Saturday, 6 March 2021

Newsthump explains Ricardo's Law of Rent

From Newsthump:

The nurses and paramedics that have just spent a gruelling year in the frontline of the war against COVID have finally seen their sacrifices rewarded by a 1% pay rise and the warm knowledge that the person who takes half their salary in rent is going to get richer...


Rich Tee said...

A big reason why I oppose the "Living Wage" is because rents will just rise to absorb the increased pay people are getting.

Mark Wadsworth said...

RT, if (big IF) this raises wages in low wage areas but not in high wage areas, then the wage difference is reduces. Rents in low wage areas stay the same and rents in high wage areas fall - there is less incentive to move there.

Any 'London weighting' (the London 'living wage' is higher than elsewhere) works the other way round - it increases wage differentials, so it increases rents in London.

So it's a vicious circle. The ostensible reason for the London weighting is higher living costs, the main cause of higher London living costs is the higher rents, the London weighting pushes up rents etc.