New Yorkers appear to be on the cusp of electing a self-described socialist, Zohran Mamdani, as their next mayor. At first glance, his youth-friendly marketing comes off as rather gimmicky, as do some of his policy recommendations, such as free public buses and state-provided baby baskets. But make no mistake, his core agenda forms perhaps the most heavily interventionist platform the city has ever witnessed, and his proposed price controls could very swiftly bring about the return of the misery of the 1970s.
$30 Minimum Wage by 2030
His platform states, “As Mayor, Zohran will champion a new local law bringing the NYC wage floor up to $30/hour by 2030.”
Minimum wage laws are a form of price floor on wages which outlaw the contractual exchange of labor for money at any price below said floor and, as basic economics teaches us, a floor above an equilibrium price creates a glut or unemployment. Employee compensation (including wages, benefits, and other intangible, employment-related advantages) is determined by the supply of substitutable laborers and the demand for that type of labor by entrepreneurs engaged in the ventures which require them. Through the effects of negotiation and competition, worker remuneration constantly tends towards the discounted marginal value product they generate—their portion of the subjective value buyers assign to the final products they helped produce.
Imposing a minimum wage above this level for a type of labor simply makes employing those workers unprofitable for marginal entrepreneurs (the employers least able to bear higher costs of employment). These marginal employers (generally smaller businesses without the resources to absorb or circumvent overbearing regulation) must reduce their demand for those employees through lower hours and layoffs and/or reduce non-wage compensation.
Given that New York City’s existing $16.50 legal minimum wage is significantly lower than most local wages, it is only directly applicable to the least skilled job seekers. These frequently consist of younger candidates and members of disadvantaged demographic groups, explaining their comparatively higher unemployment rates and lower labor force participation rates. Mamdani’s envisioned $30 minimum wage would impact a much larger portion of salaries, triggering the disastrous unemployment absent from the current minimum wage floor.
The New York City employees and entrepreneurs most vulnerable to further minimum wage increases find themselves among the retail industry, the restaurant sector, and personal care services. These are all groups particularly targeted by Mamdani’s working-class appeal. It is tragically ironic that minimum wage laws harm above all the disadvantaged people they intend to help most of all, those stuck at the lowest rungs of the labor hierarchy.
And yet, outright firings are not the only possible consequence of such a massive hike: entrepreneurs could compensate for higher wage costs with lower hours, reduced employee benefits, and/or lower investment in employee working conditions.
One thing is for certain: such a policy would result in much lower quality and quantity of employment opportunities than would otherwise be available were it not implemented.
Rent Freezes
His platform states further, “As Mayor, Zohran will immediately freeze the rent for all stabilized tenants.”
Rent freezes are price ceilings on rents which outlaw the contractual exchange of a living space for money at any price above said ceiling and, as with all price ceilings set below market prices, they lead to shortages. Its broad reputation as terrible policy is a rare example of near total consensus across the field of economics, with extensive empirical evidence of its historical failures.
It is excruciatingly frustrating for market advocates to finally witness a mayoral candidate lambast municipal rent boards—bureaucratic entities highly resembling their Soviet counterparts—only for that candidate to call for an expansion of their role. Mamdani’s rent freeze would simply be a continuation of New York City’s existing and disastrous rent control, with total freezes having already been imposed in 2015, 2016, 2020, and 2021 upon the 41 percent of the city’s rental stock subject to its rent stabilization policies.
Since 2015’s historic initial freeze, the supply of rent-stabilized units has outright fallen by 3 percent and their vacancy rate has collapsed to below 1 percent, while non-stabilized rents have soared as landlords attempt to compensate for lower rental income. Meanwhile, rent-to-income ratios (the primary metric used to justify the city’s previous rent freezes) have almost doubled and have grown far faster than in virtually every major American city with purely market-determined rents.
Rent control’s perverse incentives have also fueled a number of creative circumventions. Units are illegally sublet on platforms such as Airbnb at market rates. Owners also falsely declare unit improvements to take advantage of permitted justifications for rent increases. Landlords would offer massive bribes to tenants to abandon their leases in order to update the listing to market levels, until the practice was outlawed. Owners combine rent-controlled units with market units (“Frankensteining”), converting them to market listings. Lessors have even engaged in harassment to pressure tenants to abandon their leases through attrition.
Mamdani’s platform further highlights the poor living conditions and the lack of rental amenities such as heating as the failure of landlords, but these consequences are precisely those predicted by economic theory as the inevitable results of price controls. By reducing the profitability of providing housing as a landlord, owners are incentivized to shrink their costs and thus the quality and quantity of various aspects of their housing services. Since 2015, repair and maintenance wait times in rent-regulated housing have more than doubled, tenant complaints have exploded and basic amenities, such as laundry units and functioning elevators, are gradually disappearing for renters.
Further rent freezes would drastically worsen all of these negative consequences and, if Mamdani follows through on his threats to pursue any owner-circumventing regulation, many entrepreneurs might simply exit New York City’s housing market altogether.
Conclusion
These price control policies are but one part of his highly interventionist platform, including state-run grocery stores, massive social housing development, and record tax increases, which would make New York City the highest-taxed major city in the country. It is imperative that advocates of state intervention such as Zohran Mamdani understand that the policies they want implemented in the name of helping the poorest members of society generally harm them most of all.
Let us hope that New Yorkers come to their senses soon and that, if he is elected, his opposition from within Albany and New York City itself can at the very least stifle his plans.
