Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.

Tag: minimum wage

  • Zurich is hot

    Zurich is today one of the hottest real estate markets in Europe:

    And based on UBS’ Global Real Estate Bubble Index for 2023, it also has the highest bubble risk:

    According to Bloomberg, there are a number of reasons for this: low housing supply, a constrained geography, a key interest rate that is less than half of the ECB’s, and Google. Google is one of the largest employers in the city, with more than 5,000 employees. And supposedly the starting salaries for a software developer there can reach 200,000 Swiss francs (nearly CA$300,000).

    I also just learned that the minimum wage in Switzerland is 23.90 Swiss francs per hour. Based on 160 hours per month, that’s 3,824 francs per month or 45,888 francs per year. In Canadian dollars, that’s over $68,000 per year. Pretty healthy. Although, as we can see here, Zurich is also expensive.

    Charts: Bloomberg & UBS

  • Policies for the leisure state

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    Andrew Kortina and Namrata Patel recently published an intriguing essay called, Kinky Labor Supply and the Attention Tax.

    They begin by talking about declining labor force participation rates, particularly among young men. Remember that the participation rate is distinct from the unemployment rate. Here is a chart from the essay:

    image

    Participation is down for young people, but up for older people. This is perhaps signaling that older demographics still need to work in order to maintain certain needs and/or a particular lifestyle.

    The possible explanations for this declining rate among young people are interesting. The authors argue that it is a combination of the declining cost of media entertainment content and the amplification of social status signaling, among other things.

    The declining cost of online content has meant that this form of leisure activity has become incredibly cheap, if not entirely free (beyond the mostly fixed cost of an internet connection). So there’s always something enjoyable to do.

    At the same time, the authors argue that once people make enough money to satisfy basic needs, there becomes a tradeoff between trying to make more money and simply spending more time on leisure.

    Historically, the motivator to make more money has been arguably associated with social status signalling through conspicuous consumption. But with the advent of social media, we are all now signaling globally, instead of just locally.

    Due to increased competition, the argument is that people are now feeling demotivated by all the conspicuous consumption that they see online. It is simply too difficult to compete. The Gini coefficient is too high.

    So why not just spent more time on leisure?

    One potential policy implication is that raising the minimum wage wouldn’t be enough to spur increased labor force participation. Labor isn’t responding in the same way to wage increases. There would need to be a much more significant increase in income for that to happen – hence the “kinky labor supply curve.”

    One view of the status quo is that media companies are aggregating human attention and selling it at a discount–far below minimum wage–to advertisers in a massive arbitrage on human capital. So, the state could set the price of an hour of human attention at the minimum wage rate, and charge media companies 12% (the federal income tax rate on minimum wage) of that wage rate for each hour of human attention they consume.

    One possible solution is an attention tax. But their takeaway is that this lost productivity will more than likely be made up for with technology, which could ultimately translate into something we are already seeing: increased inequality.

    Check out the essay here. It’s an interesting read.

  • The war on work

    Air Canada bumped me from my flight this morning and so I am spending the day hanging out at Toronto Pearson Airport. I can think of more enjoyable ways to spend Canada Day, but at least there’s a nice seating area in Terminal 1 with free wifi and lots of plugs.

    I just finished watching the below talk by Harvard economist Ed Glaeser at the Manhattan Institute. His overall thesis is that unemployment is a far worse problem than income stagnation and that the US needs to stop creating incentives for people not to work. He refers to it as a war on work.

    He addresses a few topics that we’ve talked about here on this blog, such as guaranteed basic incomes, as well as others that we haven’t talked about, such as raising the minimum wage. To give you one spoiler: He argues that a higher minimum wage has been shown to cause an overall drop in employment, which he, again, believes is a deeper problem.

    Glaeser delivers a passionate performance. So if you have 30 minutes to spare – perhaps you’re stuck in an airport somewhere – I recommend you give it a watch. If you can’t see the video below, click here.

    [youtube https://www.youtube.com/watch?v=8xaNV_6wgak?rel=0&w=560&h=315]