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2013 February 06 Wednesday
Sales Taxes And High Minimum Wages Are Anti-Decay

As I've previously argued: Raise Minimum Wage To Reduce Illegal Immigration. Here I build upon this argument. Over on Half Sigma's Lion Of The Blogosphere blog I made the point in comments that high sales taxes cut spending on local goods and services and therefore reduce migration of the lower skilled toward where the higher skilled live.

Want to create a very upper class city with low social pathology? Jack up minimum wages to $15 per hour (at least) and make sales taxes 15%. Next, institute a flat rate residence tax in place of a property tax.

Why this would make a city a better place: High earners would spend less locally and therefore their presence would serve as far less of a magnet for low earners.

  • Relatively speaking, mail order would be much cheaper. Local stores would be few and far between and so would their employees.
  • People would spend less on local repairs and opt instead to replace broken cars, appliances, etc.
  • There'd be so few jobs for the less skilled that they've move somewhere else. The city should expand its boundaries and build a big green zone around it so that cheap services do not move to just outsides city limits.

A determined city could pile on with even more measures:

  • Ban used car dealers and put an even higher tax on car repair.
  • Ban lawn mowing. Make people put in low maintenance lawns if you allow lawns at all.
  • Institute minimum bedroom sizes and 1 toilet per bedroom minimum.
  • Require all new roofs be 50 year roofs. The roofers won't keep coming back.
  • Make high end prefabricated construction the zoning preferred way to build. Less local labor for new housing.
  • Make it easy for businesses set up package pickup locations to decrease the risk of getting packages delivered while at work.

How else to cut the demand for low skilled labor in a metropolitan area? Got more ideas?

Share |      By Randall Parker at 2013 February 06 07:36 PM 


Comments
Hubbard said at February 7, 2013 6:18 AM:

This seems to be a flawed solution because there's doesn't seem to be any correlation between high minimum wages and low illegal immigration. If higher minimum wages lowered illegal immigration, then California ($8.00/hour) would have fewer illegal immigrants than New Hampshire ($7.25/hour). If anything, higher minimum wages might exacerbate illegal immigration by making legal workers too expensive.

Black Death said at February 7, 2013 8:36 AM:

"How else to cut the demand for low skilled labor in a metropolitan area? Got more ideas?"

....

How about enforcing existing immigration laws? Plus, make it a felony with mandatory jail time to illegally take a job in this country or to hire someone who has no right to be here. Seeing a few employers doing the perp walk on the nighttime news would be a big disincentive for hiring illegals.

bbartlog said at February 7, 2013 9:39 AM:

I suspect your city would have a large number of scofflaws - undocumented Mexican yard workers and suchlike. Still, as an overall blueprint, it would probably work pretty well. Unfortunately this is just a local solution, but I suppose at this point that's the best we can hope for.

Engineer-Poet said at February 7, 2013 10:06 AM:
make it a felony with mandatory jail time to illegally take a job in this country or to hire someone who has no right to be here.
Blocked by the courts.  Alabama can't even take a census to see how many children in its schools are natives, legal immigrants or "undocumented".
James Bowery said at February 7, 2013 11:48 AM:

Neither political party in the US represents labor.

Democrats represent welfare dependency.

Republicans represent corporate rent-seeking dependency.

Labor is a threat to both.

Check it Out said at February 7, 2013 6:30 PM:

That's going to be a little hard, considering there are such strong international economic forces out there, we should be paying more attention to. As we speak the world is being dragged into what seems a long swamp of currency wars, and the U.S. might not do so well in the end. Some even say that the long-due Big One is coming for the U.S. pretty soon. Europe too.

Well, who knows really. I should know better. Making economic predictions is never a safe bet. I just wonder why, before threatening events we sit around while all around Europe and Latin America it's all protests and demonstrations in so many major cities. I don't think I'll be able to bear peacefully the thought that we could've done so much before it happened, and did not.

Thre are some really important and very urgent topics to discuss here. I do hope we can bring them about again.

Check it Out said at February 7, 2013 6:41 PM:

How far is America from becoming Bolshevik State? As we speak?

Are we really aware of how much freedom are we losing?

Do we see how damaged and abused our youth is?

Have we noticed what we've become, and how fast?

Randall Parker said at February 7, 2013 7:38 PM:

Hubbard,

You do realize where New Hampshire is as compared to where Mexico is, right?

Black Death,

I'm proposing liberal solutions. They have a better chance of being enacted. Who can oppose a living wage?

James,

Yes, labor no longer has a political party.

GMBH said at February 7, 2013 7:58 PM:

"Yes, labor no longer has a political party."

And the labor "elites" don't give a flying fuck. Apparently the schmucks that pay the dues don't either.

AMac said at February 8, 2013 2:05 PM:

As Randall alluded, the best proposed solutions are ones that can be marketed to SWPL sensibilities -- reforms that address pressing problems as the elites imagine them to be.

Higher minimum wage as "living wage," already mentioned.
High sales tax to promote Social Justice.
Banning used car dealerships to fight Global Warming.
Banning lawn mowing to promote Ecological Diversity.
50 year roofs as a way to make urgent progress towards Sustainability.

The connections don't have to actually make sense in any practical way, they just have to seem to do so. And be accepted as such.
All hail marketing.

Geoff said at February 8, 2013 7:59 PM:

1. You have to keep the businesses that require cheap labor (or condone it like Home Depot's side lots full of illegals) from even existing anywhere near your city or county. You only want high-tech employers...or better yet everyone just commutes to a nearby city and comes home to nirvana.
2. Gated community with nothing inside except houses... no businesses to employ riff-raff within.
3. The city police force guards the gates, not contractors. Be careful who you hire as policemen. You want cops who are retired or otherwise monied and willing to make sure illegals or other unwashed don't gain entrance for any reason.
4. If a homeowner intends to sell his home, the Home-Owner Association has right of first refusal to buy it before the unwashed buy it and move in with four other illegal families.

Randall Parker said at February 9, 2013 11:17 AM:

Geoff,

You can have office building businesses that employ upscale white collar workers. Dentists, doctors, engineers, software developers. How to zone for that? We don't want a county social welfare office near us. But we do want a high tech start-up with 120+ IQ employees.

AMac,

Yes, sustainability is very important. Hence the no-maintenance lawns that do not need watering. Can we use road surfaces that cost more to put in that last longer? We urgently need longer lasting stuff. None of that cheap throw-away culture.

Dual German-English and Mandarin-English immersion schools would be great. How about free moving expenses for anyone whose kid can't hack it in these schools?

Mike M said at February 9, 2013 7:14 PM:

Aside from the border security issues, illegal immigrants are not the problem. The problem is incentives that punish those who choose to produce wealth and reward those who choose not to produce wealth. It matters little weather those producers or non-producers are foreign or US born or here legally or illegally. I would rather let in foreigners who want to work and do not want a government handout and kick out the native born moochers who want a free ride.

Francis said at February 10, 2013 2:12 AM:

The property tax thing won't work. Property tax comes out of rent.
Your change would just create a one-off windfall for owners of formerly-high-tax properties.

Randall Parker said at February 10, 2013 11:50 AM:

Mike M,

The children of the illegal aliens vote for politicians who are redistributionist. The children of illegal aliens are native born and they do not make a lot of money. They have high rates of illegitimate births, high rates of dropping out of high school, and high rates of voting for policies to take from you to give to them.

calvaria said at February 10, 2013 6:46 PM:

I'm sorry, I have to laugh. The first question that comes to mind is: who would want to live in such a city?

1) There would be *very* few restaurants, and those that existed would be overpriced -- a 15$ minimum wage and 15% sales tax brings the bill for 2 cheeseburgers at Chili's to over 30$. Push that up the 'niceness' chain and you're looking at a 100$ bill for a decent dinner for two, without alcohol.

2) There would be no small shops for immediate conveniences and luxuries. No more picking up flowers on the way home as a spur-of-the-moment romantic gesture, or grabbing a quick sandwich on the run. Sure there are substitutes that could be tried, but have you ever purchased flowers from a vending machine in the airport, or enjoyed the sandwich from the vending machine in the cafeteria?

3) Grocery stores, if they existed, would have limited stock and limited choice. If the labor cost of stockers doubles, expect the # of stockers to halve. You'll have to halve the # of shelves they stock, thereby halving the selection.

For those that live in Boston, imagine what would happen if half of Newbury street shuttered up, and the remaining half increased prices by 20%+. A relaxing Sunday walking the shops is over.

For the women out there: would you like to live in a city where you had the choice of paying a 50$ premium or commuting 40 minutes for your waxing? For the men, would you live in a city where you paid a 50$ premium or had to commute 40 minutes for a haircut?

If you only shop at Whole Foods and Neiman Marcus, dine only at places with a new menu developed daily, and have an assistant to fetch you coffee and handle all of life's inconveniences, then this is probably enticing.

Randall Parker said at February 10, 2013 7:17 PM:

calvaria,

You are overestimating the fraction of total retail cost that goes to salaries. Look at Trader Joe's where they pay much more than minimum wage. They have lots of great deals. The place to get chocolate, dried fruits, olive oil (though iHerb is cheaper on the web), and a number of other product categories.

You are also missing the labor savings of big box stores where they do not stock shelves the way normal stores do. The warehouse equals the retail shelves.

Hair cut premium: they make more than minimum wage. $50? A $15 per hour person can cut hair for 2 people per hour.

You are also missing other forms of automation. Look at fast food stores where you can interact directly with an ordering menu and slide a card thru. Just like gas stations where you do not have to interact with an attendant. Higher minimum wages would cause a shift toward lower labor ways to deliver services.

Randall Parker said at February 10, 2013 7:34 PM:

I also think that same day delivery will reduce the need for stores. Order stuff (like what you want to have for dinner) on your tablet in the morning or the night before. Go home and find it there. Saves time. UPS and USPS drivers make more than minimum wage already.

Mthson said at February 10, 2013 8:05 PM:

In a planned city, if there are going to be many deliveries, I wonder if underground tubes could be more efficient.

Residents ordering from a store could get it auto-delivered immediately. The entire process could sometimes be automated, with Kiva-style warehouse robots placing items in the tubes.

Side bonus: no delivery trucks adding to traffic and parking in the street when there aren't spots available.


I wonder if those Middle Eastern and Asian high-tech planned cities are doing anything truly innovative in the final plans.

If I remember correctly, there's a Middle-Eastern planned city that's having car traffic go through underground tunnels, so the surface of the city can be extremely walkable, and without being surrounded by noisy, pollution-causing cars.

calvaria said at February 10, 2013 8:16 PM:

RP, quite a lot goes to labor, more so than the veneer you see. Remember, the 15$ boost in minimum wage applies not just to the waitress, but the service bartender, the prep cooks, the line cooks, the busboys, the dishwashers, the janitorial staff. I've worked each of these jobs, and can tell you that would be a massive labor cost increase. A waitress would break even (as tips would be gone likely), the service bartender makes ~11-12$/hr, the prep cook is around 9$, the line cook is around 10$, busboys are 7$, dishwashers are 7$, janitors are 7$. None of these are positions that are 'easily automatable'.

That's the problem with fiats intended to manipulate the unskilled labor market. It's a job that 1) requires *no* skill, therefore no capital investment in acquiring talent or skill and 2) has little real value. This is where the automation ship crashes against the jagged rocks of reality. Nobody is going to spend a million dollars to develop a machine to replace a window washer. I can pick a random guy off the street, give him a spray bottle and squeegee and 10$ an hour for the same task.

Everyone romanticizes about automation when they see robots putting windshields on cars, but realize: this is a highly repetitive job where a simple, limited task (i.e. gluing) is performed 100s of times at the exact same 3 dimensional coordinate (the frame is in the same *exact* place, the glass is moved in the *exact* same manner) and replaces 3 union laborers (2 to hold the glass, 1 to glue). That's a complex robot, operating at perhaps 4x the speed of manual labor, so that 1 robot replaces 12 high-cost workers. The task was simple enough, repetitive enough, and the labor cost was high enough that it was worth automating. Those are 3 requirements that must be met for automation: labor per unit must be expensive, task must be simple (i.e. does not require complex movements), and task must be repetitive (impossible to reprogram on the fly, reprogramming is a massive sunk cost).

Those few cases where retail automation is utilized are done so with low quality:

Given the choice, would you buy a 2$ cappuccino from the vending machine at a 7/11 or pay 3$ for a cappuccino at Starbucks?
Would you pay 4$ for a turkey and cheese sandwich fabricated by a machine (these are the ones you see in vending machines) or 6$ for one from the local deli?

Efforts to increase minimum wage and jack up labor costs will push the prices on the more desirable (latter) choices, making them less palatable. Ultimately you'll have the choice between (automated) vending machine coffee for 2$ or (non-automated) high-labor coffee for 6$; 4$ for vending machine sandwich vs. 12$ for fresh. That in and of itself is undesirable. Given the choice between two cities based on the above principles, would you choose one with high costs and limited choice, or a city with low cost and more choices, even if it means you're unable to insulate yourself from low-skilled workers?

Mthson said at February 10, 2013 9:45 PM:

Calvaria:

Those are some good points, but parts of that equation might be about to change.

This tech startup's automated gourmet burgers look delicious, and save a lot on costs. Robot serves up 340 hamburgers per hour.

The company seems to have good momentum, and a lot of smart people behind it.

Randall Parker said at February 12, 2013 9:18 AM:

calvaria,

Even low wage jobs get automated. Consider:

Restaurants use dish washing machines and have been using them for decades. Some fast food joints use customer-facing order UIs. The fast food joints basically expect you to clear the food from your own table. Gone is most bus boy work.

Automated high quality coffee machines seem doable. They'll take market share from Starbucks because they'll use less space and therefore be locatable closer to wherever you happen to be. Some will go to Starbucks for the esthetic experience and a place to sit. But not all.

The cost of automation keeps going down. So even low wage jobs get automated. In China one restaurant uses robots. At this point in time it might not make sense economically except as an experiment.

Chinese and Carnegie Mellon experimental cooking robots show where things are headed. I suspect the robots in this Japanese restaurant are more practical.

What I think is telling: Noodle slicing robots that cost a couple thousand dollars pay for themselves in China in less than half a year.

Geoff said at February 12, 2013 3:22 PM:

@Calvaria,

I don't think you understand what we're trying to design here. If you can't afford to spend $100 on a night out with your wife, you're the type of person we're trying to keep down the road.

Geoff said at February 12, 2013 5:22 PM:

@Randall Parker,

You said "Dentists, doctors, engineers, software developers. How to zone for that?"

Anything that's not commercial office property (and ALL business goes outside the gated community I recommend--no employees get access to the housing area UNLESS escorted by the homeowner or city cop at $50 an hour), must have an Environmental Impact Study to end all Environmental Impact Studies...no one gets approved in less than 5 years, and even then you force them to pay a local-city run insurance fund. Basically, you place such a high financial and administrative burden on Home Depot to put a store close to you that they just say fuck it.

Also, no city services above bare minimum = no libraries. You want books, go to Amazon. No city-funded concerts = buy your own ticket if you want to listen to a band. No city parks--tragedy of the commons wins out every time. The school district is a CITY school district, only for families within the gated community. And the school lies outside the gate--teachers never get inside, nor janitors. Think access to an Army base--no one gets in without a computerized ID, or they go through the visitor center first to get a day pass.


@Calvaria,
I didn't mean that to sound as harsh as it did...but I'm willing to pay ungodly amounts of money for real estate that won't become worthless once it starts turning into Detroit. If that means more expensive haircuts and flowers, I don't give a shit. I've worked too hard and saved too much money for me to quibble about minor expenses when I truly care about a house that doesn't see its value go to zero. I understand you're not that well-off yet--I hope you get there some day and then you'll see what we're talking about. I've got a house in California I'd like to burn to the ground and I'd take half the insurance money without complaint (I'm renting it now for half the mortgage payment because illegals took over the state). If we can't have restrictive covenants anymore, we'll just have to be creative.

Randall Parker said at February 12, 2013 5:43 PM:

@Geoff,

Libraries do not attract the non-reading lower classes. But the upper classes do not have a lot of need for them. I wonder who still goes to libraries. Middle aged women looking for romance novels? Moms looking to get out somewhere with the kids?

I think city-funded concerts can work if they are all for classical music. Anything that draws smarter folks isn't a problem. But how to prevent funding for purposes that attract lower IQ folks?

City parks: Yes, how to prevent the way they fail? Private parks?

Geoff said at February 12, 2013 7:24 PM:

Libraries don't attract lower classes? You should visit any library in California and close your eyes--then just follow your nose to the homeless dude downloading porn.

City-funded classical music is using funds of the many for the desires of the few--this is how the USA got to 3 trillion deficit spending annually. Everybody pays for their' own entertainment in my version of Galt-ville.

If by "private parks" you mean country club, then yes. My ideal city would have no public property except the police station. So if some ne'er-do-wells show just to "hang" in the rich white part of town, they can quickly be escorted from the private property they're on to the only public property in the city. And regardless of cost, I'd prosecute every shoplifter with mass media coverage of the trial, no plea-bargaining--ideally with citizens at the courthouse with placards that essentially say "you got what was coming to you for leaving your part of town."

I don't have the capital to plan and execute this fully-planned community, but I have given the idea a lot of thought over the years. Would love it if you revisited this issue every six months or so.


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