Housing is not a Justification for Higher Minimum Wage

An argument currently making the rounds goes like this: America needs a higher minimum wage because a minimum wage earner working full time cannot afford his or her own apartment. It is true that in a prosperous society, everyone should have shelter. But when did we decide that one should have to pay for it all by him- or herself? There are four reasons why housing, in particular, is fallacious justification for a higher minimum wage: Housing is already being subsidized; low wage earners should not necessarily live alone; higher minimum wages reduce employment; and there are better alternatives.

First, there are already public subsidies for housing. Let's look at Massachusetts as case-in-point. There are programs to get the homeless off the street and into private housing (HomeBASE, MRVP). There are programs to pay the rent (Section 8, Raft). There are programs for veterans (Public Housing). Renters can get free attorneys and advice. There are housing non-profits with million dollar operating budgets (CHAPA). Massachusetts spent over $70 million in FY 2014 on the administration of housing programs. And we received our share of the $200+ billion HUD distributes yearly. Unlike a general increase in the minimum wage, these housing-specific programs ensure that money is spent on housing.  They ensure that housing meets minimum standards for habitability. If these programs are failing to meet their goals, they should be reworked. Any failure or shortcoming here is not justification for higher minimum wages.

Second, low wage earners are better off living with others. It's basic math. The average national rent is something like $1,000 per month (plus or minus). If one person wants to qualify for that average apartment, they will need to earn 3x the monthly rent, or $3,000, all by themselves. If they find a single roommate, their contribution to that apartment drops to $500/mo. With a third roommate, they can afford the apartment earning only $6.25/hr. Such cohabitation is not unprecedented. The average household size in 1850 was six people, three of which were adults. Sharing a living space has benefits. If one loses their job, two can provide groceries. If one has car trouble, two can give a lift. If together they select an apartment below their means, they can save for educating their children or for retirement. Living with others has benefits far beyond what minimum wage can provide.

Third, higher wages reduce employment, particularly in the housing industry. While it's true that every job has its own tricks, it does not take much education to sweep a sidewalk, to haul trash, or to pull weeds along a fence. Fewer people find work in these transitional jobs because of the minimum wage. Landlords can afford $5/hr, but at $15/hr, they don't hire. Sidewalks stay dirty, trash accumulates in basements, and fences become overgrown with maple seedlings. Or if not, these low-skilled jobs are done by high motivation, high hourly rate people employed primarily to do something else. Fewer jobs are created. Keep in mind: people need not remain in minimum wage land forever. They can move up with experience and education. Landlords and others who employ low-wage workers expect high turnover as individuals improve their lot. Increasing the minimum wage simply increases the skills required to start working.

Fourth and finally, there are better alternatives to higher minimum wages. Warren Buffet wrote in the Wall Street Journal about expansion of the earned income tax credit. It would be just as progressive and just as helpful as a higher minimum wage without any of the drawbacks, he argues. His particularly good insight is that the EITC should be paid out monthly. Housing gets rented monthly. If the EITC can be made to appear on a prospective tenant's application, it will help that tenant to meet or lower the landlord's income requirements. We do this all the time with Section 8. We can do it with the EITC as well.

So if minimum wage is the solution, housing is not the problem. We can take comfort in the knowledge that providing shelter, that most basic of all human needs, is already within reach.