Increasing wages will not help as they will be captured by rising rents. I hate to get all Georgist here, but landowners are not creating economic value. In fact, by supporting zoning laws they are vastly worse than landowners historically. They are leaching off the productivity of the city. The moustache-twirling villains are not the business owners nor even the corporations, it is the land owners who created nothing yet receive most the value these workers generate. Just because this is a tyranny of a majority who owns, this does not make their yoke any less evil.
From a policy perspective, I like federal land-value taxes that tax based on the counterfactual value of the land absent zoning restrictions, which would internalize the costs of zoning on landowners.
But almost no common law jurisdiction has escaped the zoning-law trap, save for Texas. So I don't see it getting better any time soon.
> landowners are not creating economic value. ... They are leaching off the productivity of the city.
I think this is the nub of it. Whilst increasing rents might look good in the context of an economist's "perfect" model, the reality sucks ass for actual human beings trying to make a living and have a decent quality of life. And I cannot overstate the importance of the latter.
I don't pretend to know what the answer is here, particularly not in the context of a US economic and legal milieu (I'm from the UK), but it certainly seems like there's a strong disparity in power between landlords and tenants (possibly fostered by the legislative environment) that needs to be addressed.
Increasing wages obviously would help. The other workers at Facebook (i.e., these people’s coworkers) who make six figures are able to live comfortably.
I agree with you that our economic model for housing and land ownership needs to change though.
The real problem is that there is not enough housing that people want. I do not see how taxes, rent controls, minimum wage laws and other measures that do not address the fundamental problem of there not being enough quality housing can solve the problem.
You either:
1. Build more housing. But where? Ask about any specific project, and people are usually against it.
2. Redistribute existing housing. E.g. does everyone that lives in London really need to be in London? By definition, it will be a painful solution for some and require the use of force. Making existing neighborhoods nicer to make them more attractive for a particular demographic also fall into this category.
3. Spread people/jobs/businesses around more. This includes encouraging remote working practices where possible (but this will not help the kitchen staff). Perhaps turn currently depressed areas into some forms of free(r) economic zones, where taxes are lower and there is no requirement for planning permission?
4. Get better transport links. If trains were fast, went on time, were reliable and comfortable, more people would take the option of commuting and they would commute further out.
This is a simplistic analysis of the situation with some misconceptions.
Landowners supply land, one of the key inputs to the economy. It is part of the capital behind almost all economic activity. Trying running a business - or even living - without using at least some real estate. This is a very fundamental economic misconception.
Landowners don’t support zoning restrictions on their own land. And while many support zoning restrictions generally so do non-landowners (see surveys on the issue). Plus landowners are a minority of voters in the areas with the most restrictive zoning like SF and NYC.
Taxing landowners as if they control their own zoning would distort incentives in bizarre ways. They are already bearing the costs of not being able to fully develop their property. (A negative tax might make more sense!?)
IMHO the core problem is granting local politicians strong powers over zoning because they can gain both support and contributions (legal & illegal) by manipulation zoning. Their powers need to be limited by strong property rights (like in some parts of TX).
A secondary issue in economic and financial illiteracy. There are so many misconceptions about this issue that people often act against their own interests.
Unfortunately I have to agree it is unlikely to get better soon but there are some hopeful developments.
If I were to buy a house there I would probably make no money renting for efficient market reasons. The bank would probably absorb all the money I could make into interest, after all why wouldn't they? The only people who are benefitting are the previous landowners, who saw the appreciation.
It's not the land owners at all. It's the legislators who restrict zoning. You may argue that the land owners "push" for legislation, but ultimately it's the choices of our Elected Officials.
A) So what should these landowners be doing according to you besides jumping off of a bridge? Are you against private property. Or did just exactly the set of evil people happen to be also be exactly the set of people who wanted to buy property
B) So what should we do, a Mao style repossession from everyone who bought land totally fairly according to the legal system they bought it in?
C) You honestly believe they are mustache twirling villains don't you?
> Increasing wages will not help as they will be captured by rising rents.
That isn't as true at the low end. When there are a bunch of people making $200k-$300k, and a bunch of people making $20k-$30k, increasing wages for the former isn't going to cause as much rent competition since the latter already dwarfs buying power in the market.
Reducing income disparity is effective in the longer term by just making everyone a bit more equal in their buying power.
At this point I fully support the "nuclear option" against NIMBYs: the state needs to step in and override local zoning. Local zoning boards have proven themselves to be self-interested obstructionists who are only interested in bleeding cities dry by restricting supply to profit off real estate inflation. My ears are pretty much closed to any appeal otherwise. NIMBYs can go to hell.
"It is those other rich people's fault." While the specifics of what you wrote are certainly true, it's the capitalists that are the problem. It is a class of people. High earners, for example executives of corporations, are oftentimes the same people as the property owners.
Many restaurant owners in the bay area are annoyed at Google and Facebook, because they keep on hiring away their line cooks and other staff with higher pay and better benefits.
I suppose this article is on the front page because it bashes tech companies though.
It can simultaneously be the case that restaurant workers are underpaid and that the jobs at Facebook/Google are better paid. These workers may have improved their pay but still not be making enough to make ends meet.
Also, in many (but certainly not all) restaurants tips are shared with back of house staff.
> Many restaurant owners in the bay area are annoyed at Google and Facebook, because they keep on hiring away their line cooks and other staff with higher pay and better benefits.
To be fair, and this is certainly the case in the UK for all but the 0.1% of absolute best restaurants, this is not a terribly high bar for Google and Facebook to stagger over.
Restaurant pay is, by and large (and even in restaurants that serve good food), not good at all.
The bay area Housing situation is hopelessly screwed up. There's no way in we're going to be able to undo 50 years of political insanity and build enough housing for everyone in just a few years. It's time we accept that hiring in the bay area is no longer feasible. Right now, this isn't Facebook's problem. As long as there's still desperate people to hire, then they'll always be able to hire more.
We (the people that work for these companies and the voters within the city) need to take a stand, and start lobbying these companies to get out of the bay area. Or at the very least, we need to start asking for much higher salaries. 600k to 800k needs to be the norm to live in palo alto to afford an average house (2.5M - 3.5M).
Personally, I don't think people are going to be able to do it. There's such a vast oversupply of labor, that the employers have a much stronger bargaining position.
There's still many other cities with plenty of tech people to hire. i don't see why all tech companies have to be in the 1 place where local voters don't want any residential growth.
Employment has inelastic demand, people will work for anything to survive because they have to. It’s that or get your way into disability, which an increasing number of people do.
I hope these people manage to get better pay. I hope the same thing happens all across the Bay Area in all service jobs, and I hope the pressure trickles up until the tech employees feel the squeeze of $25 burritos, plus even worse rents as the people making their lunches can afford to live in the city and compete for housing. Then I hope people either stop accepting tech jobs in the Bay Area, or companies decide it's a losing proposition to set up shop in a place where you have to pay $250k a year to a new grad.
We've got better communications and networks than any time in history. Why do software companies, which consume no raw materials and produce no physical product (both good reasons for setting up in a port city), all need to cluster in half a dozen spots? Think how much more runway you could get out of your seed funding if you set up shop in Missoula or Albuquerque, where you can rent a whole house for $1500/mo, can hire from the local university, and have beautiful outdoor recreation within a 15 minute drive?
Missoula or Albuquerque are nice places to live in. But, the supply of talent is very limited and not so diverse. In the Bay Area, you have so much talent concentrated that its easy to get people iff you pay the right amount of money(which is pretty high)
The fastest and most effective way to increase the pay for all low wage workers is to abolish sales taxes. This implies no cost for companies and increased income for all citizens. The city only needs to reduce its spending 25% to achieve that. Considering it already has one of the highest and most inefficient government expenditure rates in the world, its easily achievable with very little fiscal discipline.
The answer of course is to distribute. Silicon Valley has an echochamber problem already, maybe it's time for these companies to spread out/move their HQs across the US. There's plenty of room.
What's so special about the bay area? Surely if FAANG move somewhere else their employees will follow.
Toyota moved their headquarters from LA to Dallas a couple years ago, and they retained 2/3's of their HQ employees in the move. FAANG isn't exactly the same but it's the closest example I could find of a recent large scale move from California.
If there is a point where the tech industry starts to grow less and be more stable, you'll probably see some companies trying to make the move. But right now it'd be too disruptive to potentially lose 1/3 of your HQ employees in a move and screw up any growth plans you had.
I have a huge amount of sympathy for these people. Clearly something is going wrong and they shouldn't be the ones dealing with it. That said...
> "When a company is trying to pay you the same rate that they pay in other cities, we can’t accept that." [said a line cook]
If it works for other cities, the problem clearly isn't the rate of pay. The problem is probably local politics of housing. Demands like that are not completely reasonable.
> If it works for other cities, the problem clearly isn't the rate of pay.
Ok. So if they earned 5 dollars a day, it would be ok because it works for cities in third world countries? I think it's obvious that the local cost of living is always a relevant factor in pay.
Today, in SF, you have more power in wage negotiations than local housing politics. It's reasonable to work towards what appears to be the more likely solution to your problem.
I was kind of shocked when I saw the $23/hr, because that's a pretty high wage for a line cook. Like I could not imagine anywhere else except for maybe NYC where a line cook would protest with that rate.
According to the MIT Living Wage Calculator, he would be able to support himself on that but it'd be difficult if he had any dependents. http://livingwage.mit.edu/metros/41860
Its quite daunting that the employees find it easier to compel facebook to increase their salaries, maybe 10%, than to complain on city hall that puts the rules that made their rent 300% of what they were.
At ~500k/unit, neither municipal nor state government can afford to build public housing in any meaningful quantity. We just had a huge electoral battle over a measure that raises taxes for only a few thousand units (Prop C). Millions of them would be required. Rent control expansion is both popular and technically doable, but would require repealing Costa-Hawkins, which survived this year's challenge.
You will never see a left-leaning activist group representing the working class in California support a "let the market work" sort of policy like more for-profit development permits. Those ideas - public housing, rent control, increased supply - are pretty much the policy levers, and none are going to happen at scale within this set of voter preferences.
On an economical level, what's a better solution? Facebook paying their kitchen staff more (than the current $23/hr), or SF taking steps to lower its cost of living so that "one job should be enough" to get by on minimum wage (currently $15/hr)? Or something else?
Isnt this the common situation in most of Bay Area for service workers? Im in no way associated to Facebook, but I think its a bit unfair to call them out just to make the headline sensational. They're just another tenant in the Bay Area.
The truth is that the only way to increase wages is to protest or to quit their jobs en masse so I support these workers protesting. The problem with low-skilled jobs is that there's probably someone waiting to take their job at $23/hr, but that's how the system works and unfortunately low-skilled jobs don't have a tremendous amount of value. This is the counter argument to allowing illegal immigrants - they are more willing to take these low-skilled jobs and to suppress wages much longer.
Instead of creating a useless currency, Facebook should of allied itself with 20 other tech companies and created a brand new city, in the middle of nowhere. One that was built from the ground up to be sustainable and affordable where everyone can walk or scoot to work. A city unhindered by zoning or burdensome regulations. Then connect it to some of the existing cities with high speed trains or helicopter buses. It would be a win win situation for everyone involved.
I've recently reached a personal finance threshold where I'm making a substantial return e.g. enough to live on on a relatively "low risk" mix of index funds/stock investments. It made me realize that being in a position where your money is "working" for you is really the starkest difference between the rich and the poor.
This housing crisis is going on for long time. I was wondering why don't these tech giants build housing complex for their employees.
It would definitely solve a lot of issues, including controlled and balanced housing cost for the employees, group/public transport, and above all a vibrant community.
[+] [-] ZhuanXia|6 years ago|reply
From a policy perspective, I like federal land-value taxes that tax based on the counterfactual value of the land absent zoning restrictions, which would internalize the costs of zoning on landowners.
But almost no common law jurisdiction has escaped the zoning-law trap, save for Texas. So I don't see it getting better any time soon.
[+] [-] bartread|6 years ago|reply
I think this is the nub of it. Whilst increasing rents might look good in the context of an economist's "perfect" model, the reality sucks ass for actual human beings trying to make a living and have a decent quality of life. And I cannot overstate the importance of the latter.
I don't pretend to know what the answer is here, particularly not in the context of a US economic and legal milieu (I'm from the UK), but it certainly seems like there's a strong disparity in power between landlords and tenants (possibly fostered by the legislative environment) that needs to be addressed.
[+] [-] ihm|6 years ago|reply
I agree with you that our economic model for housing and land ownership needs to change though.
[+] [-] agent008t|6 years ago|reply
You either:
1. Build more housing. But where? Ask about any specific project, and people are usually against it.
2. Redistribute existing housing. E.g. does everyone that lives in London really need to be in London? By definition, it will be a painful solution for some and require the use of force. Making existing neighborhoods nicer to make them more attractive for a particular demographic also fall into this category.
3. Spread people/jobs/businesses around more. This includes encouraging remote working practices where possible (but this will not help the kitchen staff). Perhaps turn currently depressed areas into some forms of free(r) economic zones, where taxes are lower and there is no requirement for planning permission?
4. Get better transport links. If trains were fast, went on time, were reliable and comfortable, more people would take the option of commuting and they would commute further out.
[+] [-] spikels|6 years ago|reply
Landowners supply land, one of the key inputs to the economy. It is part of the capital behind almost all economic activity. Trying running a business - or even living - without using at least some real estate. This is a very fundamental economic misconception.
Landowners don’t support zoning restrictions on their own land. And while many support zoning restrictions generally so do non-landowners (see surveys on the issue). Plus landowners are a minority of voters in the areas with the most restrictive zoning like SF and NYC.
Taxing landowners as if they control their own zoning would distort incentives in bizarre ways. They are already bearing the costs of not being able to fully develop their property. (A negative tax might make more sense!?)
IMHO the core problem is granting local politicians strong powers over zoning because they can gain both support and contributions (legal & illegal) by manipulation zoning. Their powers need to be limited by strong property rights (like in some parts of TX).
A secondary issue in economic and financial illiteracy. There are so many misconceptions about this issue that people often act against their own interests.
Unfortunately I have to agree it is unlikely to get better soon but there are some hopeful developments.
[+] [-] whatshisface|6 years ago|reply
[+] [-] fortran77|6 years ago|reply
[+] [-] usefulcat|6 years ago|reply
If by 'Texas' you mean 'Houston', then yes. AFAIK most if not all other major TX cities have more traditional zoning laws.
[+] [-] anm89|6 years ago|reply
A) So what should these landowners be doing according to you besides jumping off of a bridge? Are you against private property. Or did just exactly the set of evil people happen to be also be exactly the set of people who wanted to buy property
B) So what should we do, a Mao style repossession from everyone who bought land totally fairly according to the legal system they bought it in?
C) You honestly believe they are mustache twirling villains don't you?
[+] [-] seanmcdirmid|6 years ago|reply
That isn't as true at the low end. When there are a bunch of people making $200k-$300k, and a bunch of people making $20k-$30k, increasing wages for the former isn't going to cause as much rent competition since the latter already dwarfs buying power in the market.
Reducing income disparity is effective in the longer term by just making everyone a bit more equal in their buying power.
[+] [-] api|6 years ago|reply
https://en.wikipedia.org/wiki/Law_of_rent
At this point I fully support the "nuclear option" against NIMBYs: the state needs to step in and override local zoning. Local zoning boards have proven themselves to be self-interested obstructionists who are only interested in bleeding cities dry by restricting supply to profit off real estate inflation. My ears are pretty much closed to any appeal otherwise. NIMBYs can go to hell.
[+] [-] sandino|6 years ago|reply
[deleted]
[+] [-] jressey|6 years ago|reply
[+] [-] forgotmyhnacc|6 years ago|reply
I suppose this article is on the front page because it bashes tech companies though.
[+] [-] Pfhreak|6 years ago|reply
Also, in many (but certainly not all) restaurants tips are shared with back of house staff.
[+] [-] bartread|6 years ago|reply
To be fair, and this is certainly the case in the UK for all but the 0.1% of absolute best restaurants, this is not a terribly high bar for Google and Facebook to stagger over.
Restaurant pay is, by and large (and even in restaurants that serve good food), not good at all.
[+] [-] TYPE_FASTER|6 years ago|reply
[+] [-] sandino|6 years ago|reply
That the tech industry's pay levels are, ergo, no problem at all?
[+] [-] cdubzzz|6 years ago|reply
[+] [-] thorwasdfasdf|6 years ago|reply
We (the people that work for these companies and the voters within the city) need to take a stand, and start lobbying these companies to get out of the bay area. Or at the very least, we need to start asking for much higher salaries. 600k to 800k needs to be the norm to live in palo alto to afford an average house (2.5M - 3.5M).
Personally, I don't think people are going to be able to do it. There's such a vast oversupply of labor, that the employers have a much stronger bargaining position.
There's still many other cities with plenty of tech people to hire. i don't see why all tech companies have to be in the 1 place where local voters don't want any residential growth.
[+] [-] chillacy|6 years ago|reply
[+] [-] mariushn|6 years ago|reply
For inspiration, would you please share an example of what you are personally doing?
[+] [-] ap3|6 years ago|reply
Why not stop working for them and work somewhere else where you can live comfortably?
[+] [-] floren|6 years ago|reply
We've got better communications and networks than any time in history. Why do software companies, which consume no raw materials and produce no physical product (both good reasons for setting up in a port city), all need to cluster in half a dozen spots? Think how much more runway you could get out of your seed funding if you set up shop in Missoula or Albuquerque, where you can rent a whole house for $1500/mo, can hire from the local university, and have beautiful outdoor recreation within a 15 minute drive?
[+] [-] theshadowmonkey|6 years ago|reply
[+] [-] conanbatt|6 years ago|reply
Thats an actual political solution.
[+] [-] chillacy|6 years ago|reply
[+] [-] cameronbrown|6 years ago|reply
What's so special about the bay area? Surely if FAANG move somewhere else their employees will follow.
[+] [-] sct202|6 years ago|reply
If there is a point where the tech industry starts to grow less and be more stable, you'll probably see some companies trying to make the move. But right now it'd be too disruptive to potentially lose 1/3 of your HQ employees in a move and screw up any growth plans you had.
[+] [-] roenxi|6 years ago|reply
> "When a company is trying to pay you the same rate that they pay in other cities, we can’t accept that." [said a line cook]
If it works for other cities, the problem clearly isn't the rate of pay. The problem is probably local politics of housing. Demands like that are not completely reasonable.
[+] [-] ashelmire|6 years ago|reply
Ok. So if they earned 5 dollars a day, it would be ok because it works for cities in third world countries? I think it's obvious that the local cost of living is always a relevant factor in pay.
[+] [-] dfxm12|6 years ago|reply
[+] [-] ap3|6 years ago|reply
[+] [-] permatech|6 years ago|reply
[deleted]
[+] [-] dehrmann|6 years ago|reply
[+] [-] cheeze|6 years ago|reply
But I agree, you could replace FB with almost any company down there.
Shit, I'd be willing to bet that line cook at FB pays quite a bit more than fast food, etc.
[+] [-] sct202|6 years ago|reply
According to the MIT Living Wage Calculator, he would be able to support himself on that but it'd be difficult if he had any dependents. http://livingwage.mit.edu/metros/41860
[+] [-] conanbatt|6 years ago|reply
[+] [-] closeparen|6 years ago|reply
You will never see a left-leaning activist group representing the working class in California support a "let the market work" sort of policy like more for-profit development permits. Those ideas - public housing, rent control, increased supply - are pretty much the policy levers, and none are going to happen at scale within this set of voter preferences.
[+] [-] driverdan|6 years ago|reply
What does that mean?
If you're recommending rent control I suggest you learn more about it. It is universally condemned by economists. Rent control does not work.
[+] [-] dfxm12|6 years ago|reply
[+] [-] traderjane|6 years ago|reply
[+] [-] bassman9000|6 years ago|reply
[+] [-] theshadowmonkey|6 years ago|reply
[+] [-] docker_up|6 years ago|reply
[+] [-] thorwasdfasdf|6 years ago|reply
[+] [-] tempsy|6 years ago|reply
[+] [-] fortran77|6 years ago|reply
http://www.ktvu.com/news/sf-city-leaders-push-to-ban-company...
[+] [-] strooper|6 years ago|reply
It would definitely solve a lot of issues, including controlled and balanced housing cost for the employees, group/public transport, and above all a vibrant community.
Is it a permit issue? Or something else?
[+] [-] cheeky78|6 years ago|reply
This is not a blueprint for the rest of the US. I hope voters take notice.