Take the minimum wage as an example. The federal minimum wage hasn’t risen much over the years, and there is a lot of legitimate debate about its ideal level. Will a higher minimum wage help lift up families? Will it hurt business and reduce employment? I can’t answer those questions with confidence, but I do know that it’s crazy to have a single wage across the vast and diverse United States.
When you consider the cost of living differences between expensive cities and low-cost small towns, it seems totally nuts for businesses to have to pay the same wage. New York and rural Kansas are a world apart, and there’s nothing wrong with that. Is it fair if a McDonald’s worker in Georgia can support a family, while somebody doing the same job in California is struggling at the poverty line? The minimum wage should reflect local circumstances.
In reality, we’re already seeing this. States and even cities have been increasing their own minimum wages much more frequently than the federal government. I think this is great. State and local governments are much closer to the problem they’re trying to address, and their solutions are more tailored to local needs.
There are plenty of other policy areas where we can see a similar dynamic. Most people would agree that we want our education system to be better. But does that mean we need sweeping federal legislation to “fix” America’s schools? I think not. This idea, which comes back into fashion every few decades, takes many smaller problems that are best addressed locally, and reimagines them as a single big problem that we can solve with a silver bullet solution at the federal level. Unfortunately, this approach is based on fantasy and it doesn’t work.
The question of what is the “right” level for solving a problem applies in every industry. In real estate, we can see it in the tension between state and local rules about land use. Sometimes a centralized solution or standardized rule is needed, but too often, it’s the wrong approach. One size doesn’t fit all.
Just as markets make better economic choices than central planners, distributed decision-making often leads to better policy. Fortunately, we already have a political system that lets us address problems at the state and local levels. Rather than looking to Washington, we can solve many of our problems closer to home.