Too often, government efforts to help the underprivileged or the young tend to have the opposite effect. Take two legislative bills that are on the governor’s desk: an increase in the minimum wage and the bill to allow governments to include inclusionary housing mandates on developers.
Yesterday on this site, Loren Kaye pointed out that the new minimum wage law, AB 10, expected to be signed by the governor, would have a negative effect on teenage and young adults trying to break into the workforce. He cited the writings of economist Robert Samuelson who noted companies that think the increase would cut deeply into their profits won’t expand. Another economist cited by Kaye said youth employment would decrease because of the legislation.
While legislators understandably are concerned about a weakening middle class, they lose sight of the role minimum wage jobs play in the economy. For the most part they are a way for the young to get a start in the business world. Fewer opportunities are likely to exist when the minimum wage increase becomes law.
The housing bill, AB 1229, is designed to overturn a court ruling that pulled back local government authority to demand developers set aside affordable housing units.
The legislators’ motivation is clear—to help provide low income housing in a high priced market. However, again economists point out that the end result of the law could be quite different.
A number of economists wrote the governor on behalf of the building and real estate industries that oppose the bill arguing that inclusionary rules result in price increases while limiting the housing supply. In their letter, the economists cited a study out of San Jose State University that “found inclusionary zoning is an ineffective public policy response to high housing prices.”
So, while the legislation is designed to keep prices low for the few, housing prices go up overall, which affects everyone looking for housing.
And, let’s not forget that many in the legislature have their eyes on other plans to increase housing costs by making it easier to raise property taxes.
While there may be good intentions behind some of the legislative action, the end results may not be what the legislators bargained for. Governments can pass laws but the laws of economics and unintended consequences can trump good intentions.