It seems odd, but some people still need to be explained how things like wage manipulation and taxes cause rent to increase. Democrats especially have no concept of the following correlations as I will attempt to explain them.
A single tree standing alone in the forest has no value. It does not gain a value, or price, until the logger spends time to cut it down. At this point, the tree, has a value of a few hours of labor. Additionally the value of the tree is increased by a tax called a permit, the logger pays the government for permission to cut down the tree.
The value of the tree is increased by the labor used to collect it and place it in a truck. The truck driver increases the value by using his labor to take it to processing. It is noted that the truck driver is paying tax to move the tree by way of fuel tax.
The next stop is processing, first the tree has to be unloaded, stored, and dried. Once dried, a crew cuts the log into lumber. This lumber is then stacked, further dried, then shipped to a lumber yard for sale. Note that these mills, and space to dry lumber, take up land which is taxed. Most mills additionally pay a business tax.
At this point the average tree yields twenty-four boards used for construction of a home. From forest to lumber yard, on average nine hours of minimum wage work is needed in packing and preparation, four hours transportation, and eight hours of specialized labor is needed for cutting and milling per tree.
To build a home, around two hundred man hours is spent with the lumber assembling the frame. The average two bedroom home utilizes 450 boards for the walls, and around 180 longer boards for the roof structure. Additionally wood products are used for the exterior walls adding additional cost.
Once the basic home is built, gypsum wall board is installed, copper wiring is run for electrical wire, tin ductwork is installed with a heating system, fiberglass insulation and roofing tiles are installed, finished wood cabinets are placed, walls are prepared then painted, and prefabricated flooring is installed. These specialists spend more than a thousand work hours to finish the structure, this ignores the dirt work and concrete work needed.
My point for explaining this is twofold. Firstly, and most obvious is that labor costs drive the cost of building the home. Lastly, before the home is even built, government has taxed it.
Once the home is finished it has an assessed value based on the cost it incurred to build. This value can increase as it is weighed against the cost to replace the structure. Let us say that a home built in 1984 cost fifty thousand dollars to build, and a home now costs two hundred thousand to build, the cost to replace the home will be 200k so the value can be assigned 200k. The land underneath the home may also increase in value relative to the desirability of it’s location.
Property taxes are based on the assumed value of a home, or it’s real value. Real value is calculated by land price, plus the value of the home as leaned against it’s replacement value. Simply put, if a replacement home cost 200k, the current home has all the modern upgrades, and the land is worth 30k, it is possible an assessor could value the home at as much as 230k even if it cost 50k to construct.
So, therefor, the deciding factor of the value of a home is labor. This equally means that the recurring property tax placed on a home is increased with labor increases. Rent increases with the desire of people living at a location, and the amount a renter is required to pay in rental and property tax. This is how minimum wage increases physically cause rental increases.
To look at an extreme example of wage manipulation gone unchecked a deep analysis of the copper industry can show how short sighted a minimum wage actually is. Copper is a metal found in the form of oar, and must be mined. As a metal is has a sales price that is fixed by availability worldwide. In the 1980s the minimum wage was increased to such a point that a miner obtaining the oar was making minimum wage to obtain it, continued wage manipulation made American mined copper cost more per pound then it cost to buy foreign copper and have it shipped to the U.S.
Continued wage manipulation has led to imported metals and a decrease in recycling. As wages have been forced to rise, materials are cheaper to purchase from foreign countries than it cost to recycle them in the United States. It is cheaper to buy steel from a non-regulated polluting strip mine in China, than to mine iron from our U.S. mines.
So, the purpose of my little blurb here is to open a person’s mind up to the primary key problem with wage manipulation. There are many more examples, but this one is direct. Although it looks nice to get two or three dollars more an hour, how much shorter does your dollar stretch? How much will your rent, food cost, etc. increase?