Land Use Implications of the Living-Wage Debate

Source: Maureen McAvey, Urban Land, October 25, 2013

The living-wage issue is rife with complexities. On its face, it sounds both like a terrific idea and a terrible idea. On the positive side, who wouldn’t want to reward someone’s work with a wage and benefit structure that allows an individual or a family to live without government assistance, at least at a modest level? On the negative side, this is another government intrusion into business that does not factor in all the complexities affecting the bottom line. Of interest to the real estate community, of course, are the implications for land use. What effect does the minimum wage have on retailers and, in turn, their demand for real estate? The answers are important to anyone involved in creating thriving, walkable, multiuse urban centers where people can afford to live—and shop….

…After looking at impartial academic studies, one can conclude that raising the minimum wage is not the crucial factor in the success of a business; local market forces and demand are more important. In high-demand areas, increasing the minimum wage did not affect business success, and the local jurisdiction often continued to outdo its neighbors with lower wage scales. From a retail perspective, the old mantra of “location, location, location” still applies.

There is no question that retailers these days face a host of challenges ranging from the internet to lower household incomes. But raising the minimum wage—if done in a fair and rational manner—may actually boost the revenues of retail and hospitality vendors by providing their customers with higher incomes and higher spending potential….