Tuesday, August 27, 2013

What Airbnb and Fast Food Strikers Tell Us About Local Economies

First, why might there be a connection between these seemingly different things? The reason I see the possibility of a link between the growing use of Airbnb for additional income support (by informal landlords) and the recent "fast food" worker (and related retail) strikes, was my own quest for living in a city on near minimum wage income, about fifteen years earlier. At the time it was still a fairly reasonable option to rent rooms from home or apartment dwellers - when one had a lower wage job - in many cities of the U.S., even though many apartments were already out of the reach of lower income individual renters.

Even as cities often struggle to limit the growth of Airbnb, they are partly responsible for the creation of these economic adaptations, by their own maximizing strategies of exclusionary policies. As a result, travelers now seek the same couch or bedroom spaces which were once rented to local lower income workers. An informal rental marketplace in cities which was once well within reach of the lower income worker, has come into an unexpected collision course with the budget conscious traveler.

While other living options still exist for lower income, they tend to be found where public transportation routes either didn't exist, or have faced cutbacks in recent years. That means the lower income worker also needs to be able to own and maintain a vehicle in order to take advantage of rental possibilities in outlying areas within commuting distance of work. Whereas travelers which now rent city spaces, have the nearby transportation routes as an additional perk, and they can pay a more significant price for the same space. What the traveler is able to pay, further assists the renting landlords who of course already have budgeting concerns which prompted them to open their homes to strangers.

By no means were informal landlords the only ones feeling the pressure, to choose the nightly traveler over someone they could build a more reliable relationship with. Travelers were willing to take their chances because of the growing expense of hotels. Now, the pressure gets "passed on" - in the form of strikes - to businesses which can ill afford to pay greater wages to low income workers. And of course the low income workers, who are simply trying to find a way to remain in the workplace, now find themselves incentivized - around the countryside! - to take the whole sorry proceedings out on their hapless employers, for lack of a better solution.

The primary reason I have the least sympathy for local municipalities in this growing lack of affordability for lower incomes, is the fact that municipalities are always the ones with the most leeway in provisions of choice sets for both production and consumption in any overall sense. They are the ones who can make the difference for all of us to have a better life through more reasonable zoning and regulation, and yet they choose not to and continue to get away with it. Every arbitrary zone or regulation only serves to lock out more possibilities for the ability of people to thrive.

At some point, local economies have to account for the fact that their citizens need to have a wider range of both consumer and producer options depending on actual income, which need equivalent offerings in the marketplace. Until such offerings are available, the call will always go out for wage increases which - today - only tend to stretch elements of existing systems further beyond their carrying capacity. What's more, efforts on the part of central bankers to cap the "inflation" which really originates in this escalation of unnecessary local requirements, mostly succeed at throwing even more people out of work, or out of business, to compensate for artificially inflated ideas as to what real wealth should represent.

There is a world of survivability options for all kinds of economic actors, which municipalities have simply left out as possibilities. Many businesses - which out of necessity pay lower wages - just don't have that kind of leeway in their choice sets for survivability. In the long run, such measures either force them to use more automation, or leave for more affordable environments. However, other local economic actors who take part in these settings, don't always have the option of starting over elsewhere. Over time, as these issues go too long without being addressed, the ramifications finally go well beyond the exclusionary circumstances which they begin with.

When municipalities choose the upper end of livability options out of convenience and the most wealth gain possible, that doesn't mean it is always possible for their local business and residents to do the same. In turn, that limits the number of businesses that can set up and offer work to local residents, and it also limits the number of potential residents who could come to live and work, which means they often remain unemployed because they can no longer afford to live where work is actually being offered.

Cities have to realize that their citizens now need new strategies. As a series of graphs from a post at MacroMania aptly show, (especially graphs two and three as related to investment) citizens can not always be expected to spend us all back to prosperity, when local economies have already claimed too much of the take. In a recent post by Business Pundit, a series of illustrations indicated that 50% of income went to housing, education and healthcare costs in 1975. By 2013, 75% of income went to those same categories.

In other words, by the time the necessities of life are met, only a quarter of one's income is left for more discretionary purchases, and that is for the average consumer in terms of statistics - let alone the lower incomes. It is time for local economies to stop imploring Washington for ever more help, and start making life easier for their citizens on the terms they are actually still capable of. When cities begin to find more inclusive ways for all their citizens to participate in economic life, everyone will be the better for the effort.

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