Raising the Minimum Wage – Indispensable for Affordable Housing

minimum-wage

Last Thursday, two prominent newspapers, the Washington Post and New York Times, had stories on their front pages about raises in the minimum wage. In New York State, it is likely that fast food workers will have a minimum wage of $15 per hour. In Washington DC, the voters are likely to vote in 2016 whether to increase the minimum wage to $15. Currently, the minimum wage is $10.50 and is scheduled to increase to $11.50 next year in the District of Columbia, a policy change which took years of organizing and political work to make happen.

Affordable housing and minimum wage policy go hand-in-hand, creating housing that families can afford with enough income left over for other basic necessities. Even if the minimum wage increases to $15, it would probably take two wage earners in a household to afford unsubsidized housing in the District of Columbia. The DC Fiscal Policy Institute calculates that in 2010, about two-thirds of households with incomes below 30 percent of area median income, or $31,050 for a family of four, paid more than half of their income on housing.

A minimum wage of $15 per hour brings a full time worker to about $31,200 in annual income or the income for households that was likely to result in a severe cost burden or spending more than half of income on housing. The minimum wage in the District of Columbia has just raised to $10.50 or $21,840 per year, which is clearly still too low to afford housing. Manna has sold affordable homes to families making around or under $30,000, but we and other affordable developers cannot build enough to meet low-income working families’ needs. There is not enough vacant housing stock and public and private subsidies to build enough affordable housing for low-income households without also making efforts to raise wages.

Opponents of minimum wage increases state that while it is laudable to increase workers’ wages, the increases will generate more unemployment because the cost of production will increase and profits will be reduced below minimums needed to sustain small businesses. When wages increase beyond a certain point, the opponents of wage increases will be correct. However, the minimum wage has not kept up with inflation. Paul Krugman, a Nobel Laureate economist and columnist in the New York Times, states that minimum wages have not kept up with inflation for four decades while worker productivity has doubled. There is clearly room to raise the minimum wage.

Moreover, Krugman documents that states that raised minimum wages did not experience increases in unemployment when neighboring states left minimum wages the same. Finally, there is a motivational factor at play. If a company pays a worker decent wages, the worker will be more committed, work harder, and call in sick less frequently. The positive experiences of Costco which pays relatively good wages is contrasted with the poor work environment of Walmart that has lower wages and benefits (http://www.nytimes.com/2015/04/03/opinion/paul-krugman-power-and-paychecks.html and http://www.nytimes.com/2015/07/27/business/economy/scale-of-minimum-wage-rise-has-experts-guessing-at-effect.html?_r=0).

During the coming year, the debate over the minimum wage will ebb and flow. It will get heated. But just remember that adequate increases are long overdue, and affordable housing construction and programs are only part of the solution. Housing has become so expensive in Washington DC that we need multiple policies to make it more affordable for DC workers to have a chance at actually living in DC. It’s time for more change and living wages!

 

Josh Silver is the Development Manager at Manna, Inc. Prior to his time at Manna, Josh served as Vice President of Research & Policy at NCRC. Josh is an avid District sports fan and loves spending time with his daughter.

One thought on “Raising the Minimum Wage – Indispensable for Affordable Housing”

  1. Employment (and decent wages) are key (but often overlooked) components of an affordable housing strategy. However, as workers’ wages rise, landlords tend to increase rents. Rent control in the District of Columbia should help moderate those increases, thereby making the increase in minimum wage more effective.

    Another technique for increasing employment and moderating housing prices would be to shift the property tax off of privately-created building values and onto publicly-created land values. Communities that have made this shift have increased employment in construction and related trades while reducing prices for both buildings and land.

    For more information, see Breaking the Boom and Bust Cycle at http://webapps.icma.org/pm/9407/public/cover.cfm?author=Rick%20Rybeck%20and%20Walt%20Rybeck&title=Break%20the%20Boom%20and%20Bust%20Cycle&subtitle=

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