THE MISLEADING CLAIM: When did “if you work full-time, you should be able to comfortably afford shelter, food, and utilities” become an extreme leftist belief?
Let’s address the first part of this claim: that of “if you work full-time, you shouldn’t be living in poverty.” The fact of the matter is, according to the US Census Bureau, approximately 98% of full-time workers (year round) are not in poverty. [a] To suggest that living in poverty while working full time is a huge problem in America demonstrates either ignorance or a complete malfeasance of facts.
Regarding housing costs, it is true that those have increased over time. A study released by the National Bureau of Economic Research in 2005 found that since 1950, housing prices have increased by approximately 2% a year. [b]
There appears to be many factors for this, but two in particular are 1) – the median size and amenities of houses have increased, and 2) – land use regulations that drive the cost of housing up.
Per the Wall Street Journal, the median size of a new single-family home was 2,467 square feet last year, which was the biggest on record as of 2016. [c] Homes are 61% larger than the median size 40 years ago, and 11% larger than a decade prior. The WSJ further states that “American homes have not only been getting larger, they’re also including more bathrooms and amenities such as air conditioning. Some 93% of new houses had air conditioning in 2015 compared with 46% in 1975. About 96% of new homes last year had at least two bathrooms versus 60% four decades earlier.” Obviously, these factors play a role in pricing, a fact the WSJ also notes.
The second factor in the housing costs issue is that of land-use regulations. Writing for the Brookings Institute, Ed Glaeser states the following:
“How do we know that high housing costs have anything to do with artificial restrictions on supply? Perhaps the most compelling argument uses the tools of Economics 101. If demand alone drove prices, then we should expect to see places that have high costs also have high levels of construction.
The reverse is true. Places that are expensive don’t build a lot and places that build a lot aren’t expensive. San Francisco and urban Honolulu have the highest ratios of prices to construction costs in our data, and these areas permitted little housing between 2000 and 2013. In our sample, Las Vegas was the biggest builder and it emerged from the crisis with home values far below construction costs.”
Some may speculate that housing shortages (and therefore higher prices) are due to geographical limitations such as shortages of land. Glaeser, however, while acknowledging this is possibly a small factor, continues by saying:
“The primary alternative to the view that regulation is responsible for limiting supply and boosting prices is that some areas have a natural shortage of land.
Albert Saiz’s (2011) work on geography and housing supply shows that where geography, like water and hills, constrains building, prices are higher. He also finds that measures of housing regulation predict less building and higher prices.
But lack of land can’t be the whole story. Many expensive parts of America, like Middlesex County Massachusetts, have modest density levels and low levels of construction. Other areas, like Harris County, Texas, have higher density levels, higher construction rates and lower prices…
If land scarcity was the whole story, then we should expect houses on large lots to be extremely expensive in America’s high priced metropolitan areas. Yet typically, the willingness to pay for an extra acre of land is low, even in high cost areas. We should also expect apartments to cost roughly the cost of adding an extra story to a high-rise building, since growing up doesn’t require more land. Typically, Manhattan apartments are sold for far more than the engineering cost of growing up, which implies the power of regulatory constraints (Glaeser, Gyourko and Saks, 2005).” [d]
Regarding the second commodity listed in the meme, food, it’s likely counter-intuitive to many people, but cost of food as a proportion of one’s income has actually DECREASED dramatically since 1960, per the US Dept. of Agriculture. The chart in the article shows that the average share of per capita income spent on food fell from 17.5% in 1960 to 9.6% in 2007. As of 2013, it had inched up slightly to 9.9%. [e] As Annette Clauson, a USDA agricultural economist who helped calculate the chart’s data stated, “We are purchasing more food for less money, and we are purchasing our food for less of our income. This is a good thing, because we have income to purchase other things.”
Moving on to the last commodity mentioned in the meme, utilities, it is true that utility costs have risen in recent years. Electricity is the most commonly thought of, so for purposes of this post, electricity will the utility discussed. The LA Times has more on the rising electric rates and some of the reasons behind them. [f]
• In California, for instance, electricity prices rose 30% between 2006 and 2012, even after adjusting for inflation.
• “San Francisco-based Energy + Environmental Economics, a respected consultant, has projected that the cost of California’s electricity is likely to increase 47% over the next 16 years, adjusted for inflation”
• There are several reasons for higher utility rates, but some are:
- New federal regulations on toxic emissions
- Rules on greenhouse gases
- State mandates for renewable power
- Technical problems at nuclear power plants
- Unpredictable price trends for natural gas
To make matters even worse, new emissions rules on mercury, acid gases, and toxics by the EPA are anticipated to cause substantial losses of the US’s coal-generated power. Historically speaking, coal has been the US’s largest and cheapest source of electricity. However, two dozen coal generating units (at the time of the cited article) were scheduled for decommission. Energy Department estimates that the decommissioning will reduce electrical capacity by 60 gigawatts of capacity. To put 60 gigawatts in perspective, this is the equivalent output of 60 nuclear reactors.
Renewable energy mandates, which are the law in 30 states, require the use of wind and solar energy, which are more expensive. As those sources are largely reliant on the weather, they require backup generation, which could add significantly to the consumer’s overall cost. In some cases, renewable power costs as much as TWICE the price of electricity from new gas-fired plants.
As we can see, a large portion of the reason for higher utility rates stems from regulatory mandates that only serve to make electric bills higher for consumers. Studies also show that higher utility rates have a negative effect on the low-income bracket in particular. [g]
In conclusion, the original meme gets it completely wrong on food costs and the relation between poverty and full-time employment. It correctly states the fact of increased housing and utility costs, but ignores the impact government regulation has had on those sectors. Therefore, the question posed should be:
So when and why did “let’s support government regulations to increase the cost of housing and utilities” become the mantra of those who purport to be on the side of “the people?”
SOURCES:
A: https://www.census.gov/content/dam/Census/library/publications/2017/demo/p60-261.pdf
B: http://www.nber.org/papers/w11129
C: https://blogs.wsj.com/economics/2016/06/02/u-s-houses-are-still-getting-bigger/
D: https://www.brookings.edu/research/reforming-land-use-regulations/
E: http://www.npr.org/sections/thesalt/2015/03/02/389578089/your-grandparents-spent-more-of-their-money-on-food-than-you-do
F: http://www.latimes.com/nation/la-na-power-prices-20140426-story.html
G: https://www.nrdc.org/experts/khalil-shahyd/study-highlights-energy-burden-households-and-how-energy-efficiency-can-help
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Source: Liberty LOL – MISLEADING CLAIM: "If you work Full Time, You Should Live Comfortably!"