Thread by @Noahpinion

1/Today's Substack post is about a neat idea I had:

Tie minimum wage to local rent.

I think it would help make sure minimum wage is a living wage, AND provide an incentive to build more housing.

noahpinion.substack.com/p/why-not-tie-…

2/The minimum wage debate has brought attention to the fact that the minimum wage that's appropriate for small-town Oklahoma isn't the same as the minimum wage that's appropriate for New York City.

Regional differences matter!

noahpinion.substack.com/p/the-minimum-…

3/One idea is to tie minimum wage increases to changes in PRODUCTIVITY, since many people believe that productivity differences are the source of local cost and wage differences, and because making wage=productivity feels fair.

But there are big problems with that approach.

4/A second idea is to tie minimum wage increases to INFLATION. That's better, but because inflation doesn't always reflect the cost of what low-income people buy, it could end up not being a living wage.

fivethirtyeight.com/features/infla…

5/A third idea -- and the one Biden has proposed -- is to tie minimum wage increases to changes in MEDIAN LOCAL WAGES. That will be a fine approach, since we have evidence that minimum wages at 60% of local median wages are pretty safe.

But can we do even better?

6/If we want to make sure minimum wage is a living wage, we could tie minimum wage increases to the local rent.

Shelter is the biggest single spending item for poor people, absorbing over a quarter of what they spend!

7/What's more, shelter -- along with food -- is the most essential of all goods. We'd like to make sure minimum wage covers not just what poor people DO buy, but what they absolutely NEED to buy.

8/But tying minimum wage increases to local rent increases could have another beneficial effect -- it could provide an incentive for cities to build more housing!!

9/Many cities have a rent crisis. And as things stand, there's not much that the federal government can do to fight local NIMBYs and incentivize cities to build more housing.

10/But if we tied minimum wage increases to local rent, then businesses would immediately be turned into a lobby against NIMBYs!

11/Now, there are at least two big challenges for this sort of policy that I can see.

First, we don't want poor people to get swamped by the cost of other essentials like food, so we can include that in the "essentials" index too. Rent will still be the biggest item.

12/A second problem is to determine *which rents* to index too. You want to index to the rents low-income people actually pay! There are various schemes for doing this:

https://twitter.com/femboyhimbos/status/1364932176895242245

13/Here's another idea:

https://twitter.com/poach187/status/1364976107296972801

14/So anyway, there are definitely implementation challenges, but I just wanted to throw this idea out there.

(end)

noahpinion.substack.com/p/why-not-tie-…

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