How Progressive Policies Enable Discrimination

by | Apr 23, 2019

How Progressive Policies Enable Discrimination

by | Apr 23, 2019

While progressives claim to want to eliminate discrimination, some of their favored policies make discrimination more likely to occur.

Take the case of rent control. Earlier this year Oregon became the first state to pass statewide rent-control legislation. The goal is to presumably make housing more affordable for more low-income residents, particularly minorities.

Placing price ceilings on rent, however, is well known to have many negative effects. Among them are a decrease in the availability of housing as suppliers are less willing to supply housing at lower fixed rental rates, and decreases in the quality of housing as there is little incentive for landlords to invest in upgrades.

But rent control also makes it easier for landlords to discriminate on the basis of non-price factors such as race, nationality or religion.

How so?

In a freely adjusting market for rental housing, prices (i.e. rent) will tend toward an equilibrium – or market clearing – price. This is the price at which the number of units demanded equals the number of units supplied. In other words, every tenant willing to pay this price will be able to rent a unit, while every landlord willing to rent at this price will find a willing renter.

A price ceiling in the form of rent control, however, may well cap rental rates below what the market-clearing rent would be. In this case, the lower rental price would attract more willing tenants than it would willing landlords. This is commonly referred to as a shortage in supply, or a surplus in demand.

In the case of a demand surplus in a freely-adjusting rental market, tenants bid up the rental price on available units, pushing rental prices upward toward the market-clearing rate. The effect of the higher prices would be twofold: demand would decrease and there would be fewer willing tenants; supply would increase, and landlords would be motivated to fill the additional units. In both cases, landlords would be punished if they turned down potential tenants because they would find it difficult to fill all the available units.

But with a price ceiling imposed by rent control laws, this process is not allowed to take place; and the demand surplus continues.

Such a demand surplus enables the landlord to be choosier, and in turn they can use non-price criteria by which to discriminate against potential tenants they deem to be “undesirable.” Because the landlords recognize there are more willing tenants than there are units available in the market, they can feel free to turn down potential tenants knowing there are plenty more willing tenants lined up waiting for their opportunity to rent one of the scarce available units at such a low price.

Thus, landlords who are disposed to reject tenants based on personal biases can do so with little chance of paying an economic price for doing so. Rent controls lower the price paid for discrimination, making it more likely to occur.

Minimum wage laws, another favorite cause of progressives, similarly make discriminatory hiring practices more likely. Higher wages both decrease the demand for low-skilled labor by employers and increase the number of workers willing to supply their labor for low-skilled jobs.

When the supply of willing workers outnumbers the amount of low-skilled workers being demanded by employers, the result is a supply surplus. In a freely-adjusting labor market, a surplus in the labor supply would cause wages to fall, as workers competing with each other would bid down the wages they are willing to accept to get one of the relatively scarce available jobs.

But a minimum wage does not allow this adjustment to take place, and the supply surplus persists. As a result, those demanding low-skilled labor (employers) can be more selective and incorporate non-wage, and non-job related factors by which to discriminate against applicants.

Employers choosing to discriminate based on gender, race or nationality can do so more freely knowing there are plenty of other applicants to choose from. They will pay little to no penalty for discrimination.

While libertarians agree that the freedom of association is a vital component of a free society and acts of “discrimination” should not be criminalized, we can also recognize that progressives face a dilemma when it comes to discrimination. Namely, that while they claim a desire to stamp out discrimination, some of their favored interventionist policies make discrimination more likely.

Instead, it is competitive, freely-adjusting markets that punish discriminatory behavior and therefore makes it less likely.

We should not hesitate to point this out to progressives, as it just might give them pause in continuing to seek the state as the solution of all of society’s ills.

Bradley Thomas is creator of the website, and is a libertarian activist who enjoys researching and writing on the freedom philosophy and Austrian economics.

Follow him on twitter: ErasetheState @erasestate

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