The state of Oregon has declared war on the laws of economics. Not satisfied with merely raising the minimum wage – in the interests of “helping small businesses” – the state legislature has now passed a law requiring developers to sell homes at below cost.

What’s next? The law of gravity?

“Gov. Kate Brown signed historic increases to the minimum wage into law Wednesday, claiming a major win for Democrats and promising to uplift the working poor,” The Oregonian reports. “Speaking to reporters in her ceremonial office at the Capitol, Brown said the bill is a well-crafted compromise between labor groups and businesses that demonstrates Oregon’s wise culture of governing.”

According to the state’s labor commissioners, the new wage will be “good for Oregon families and is going to add to consumer purchasing power that will benefit our small businesses.”

But as James Sherk of the Heritage Foundation notes, that’s not how it works.

“Good intentions can produce terrible results,” he wrote. “Recently the Oregon legislature passed an unprecedented minimum wage hike in effort to help workers within their state, but the legislation will hurt the workers it’s supposed to help … economists examining the 2007-2009 federal minimum wage hike found that affected workers’ weekly earnings dropped by an average of $150 month. This is because while some workers got higher pay, others lost their jobs – or could not find work to begin with.”

Instead of benefiting small businesses, as Oregon officials claim, the new wage will hit restaurants, day care centers, retail shops and other small businesses the hardest.

“What many advocates miss is that many employers cannot afford these higher wages,” Sherk explained. “The average restaurant has a profit margin of around 4-5 percent. Simply raising wages would completely eliminate most restaurateurs’ profits – and then some. They will have no choice but to raise prices. That in turn will drive away customers, reducing the number of employees needed.”

It’s not just the minimum wage. Oregon has also passed a law mandating “inclusionary zoning.” The law requires builders who develop new homes to set aside a certain number of them to sell at below-market rates.

In other words, they require builders to lose money.

Randal O’Toole, of the Foundation for Economic Education, points out this will only make housing less affordable.

“This will also lead (developers) to build fewer homes and to sell the market-rate homes they do build for higher prices to offset their losses on the ‘affordable’ homes,” he explained. “In other words, this law relies on the counterintuitive notion that making housing more expensive will make it more affordable. Once again, the legislature is playing a balancing game. A few people will get – and be very grateful for – more affordable housing. Every other homebuyer and renter will end up paying more, but not enough more for them (the legislature hopes) to complain about it.”

Both of these policies are price controls – one on the cost of labor, and one on the cost of housing. Price controls always fail, because they ignore the most basic laws of economics.