Reply to post: The simple answer: she's not being paid too little but she is paying too much rent

Yelp minimum wage row shines spotlight on … broke, fired employee

Charlie Clark Silver badge

The simple answer: she's not being paid too little but she is paying too much rent

Wages: $1,466 (after taxes)

Rent: $1,245

That's the problem. Rent should never be > 50% net income.

This is not the employer's fault. Though it does make you wonder how an employer can continue to find workers if that situation is replicated.

However, things are never really that simple. Rents in places like San Francisco tend to rise faster than wages. This is both the result of lack of supply, partly due to local restrictions (not enough housing where people want to live), but also monetary and fiscal policy favouring property and VC investment. Rents are stickier than wages: it's easy to sack people but they still lead somewhere to live; bad housing loans lead to bailouts. Furthermore, one of the main arguments used to get people to work for less than market rates is participation in equity through stock options, which everyone likes because of the preferential tax treatment. This is routinely abused by VC funded companies. They also prefer to offer perks like catering and stuff, because they are much easier to scale back than wages, they may also have preferential tax treatment. Rent controls of the European variety might to some degree mitigate against some of the excesses by limiting the amount rents can rise in any year. But San Francisco definitely needs more capacity if rents are to remain affordable.

Indeed, in places like London, you'll see government money being funnelled into the property market through things like "key-worker" schemes. A bit more free market realism wouldn't hurt there: employers will move elsewhere if they can't get employees at a rate they can afford to pay. Of course, this would mean boom then bust, but that's preferable to me than keeping the bubble going with more government money.

I believe Portland, Oregon is actually trying to limit its growth as a city because it's worried about the long term consequences of boom then bust: seeing places like Detroit as a salutary example.

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