The Causes of San Francisco's Homelessness Problem
I previously wrote about San Francisco's socialist new mayor where I discuss that she is clueless about how to solve this issue and may make the issue worse with a new Prop C tax. (In my article referenced I do make the error of stating the private companies should hire locals instead of subcontracting, that is another example fallaciously advocating for a policy that would have the opposite effects of its intention.)
Most visitors on this site/Bitcoin users should understand the flaw in increased wealth redistribution and how this makes the problem much worse. Taking money from one group and giving to another alters the economic incentives, which usually resulting in the opposite effect of its intention, and we have seen the consequences of this in a terrible way in San Francisco.
Before moving to San Jose from Atlanta I had heard 'the BART is so great', 'it's much better than MARTA!' (public trains in the city of Atlanta). While the BART goes more places and is easier to use, however it is filthy.
I took my first BART trip from Oakland to San Francisco, the train smelled horribly, the person in front of me covered their nose with their hoodie the entire ride and homeless loitered throughout the ride. MARTA has its issues too, but at least our stations and trains were clean.
When exiting the train in SF I noticed the station itself was dirty as well, pigeons everywhere, homeless sleeping all over.
Yet as a resident of CA we have the highest state tax rates in the country, and they cannot even keep the public transportation stations clean. I wonder why?
One of the best ideas to rectify this problem I have heard is to pay the homeless to clean up the stations and city (I recommend watching the entire video):
However, the government probably cannot even do this as they would be breaking the law since minimum wage is $15 an hour.
The minimum wage concept seems great initially until we begin to look at its adverse effects on the economy. Employers will not hire inexperienced workers for $15 an hour, and now have an incentive to what would have been human workers with kiosks or robots where possible. I saw this for the first time at a lunch spot in SF a couple of months ago.
Minimum wage actually increases unemployment, since it is now illegal to work for <=$14.99 in the city.
Minimum wage also drives up prices, since the cost of employees for those businesses is higher that what it would have been.
Lastly we have rent controls being implemented in the city. Again, we have a policy that has the opposite effect of its intention. This policy places a cap on how much rent can be charged by landlords to their tenants, intending to battle the rising cost of living in the city.
In Henry Hazlitt's Economics in One Lesson the consequences of rent control are explored.
"If landlords are allowed to raise rents to reflect a monetary inflation and the true conditions of supply an demand, individual tenants will economize by taking less space. This will allow others to share the accommodations that are in short supply. The same amount of housing will shelter more people, until the shortage is relieved."
Hazlitt, Henry M. Economics in One Lesson. New York: Three Rivers Press, 1946 Published. Print.
This may seem to hand-wave the issue away but may not seem so much if you consider the alternative for those tenants who refuse to accept less space would be homelessness.
To provide a real example my co-worker lives in a rent controlled home that is extremely nice and should be much more expensive than what they pay. Since rent controls are implemented one who has a decent amount of wealth now have an incentive to take advantage and splurge on a nicer apartment and take more space than they would have otherwise, artificially reducing the supply of available housing.
Rent controls discourage landlords from further profit seeking, as they now no longer have as much as an incentive to build housing, remodel, or make improvements since a cap is placed on their potential profits.
Each of these effects compound over each other and have made caused and made the homeless problem in San Francisco much worse. Homeless are unable to get a job to lift themselves out of poverty, the government redistributes wealth via taxation, providing a disincentive to seek work in the first place and rent controls artificially limit the supply of housing while increasing demand.
Government intervention in the economy has the opposite effect of its intention, and we have few better examples of this in this country than in the city of San Francisco.
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