Tech Booms, War and The Minimum Wage

A tale of two eras, three cities and minimum-wage jobs
by Rosalea Barker

Imagine you live in a small city, say, 23,000 people. It’s been going through hard economic times lately, but so has everywhere else. Perhaps you’re lucky enough to have a job in one of the town’s small manufacturing industries fabricating hot water heaters or canning fruit. Then a hitherto small local industry, one that the whole world is now suddenly depending on, gets a shot of innovation and within a couple of years the population of your town has risen to 120,000 because of the influx of new workers.

It is WWII, the industry is building the ships that carry equipment and supplies to, first Europe, then the Pacific, and the town is Richmond, California. Here, from an exhibit at the Rosie the Riveter World War II Home Front National Historical Park, is a list of how the $61 a week you now earn at the shipyards is spent. Despite the enormous pressure on housing, your rent is only 16 percent of your income, thanks to federal regulations controlling prices and rents.

Now zip across the Bay to the 49-square-mile City and County of San Francisco in modern times. Again there is a boom in a particular industry. The WWII regulations have to some extent continued in the form of rent-controlled apartments, but there are ways that landlords can get around that. According to this Living Wage Calculator created by MIT, your housing costs in SF today are *59 percent* of your income and a living wage would be $12.83 an hour.

This infographic on the Association of Realtors website for Q4 2013, shows why: San Francisco is the second most expensive housing market in the United States, after San Jose. While it’s not possible to draw a direct comparison between housing prices and rents, the fierce competition for apartments brought about by San Francisco’s tech boom is undoubtedly driving up prices, as this tweet from a local TV reporter attests:

I arrived in San Francisco in 1999 at the height of a previous tech boom, the dot-com bubble. I found a job outside that sector immediately, but it took months for me to find somewhere to live. The owners of the small tourist hotel I initially stayed at told me in disgust that cab drivers picking up tech whiz-kids at San Francisco International Airport would offer to take them straight to apartments they could immediately rent, bypassing the long queues of hopeful would-be renters. And cheating small hotel owners like themselves out of temporary guests. I never did rent anything in SF, instead moving across the Bay where my expenses are lower.

For this article, I’ve only been looking at the costs for a single person with no children, but the situation is worse for those with children. Even with San Francisco’s current minimum wage ordinance of $10.74 per hour, the cost of living in the City makes it impossible to survive with just one minimum wage job. Complaints that raising the minimum wage would kill small businesses and lead to a loss of jobs seem to be refuted by this recent article about SF’s low unemployment rate of 4.4 percent, featuring a business that is thriving despite the higher wages.

Meanwhile, up north in Seattle, the city council voted unanimously on June 2 to raise their minimum wage to $15 over the next three to seven years. Not entirely happy with that victory, activists are now trying to get a measure on the ballot in November to have the wage hike implemented immediately in large businesses. One of the biggest supporters of the Seattle living wage campaign is local venture capitalist Nick Hanauer. In this Bloomberg View blog written at the time Congress was considering a federal minimum wage of $15 per hour, he gives “The Capitalist’s Case for a $15 Minimum Wage.”

Hanauer’s theory of middle-out economics (as opposed to trickle-down economics) is disparaged as “fact-free” on this National Review blog. The writer’s opinion about middle-out is that it’s “a new term for the old leftist dream of redistribution over wealth creation.” Perhaps James Pethokoukis has never seen the video embedded in this story about Portland’s divestment from Walmart. It explains how little extra Walmart shoppers would have to pay for items in order for the workers there to be paid a living wage and not have to depend on federal government food stamps.

Surely Pethockoukis doesn’t condone wealth creation (for the Walton family) being predicated on their reliance on welfare assistance (for their employees)?