[Mpls] Affordable housing and higher wages

[jeremy at utne.com]

Some time ago somebody on the Minneapolis list serve, forgive me, I've
forgotten who it was, posted an article from the Minneapolis Federal
Reserve that proposed that the real problem surrounding housing wasn't a
lack of affordable housing, rather it was a lack of appropriate income. 
Wages simply have not kept pace with speculation dating to stock investors
cashing in options and dumping the profits into the real estate market. 
Not only has this affected the price of single-family homes, but rental
property also went up.  True, the rental market is down a bit now, but
rents are still tough to make for many Minnesotans.  I found the proposal
in question to be intriguing for its originality.

In light of what this economist from the Federal Reserve proposes, why
aren't we having a discussion about raising wages in Minneapolis?  If the
affordable housing gap is really an income gap, then why aren't we trying
to address that?  Someone getting through the day on full-time work at $10
an hour can pay $520 a month, assuming the Federal 30% rule.  $10 isn't
too shabby, but that still doesn't buy a lot of home or apartment. 
Imagine if you're making the “generous” wage of $7 an hour?  That doesn't
buy much house.

There is an economist in town, Ann Markesun I believe, who makes a great
argument that we can safely raise wages in our community.  The argument
goes like this, if I understand it.  Most people paying lower wages are in
the service industry.  I like to use the example of a barber.  Likely, the
receptionist in a barbershop makes $7 an hour.  The haircut is $20
(remember, barber, not stylist).  Raising the wage from 7 to 10 requires
an outlay of $120 more per week.  Say a barber does 15 appointments per
day for five days.  That's 75 customers.  $120 divided by 75 customers is
less than $2.  So let's be generous and raise the price from $20 to $22. 
A 10% increase in price for my haircut translates into a 40% increase in
pay for someone else.  I can assure you that I won't travel to another
town for a haircut to save $2.  That's the case with most service
industry.  They're tied to geography, and the customers will generally
stay loyal to the geographic region.  You can pick up and move to
Bloomington, but you'd lose my business, because I'm not going to
Bloomington for a haircut.  Boosting wages on the low end by 40% will help
make more housing affordable, and that means less TIF financing, which
means better cash flow, and everyone benefits.

Now, how much would Target have to raise the price of greeting cards to
increase payroll that much?  I suspect not much, though I've never been
able to look at the books of one of their stores.

I would love to solicit other opinions on this.

Jeremy Wieland
Candidate, 3rd Ward City Council
www.jeremywieland.blogs.com