people in urban areas earn more than federal minimum wage, they spend more than 30% of their income on rent and they don't necessarily live alone in one-bedroom apartments, which is always disproportionately expensive. They're also not working 2.5 jobs, unless it's part time jobs.

Currently inequality is high, companies are making huge profits and more and more money is going to the executives and shareholders of companies. If a company is making large profits and the minimum wage is increasd to a point where they are making a more modest profit it is still in their interest to employ the workers to keep making money.

Also, read about labour monopsony power. There are other factors at play than just supply and demand that effect the price paid for labour.