We all understand that certain markets are expensive. We all understand that housing availability and housing costs are skyrocketing in certain places.

We all understand that wages often increase in response to the cost of living, as natural supply and demand in the labor market reaches equilibrium. If workers can’t afford to live in San Francisco making $35,000 per year, they either find other work that makes more or find work (and housing) outside San Francisco.

We may not love the equality this scenario creates, as it can crowd out diversity in certain areas and force lower wage workers to leave the places they love. I’m generally a “free markets” guy, who certainly respects the workings of the labor market and sees intervention as temporary in nature. I also know I would not want to leave my home because I could no longer afford to live there.

These issues often come to a boil and make the news. Just this week we see an example of how rising housing costs resulted in labor unrest. About 200 teaching assistants at University of California Santa Cruz held an unauthorized strike to look to drove higher wages. UCSC ultimately fires 54 of them, and has chosen to not extend employment for others. Here is a link for more details.

This highlights the supply/demand problem. UCSC was willing to let them go, presumably because others are willing to become TAs at current wage rates. The labor market doesn’t require higher wages – there is equilibrium. But to a market participant, a change is required – the person who was creating equilibrium before won’t the person creating equilibrium in the future.

Like past posts about pay fairness, we continue to see how wage fairness is a complex occur with no easy answer. I’ll stay out of the specific union issues this case also presents, but certainly we can see how rising cost of living continues to create headlines for compensation functions. Do we focus on fairness for those we already have? Or focus on the market replacement cost? They are not always the same thing.

As a side note, UCSC has always won the award as my favorite college sports mascot. UCSC’s teams are the Banana Slugs, with Sammy the Slug leading the cheer. It’s bizarre. And awesome.