Seattle sees fallout from $15 minimum wage, as other cities follow suit

[FollowChrist34]

I am in agreement here.
I have believed for a long time that most could afford to build their own home if not for the regulations.

With one drawback - removal of zoning regulations feeds a developer, cheap housing, short-term profit frenzy. The integrity, history and livability of a community is destroyed in no time (sometimes built up over a century or more). The really poor are still out in the cold and anyone who can gets out asap, especially families. The process repeats itself somewhere else. Once the historic buildings and shared neighborhood identity and character are gone - you will never get them back. Nor the livability, nor the real sense of community. And so we march on, leveling, leveling, in misery. Throw the baby out with the bathwater.

 

[Erich]

If we really wanted to help poor people we would get rid of most government regulation.

And most government “assistance.”

The federal government actually runs something like 126 separate anti-poverty programs, managed by 13 different agencies… and something like 33 different housing programs. It’s hard to find a government department that doesn’t run an anti-poverty program. All this adds up – and this is just the federal government – to the tune of $20,610 for every poor man, woman and child in the country.

For a poor family of three, that’s nearly $62,000 dollars. The poverty line for that family is just $18,500. With this kind of spending, poverty should be wiped out - instead it’s growing.

 

[exnihilo]

With one drawback - removal of zoning regulations feeds a developer, cheap housing, short-term profit frenzy. The integrity, history and livability of a community is destroyed in no time (sometimes built up over a century or more). The really poor are still out in the cold and anyone who can gets out asap, especially families. The process repeats itself somewhere else. Once the historic buildings and shared neighborhood identity and character are gone - you will never get them back. Nor the livability, nor the real sense of community. And so we march on, leveling, leveling, in misery. Throw the baby out with the bathwater.

I’m not sure why you think that. There are plenty of historical buildings in my community that are quite old by New World standards. Many of the historical buildings survived because in the absence of laws they were able to be put to some use. With laws like the ADA if you modify a structure you are required to meet ADA rules which can raise costs even to a point of making it prohibitive.

Also, in many places the poor tend to live in neighborhoods that used to be nice, new homes. There is a sort of constant migration of rich to new neighborhoods and poor to old ones.

And most government “assistance.”

The federal government actually runs something like 126 separate anti-poverty programs, managed by 13 different agencies… and something like 33 different housing programs. It’s hard to find a government department that doesn’t run an anti-poverty program…

Well there is a war on poverty. You know how most US wars turn out? There is no victory and they go on forever.

 

[Inquiringperson]

If the benefits that the state give rise above what people can make at 15 dollars, then people will likely go for the higher ‘wage’, which would be State benefits.

I suppose if the there is some kind of graduated scale of benefits tapering off for the working poor as the earn more money, rather than disappearing completely, then there would be profit in working. But that would work at any minimum wage.

It would be very difficult for a federal government to control such things in a system where states differ significantly in the kinds of programs and economic opportunities that they have to offer. I am not sure why this would be mandated at a federal level, except for its populist appeal.

I think that’s the reason.That or Bernie Sanders is delusional.

 

[Inquiringperson]

The problem is not that they get lazy; the problem is that at certain points, they lose more in government aid than they gain in wages.

If they lose their housing aid as the result of wages which have increased, bit not enough to cover their rent, then the wage hike harms them and their family.

These “cliffs” do act as perverse incentives as Ridgerunner mentioned.

I remember Rick Santorum talking about that concept in his “Blue Collar Conservatives” book.

 

[stinkcat_14]

With one drawback - removal of zoning regulations feeds a developer, cheap housing, short-term profit frenzy. The integrity, history and livability of a community is destroyed in no time (sometimes built up over a century or more). The really poor are still out in the cold and anyone who can gets out asap, especially families. The process repeats itself somewhere else. Once the historic buildings and shared neighborhood identity and character are gone - you will never get them back. Nor the livability, nor the real sense of community. And so we march on, leveling, leveling, in misery. Throw the baby out with the bathwater.

Actually this is false. Houston does not have zoning regulations and it is a thriving city. No city has ever been harmed by the lack of zoning. But poor people are always harmed by zoning. Zoning does absolutely nothing positive for the poor, it harms them by driving up real estate prices and rents.

 

[Thomas_White]

What I am saying is that if there is a buck to be made for people to ask for lower hours, then that is a rational decision for them to do just that. They are the market in that instance.

In this case, the experts deem that a higher minimum wage is better for them. But those who make the decisions for their own lives can only benefit from that higher minimum wage if they work less hours. So if that is the case, the market- that is the people making the economic decision to work shorter hours- are making the rational choice, and the experts who raised the minimum wage have miscalculated and their policy is having the opposite effect intended.

A major factor leading to the 2008 financial crisis were sub-prime mortgages, where lenders provided high-risk loans to buyers when both parties knew, or reasonably should have known, that the buyers did not have the financial means to repay the loans. In what way were markets acting rationally?

Is it the assumption that humans will invariably behave rationally? I would suggest there is plenty of evidence to the contrary.

 

[stinkcat_14]

A major factor leading to the 2008 financial crisis were sub-prime mortgages, where lenders provided high-risk loans to buyers when both parties knew, or reasonably should have known, that the buyers did not have the financial means to repay the loans. In what way were markets acting rationally?

They were acting rationally in a number of different ways. For example, subprime mortgages for much of the early 2000s were immensely profitable. They had high interest rates and high points and if a borrower got into trouble, real estate prices were going up, so the borrower could sell the property before foreclosure and both the lender and borrower would profit. Also, our corporate laws which limit the risk of owners of corporations may have encouraged excessive risk taking. Especially on the part of managers with a small stake in the firm.

Is it the assumption that humans will invariably behave rationally? I would suggest there is plenty of evidence to the contrary.

The test of a model is not whether the assumptions are reasonable, but whether the model makes accurate predictions. We can come up with exceptions to rationality, but models that assume irrationality don’t predict as well that those that do assume rationality.

 

[Ridgerunner]

They were acting rationally in a number of different ways. For example, subprime mortgages for much of the early 2000s were immensely profitable. They had high interest rates and high points and if a borrower got into trouble, real estate prices were going up, so the borrower could sell the property before foreclosure and both the lender and borrower would profit. Also, our corporate laws which limit the risk of owners of corporations may have encouraged excessive risk taking. Especially on the part of managers with a small stake in the firm.

The test of a model is not whether the assumptions are reasonable, but whether the model makes accurate predictions. We can come up with exceptions to rationality, but models that assume irrationality don’t predict as well that those that do assume rationality.

Far and away most of the loans sold to the “secondary market” were “without recourse” to the original lender. That, and little concern about underwriting standards on the part of FNMA and FHLMC, who weren’t the whole market but were the biggest players and set the way things worked.

Such a deal! Mortgage brokers proliferated like mushrooms after a spring rain. Bankers joined in. Make a bad loan, sell it into the secondary market, take your loan origination fee and yield discount, and go make another one.

From their standpoint, it was a perfectly rational thing to do. From the government’s standpoint, it was entirely irrational.

From the standpoint of the buyers of the mortgage-backed bonds, it was irrational, because they had no idea what was behind the bonds and assumed there was an implicit government guarantee of FNMA and FHLMC bonds when there wasn’t.

 

[stinkcat_14]

Far and away most of the loans sold to the “secondary market” were “without recourse” to the original lender. That, and little concern about underwriting standards on the part of FNMA and FHLMC, who weren’t the whole market but were the biggest players and set the way things worked.

Such a deal! Mortgage brokers proliferated like mushrooms after a spring rain. Bankers joined in. Make a bad loan, sell it into the secondary market, take your loan origination fee and yield discount, and go make another one.

From their standpoint, it was a perfectly rational thing to do. From the government’s standpoint, it was entirely irrational.

From the standpoint of the buyers of the mortgage-backed bonds, it was irrational, because they had no idea what was behind the bonds and assumed there was an implicit government guarantee of FNMA and FHLMC bonds when there wasn’t.

This is true. The interesting thing is the secondary market solved one important problem in the banking industry, the fact that S and Ls were funding mortgages with short term deposits. They also virtually eliminated regional mortgage rate differences. The problem was they solved those problems and created another one. That seems to be the pattern in finance, one risk is left uncovered, then that factor gets hit and everything crashes.

 

[Ridgerunner]

This is true. The interesting thing is the secondary market solved one important problem in the banking industry, the fact that S and Ls were funding mortgages with short term deposits. They also virtually eliminated regional mortgage rate differences. The problem was they solved those problems and created another one. That seems to be the pattern in finance, one risk is left uncovered, then that factor gets hit and everything crashes.

I’m guessing some lenders learned their lesson. I’m seeing much better underwriting by the banks that have their own securitization subsidiaries. With FNMA and FHLMC not really, but bank originators are doing better underwriting than are the mortgage companies.

The worst underwriting is (naturally) for the federally insured programs like FHA, VA, First Time Homebuyers’, Rural Development. Those are almost always well in excess of the actual purchase price of the property. Prices are inflated to allow “seller credits” to buyer to pay the costs, and the appraisals miraculously are enough to cover all of that. Borrowers are well upside down on day one.

One of the additionally bad things about over-lending in guaranteed loans (besides hanging taxpayers with default losses) is that it tends to inflate appraisals all by itself because the “comparable sales” appraisers can use are inflated.

Not as bad a situation as before, because there are so many bank subsidiaries doing their own securitization and the lenders are therefore much more careful in underwriting. But the government guaranteed sector is greatly expanded from what it was even before 2007, and that’s where the worst abuses are.

 

[gamewell45]

Fox News:

That could backfire on restaurants. If tipping is being discouraged, there might not be much of an incentive for waiters/waitresses to ensure promptness and delivery of correct orders. Getting the wrong dish or a cold one at that could drive away business. I’m sure the owners will re-think their position on this over time; especially if enough customers start patronizing restaurants who encourage tipping.

 

[Theo520]

We don’t seem to believe that for jobs in law and medicine where we seem quite content to use government policy to artificially increase wages.

I don’t follow, are you dishing on public unions and the AMA?

 

[Theo520]

A major factor leading to the 2008 financial crisis were sub-prime mortgages, where lenders provided high-risk loans to buyers when both parties knew, or reasonably should have known, that the buyers did not have the financial means to repay the loans. In what way were markets acting rationally?

Is it the assumption that humans will invariably behave rationally? I would suggest there is plenty of evidence to the contrary.

At the time it was a can’t lose proposition for the high risk homeowner, playing roulette with other people’s money. If the market kept rising, they did well, if it tanked, they lost their house but probably saved vs paying rent.

 

[Tsuwano]

The power of the market exceeds minimum wage for most jobs.

Yes, and the power of collective bargaining.

 

[stinkcat_14]

I don’t follow, are you dishing on public unions and the AMA?

The AMA is definitely part of it. After all, they fight any attempt to reduce occupational licensing restrictions in medicine. I did not intend the example of public unions, but they are another example. I was referring to the fact that the ABA goes after the unauthorized practice of law, not because nonlawyers aren’t competent and capable of practicing law, but because they want to protect their barrier to entry and drive up lawyer salaries.

 

[FollowChrist34]

I’m not sure why you think that. There are plenty of historical buildings in my community that are quite old by New World standards. Many of the historical buildings survived because in the absence of laws they were able to be put to some use. With laws like the ADA if you modify a structure you are required to meet ADA rules which can raise costs even to a point of making it prohibitive.

Also, in many places the poor tend to live in neighborhoods that used to be nice, new homes. There is a sort of constant migration of rich to new neighborhoods and poor to old ones.

Well there is a war on poverty. You know how most US wars turn out? There is no victory and they go on forever.

In Seattle right now the are trying to rezone the entire city to allow for more development - low income housing. I was talking from my own personal view. This will destroy the historical unique neighborhoods of Seattle in 20-50 years. Once they are gone, they are gone forever. We will end up much closer to LA than Boston believe me. And still have the poor without homes. In my neck of the woods zoning is our only hope to preserve the livability of our neighborhood communities. (the whole reason so many flocked here - now the whole place is being transformed for the worse - under cover of helping the poor, my favorite part)