Source: Duke Bradford, et al. v. Secretary Martin J. Walsh, et al
The floor of wages everywhere is the margin of production i.e. the profits and wages that can be earned on the best rent free locations. Everyone who understand Ricardo’s law of rent knows this except economically illiterate Marxist progressives who still think higher profits undercut wages and are apparently oblivious to the fact that most employers have landlords who charge them a premium for their establishment’s location and who themselves often pay a premium to financers for the capital they borrowed to buy and build. If we agree that tenants should have certain basic rights that their landlord should not violate and that landlords should have certain obligations to tenants then why should the same not apply to the biggest landlord in the country: the federal government? If your residential landlord bugged your apartment and spied on you people would rightfully be outraged and file suit. If your commercial landlord tried to dictate the pay structure of your business you would rightfully tell them to bugger off. The fact that we have more protections against abusive landlords than abusive governments, who often act as landlords, is nothing more than egregious despotism. So why should we think any differently about an administration that usurps the legislative powers of congress to unilaterally change the definition of federal contractor to any employer who has to pay a premium for use of federal land and water and imposes a wage floor and pay structure on them that is incongruent with their business model.
The U.S. Department of Labor (DOL), in implementing an Executive Order signed by President Biden, has ordered all federal contractors to pay a $15-per-hour minimum wage, plus overtime, starting January 30, 2022. The rule’s absurdly broad definition of “contractors” wraps in more than a half-million private firms, including 45,000 that provide concessions or recreational services—like rafting outfitters—whose only ties to the federal government are special land use permits or licenses.
Anyone who’s worked an outside sales job or any job outside of retail and food service knows that a flat hourly rate is not a universal standard of compensation. Employees and contractors can be compensated in salaries, commissions, gratuities, per diem, lump sum bonuses, healthcare and dental coverage and pension contributions. The variety and complexity of employer-employee agreements exceeds the machinations of simpletons who think a uniform wage floor is the panacea to poverty, when the problem isn’t poverty but rent burden and debt burden. This is already obvious in our metros where the cost of renting far exceeds what people can afford on a $15 hr min wage. As I’ve noted previously, policies that ignore the law of rent are almost always doomed to fail.
In the past decade, rents have only risen by an average of 36% which is higher than the 27% growth in median household income over the same period but is not as severe as the average rise in rents for big metros like Seattle (77%) or San Francisco (70%) or Phoenix (71%) or Denver (85%) or Los Angeles (65%). Over the same time period, median household income has only risen 36% in Los Angeles, 55% in Denver, 41% in Phoenix, 61% in San Francisco and 59% in Seattle. If we look at the predicament in terms of housing stability, spending no more than 1/3 of income on housing, rather than the federal poverty line, which is a poor predictor of economic outcomes given that the cost of living varies wildly across the country, we see that unskilled workers would need to make $26.51 per hour to afford a studio apartment in NYC, $42.25 per hour to afford a studio apartment in San Francisco county, $31.29 per hour to afford a studio apartment in Seattle, $24.60 per hour to afford a studio apartment in Denver.
The problem is not so much a duel between greedy employers and hapless employees but urbanization pushing the margin of production further away from CBDs through speculation and sprawl. The so-called “surplus value of labor” Marxists babble about actually goes to the landlords in rents and the bankers in mortgage/bond interest and dividends. Profits and wages fall or rise conversely with rents; rack-rents diminish the profits of capitalists, especially small business owners, just as much as they diminish the purchasing power of workers.