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Cost of Living Blues


It’s no secret that New York City is expensive. Anyone who has spent time in Manhattan has almost certainly felt they were being overcharged for normal expenses—parking, hotel rooms, coffee, subpar lunch buffets, etc. But obviously the problem is worse than an $8 cup of coffee.

ZeroHedge posted an infographic on Monday that highlights the costs of living in our nation’s most and least expensive cities, Manhattan and Harlingen, Texas, respectively.  Based on the price of equivalent goods, a Manhattan resident needs to make almost three times as much as a Harlingen resident to maintain the same standard of living. In Manhattan, it’s not luxury items that are more costly; essential items break the bank too.

The typical blue governance response to this problem, so common in many of our largest cities,  is to combat it with subsidy programs like welfare, food stamps, and housing assistance, all of which are aimed at helping the poor pay big city prices.

We shouldn’t be against helping the poor. But why not do that by figuring out ways to make the cost of living more affordable? The problem of blue governance as we see it is that it’s aimed at perpetually mitigating the ill effects of persistent inequality rather than exploring fixes that would strike at the root of the problem.

We see this same blue model governance pattern playing out with DC’s misguided “living wage” bill—a bill that seems intent on driving Walmart out of areas of the city that could really use more jobs and more retail options. City governments like DC’s ought to be moving aggressively to cut high costs of living as a way to improve real wages for the poor.

The message the blue model sends to the poor is that they are neither good enough nor smart enough to take care of themselves. This is an incredibly destructive message, and one that city governments in places like DC, NYC, Chicago and LA are broadcasting 24/7, on all channels.

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  • jeburke

    It has to be pointed out that “cutting high costs” is a tall order in densely populated cities where the cost of almost everything is a function of the scarcity of space. Residential rents are sky high anywhere reasonably close to central and downtown Manhattan because of intense market competition (everyone wants to live there). Commercial rents, ditto. Coffee and a roll will cost you because the rent for a modest retail space to run a take out joint are astronomical. And of course, higher wages and salaries add a wage push to this price pull inflation of everything. High taxes don’t help to be sure (which is proved every time the city and state offer tax breaks to developers), but they are as much a result as a cause of high COL.

    So, if subsidies to the poor is not an answer, what is? More physical development of less dense areas of the city and metro area is one — but this has been proceding apace for three decades, so it’s hard to lay blame on that score. Reducing taxes would help — a bit, but that’s likely to be marginal (most city taxes support essential services, not welfare). More better paying middle class jobs would be ideal, and I’d love to hear VM’s suggestions for how to attract/create them.

    • f1b0nacc1

      One thing that would help (though it is no panacea) is to get rid of rent control. This massive market distortion has the effect of discouraging the development of anything other than the highest of high-end housing in the cities in which it is used.

  • Anthony

    Some good points Professor. That said, it’s important to note – as Via Meadia favorite Joel Kotkin has noted – that all of the financial centers around the world are expensive. Sure you can think of New York and London as paradigmatic examples of “blue thinking” in the west, but don’t forget that Tokyo, Singapore, and Seoul are also quite expensive.

  • AD_Rtr_OS

    Trimming back the size, scope, and intrusiveness of government goes a long way towards reducing the costs of living under those governments.
    Every regulation is a compound cost as one builds upon another.

  • Pait

    New York City is expensive because everyone wants to live there, which in turn is caused by the fact that earnings there are much higher. This happens because work is more productive in NYC, a consequence of the fact that many highly productive people live in NYC.

    If this sounds like a circular argument, it is because there is a feedback loop involved. It has very little to do with government actions and very much to do with markets and individual actions. This is the subject of spatial economics, which I encourage you to study.

    • Jeff Jones

      Yes, I’m sure high taxes on businesses that, in turn, pass that expense on to their customers in the form of higher prices has nothing to do with it.

      • Pait

        Very little, as would be evident to anyone who knows fractions. Local and state taxes are a small percentage of the cost of living in NYC. Certainly much less than what what be needed to triple prices.

        Labor is costlier in NYC because there are many high paying job alternatives. And land is costly because so many people want to live there. This would be obvious to anyone who compared the populations of NYC and Harlingen.

        But to accept the argument one would have to understand market economies, and abandon the conspiracy theory that the government is responsible for all ills that befall oneself. For some this may be hard to do.

      • Jim__L

        Mostly it’s rent-seekers finding lots and lots of rent that makes the prices so high.

        Human beings were not made to live in the rabbit hutches known as “high-density housing” in urban areas. One of the appalling ironies of modern life is how many people are forced to live like that.

        • Pait

          Jim_L, your theory is wrong. The United States is a free country. People move to cities because they want to. No one forces them to.

  • Jim__L

    As telecommuting becomes more and more common, location is going to matter less and less. I work an engineering job in the Bay Area, and my own company has employees who do their work remotely from Oregon… my wife’s previous company had people living in Tempe Arizona, Modesto California (a couple hours’ commute), and the like.

    If I didn’t have to be on the factory floor now and then, I’d telecommute too, and pick up the family and move somewhere I could get a McMansion and two luxury non-commute-friendly cars, for what we pay for an all too modest attached home here.

    Fighting the problems of population density with higher population density makes no sense.

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