[wrong_variable]

I think its a lot more complex than that.

If the cost of beef was increased 4x for whatever reason, then most people would just switch their preference for meat.

There are ofcourse a lot of greedy companies.

But a lot of the time the consumer demands a price point for software product, many startups cannot afford to pay 400K to developers.

I think its not a reflection of how difficult it might be to create software but stagnant wages for the average person.

[vonmoltke]

I agree with everything you say about the economics of the situation, but ours is the omly industry I know of where inability to make enough money to pay for a sufficient workforce translates into a workforce shortage. A cattle rancher isn't going to compalain about a "ranchhand shortage" if she can't afford to pay enough to attract them.

[TrickzOnU]

It is not. The rancher would just hire an illegal immigrant often and it happens all the time on farms and restaurants. It doesn't fly in office environments and in positions where the salary cant just disappear in the books.

Secondly, only the technology industry has a massive pipeline of overseas workers available...so naturally there is constantly a "shortage" as a means to increase the pipeline of overseas workers.

I'm not saying NOT to hire overseas workers. I'm saying to be honest about it. Say -- we refuse to pay market wages and would rather that new graduates not find work than pay them a living wage for the Bay Area, instead we'll hire offshore workers desperate to flee their countries and willing to shack up 3 to a studio apartment.

[a3n]

The whole thing is based on unrealistic expectations. People work somewhere in the Bay Area, or launch a startup there; it's one of the most expensive areas in the country, maybe the world. Then they don't want to pay enough so that there is no shortage of employees.

So then the talk turns to bringing in H1Bs who will work for the low end of the "prevailing" (Ha!) salary.

Why don't these companies cut to the chase and just open an office in India? Or have the entire operation there?

Or are some of them actually not trying to change the world by delivering better toast to your door, and they just want to live in the Bay Area?

[ryanSrich]

It's a form of off shoring. They create a fake shortage, lobby for more H1Bs, pay the national average for fair market, which is laughably low for the Bay Area, and there you have it. The tech shortage sponsored by Facebook...

[illegalFallacy]

>It doesn't fly in office environments

This is untrue in my experience as the equivalent in an office environment to hiring an illegal immigrant would be subcontracting a 'job' to either a staffing agency whose H1B employees get paid piecemeal and billed out for different amounts. I've also worked with independent contractors who if you added up their low pay on the level, wouldn't be making adequate pay.

Heck, I've worked contract jobs through staffing agencies trying to make end meets and had the job location charge for parking which would be reimbursed 3 months later. Good luck getting ur money if you are working the next job and can't afford the time to follow up for that check.

There are plenty of ways companies dance around the same entity of illegal immigrant wages.

[acjohnson55]

To be fair, that is literally what a shortage is, economically speaking.

[branchless]

The system of usury against land ensures that land costs adapt to absorb all available income after food/clothing/energy costs have been accounted for.

Why is silicon valley more expensive to rent in? Because people came with money and the banks agreed to loan at a multiple of the new wage ceiling.

If wages increase x4 guess what will happen?

We need to stop banks creating debt to issue against land otherwise it will always absorb all income. And therefore all productivity gains flow to the land owner.

[mahyarm]

Also known as supply vs demand...

Bay area is infamous for many housing supply constraints in regulations. As far as loans increasing the demand side, banks can be pretty strict with %20 down payment restrictions. Which is why once houses go out of the dual income high earner price range ($1-1.5 million), you start seeing it overflow to other less desirable regions in the bay area.

[branchless]

But the creation of credit costs nothing therefore rent extraction can scale up to match productivity gains in a heartbeat.

[Tsagadai]

Which given that land is limited (you can only go so far out before you are in another place) then the price of the building will increase. It is possible to end up in a situation where even very wealthy workers cannot afford to rent within hours of a city. Sydney, Melbourne, London and Vancouver are examples where this is starting to happen.

it has not happened yet but it is certainly pricing many out at lower ends of the income scale.

[branchless]

Exactly. Go work on your productivity. The rentiers are waiting.

[hueving]

>Why is silicon valley more expensive to rent in?

Because supply and demand. High salaries attract a lot of people to the bay and communities systematically refuse to build new housing to meet the demand so the price goes up.

You can do whatever you want to the banks but that won't change the fundamental of 2X people trying to live in X houses.

[wangchow]

Silicone valley is mental. I wouldn't want to live there just because of the gentrification..

[branchless]

No, many hot-spots have large rentier presence including people "owning" and renting out multiple residencies which causes huge supply pressure.

Credit also typically increases ahead of wages which squeezes people further.

This isn't supply of people vs supply of homes, this is supply of credit. If you neutralise this you will see prices fall and be paying less of your labour to banks.

2008 - the credit taps ran dry => huge crash. Before that near unlimited credit saw land prices increase hugely. Neither on the up or the down did we see wages have such volatility.

[newjersey]

I don't know why it is outrageous to say the solution to high rent is to build more.

We shouldn't worry about "squeezing" people out. Ours is a HUGE nation. We have A LOT of natural resources and there is no reason why we can't let people build more (outside of protected areas, of course).

People who are "priced out" should move to places where rent costs less. I keep hearing about property owners having enough political clout to block further development, depressing supply. They placate existing residents with tiny portions of rent-controlled apartments.

I fail to see how "gentrification" is a problem at all in the bigger scheme of things.

I don't think people renting out more places is a problem. If landlords hold supply out of the market to prop up prices, we can discourage such actions with a more dynamic property tax that places a realistic tax burden on under occupied or unoccupied property.

All that being said, we definitely need to figure out some way to peoperly educate people about personal finance.

[branchless]

I'm not arguing not to build more I'm simply arguing with the notion that the main problem is one of supply and demand. It is not, there are other problems in the mix including taxing labour not land.

https://www.amazon.com/Progress-Poverty-Industrial-Depressio...

[newjersey]

> there are other problems in the mix including taxing labour not land

I agree to some extent. Property (land) taxes have to be high enough to discourage people from leaving it unused. I have no problems with fully replacing personal income tax but I'm not an expert and I have no idea if we can realistically raise the same tax revenue from land tax alone.

[TrickzOnU]

>> People who are "priced out" should move to places where rent costs less

It is a huge nation, but one where 70% of the tech jobs are stuck in SF/SV. I can move to Lincoln Nebraska and pay $400/mo in rent, but I sure as heck wont find an employer seeking a python job.

[nl]

Of course you will[1][2]. Lots more in Omaha[3] of course, but people underestimate just how widespread programming is.

[1] http://python.jobs.net/jobs/lincoln,nebraska.aspx

[2] https://www.linkedin.com/jobs/python-jobs-lincoln-ne

[3] http://www.indeed.com/q-Python-Developer-l-Nebraska-jobs.htm...

[whoiskevin]

Water? Nation has natural resources. Valley does not.

[Retric]

California has plenty of water for people, it just wastes most of it on crops poorly adapted for the area.

[danieltillett]

Rents can only increase if the supply is limited compared to the demand. Anything that decreases supply why demand is high will only increase prices. The solution is to either increase supply or decrease demand for housing.

[branchless]

I guess they didn't get the memo on this in all the pre 2008 countries where supply was being added like crazy and so was credit and prices rose before a huge crash.

It's very naive to think that this is simply any one factor, especially supply and demand alone.

Why are economics conversations so limited?

[danieltillett]

The complication with the supply/demand story is speculation. What happened pre-2008 was demand was artificially boosted by speculators (i.e. a bubble). The true demand for housing didn’t change much, but the speculative demand for housing driven by rising prices and cheap money increased massively. The downside of all speculative bubbles is when they pop.

The best way to avoid speculative run ups in prices (and subsequent crashes) is effective taxation. Of course taxation of land is not popular with the rich and powerful as it can’t be avoid.

[branchless]

Exactly. Forcing supply below demand through zoning restrictions does help, but once speculation begins this hurts supply also.

It amazes me on HN where on most other complex behavioural problems if someone came along and shouted "it's because of X" they would be laughed out to cries of "it's more complicated than just one thing".

Yet when it comes to millions of people with varying priorities interacting with government and the banks anyone who comes up with anything more complex than "it's supply and demand" is told "no, I've done econ 101 thank you".

Hacker news can't be bothered with Georgism, they've done econ 101 syllabus (provided by their establishment).

https://www.amazon.com/Progress-Poverty-Industrial-Depressio...

[bayesian_horse]

You are running into the fallacy that you can know what is a bubble and what is not, before the fact.

[danieltillett]

Not at all. We know in hindsight that the pre-2008 run up in prices was a bubble, but at the time this was debatable. I am just trying to explain to the OP that prices are set by supply and demand, but that demand may not always be rational.

Personally I do think it is a good idea to try and avoid speculative bubbles in assets and the best way to do this is via taxation.

[Retric]

Markets can stay irrational for a while, however the crash was a direct result of over supply. Land is plentiful and city's only have reduculys prices through poor infrastructure or artificially reduced development.

[branchless]

Land is plentiful. Land with the correct planning permission is not.

Credit however is not constrained except by a willingness to borrow and on the up this is near-unlimited. Fortunes are made not by doing but by speculating and then at the end the workers pick up the tab.

[branchless]

Would love to know how anyone could downvote this!

Come on, let's hear how rents are not tied to wages in a thread about remote working providing higher wages than the local area but lower wages than the hot-spot.

Let's hear it HN.

[metafunctor]

This seem to be exactly how it works. A lot of states and countries have tried to fix the problem by introducing housing benefits – but guess who, in the end, gets that money?

[branchless]

Housing benefit is the worst thing you can do. It's landlord benefit. Land value tax is the way forward.

[ta_donk_gt]

> many startups cannot afford to pay 400K to developers.

Then hire remote devs. Or move your startup to a more affordable location.

If you need to have developers work onsite, and you need to be in the Bay Area, then you need to pay accordingly.

[conjectures]

> many startups cannot afford to pay 400K to developers

It's a good point, but I wouldn't expect a construction company that could only pay 20% of cost to hire cranes to complete many buildings.

So maybe startups in that bracket just aren't viable under their current models. Maybe they need to rethink their salary/equity mix to make up for lack of cash.