"One definition of insanity is doing something over and over again while expecting a different result" -- Albert Einstein (doubt exists as to whether this is actually his, although the expressed sentiment is correct.)
U.S. President Barack Obama is seeking to resurrect an idea that he set aside during his first term: Raise the minimum wage to help lift working families out of poverty. The proposal, which would take the minimum to $9 an hour from the current $7.25, is far from ideal. Still, it’s the right thing to do.
This has never worked and won't this time either.
Note what Bloomberg acknowledges:
Average hourly compensation has fallen in inflation- adjusted terms since the economy hit bottom in mid-2009, something that has never happened in any recovery on record, going back to 1947 (see chart). Pay has declined even as workers have boosted output per hour by about 6 percent.
True.
Now analyze why.
From mid-2009 we have added $4.889 trillion in debt to the national ledger. This is not money that is being paid back -- that is simple pulled-forward demand -- it is pure monetary emission, most of which has been absorbed into The Fed's balance sheet.
It's also about 8% of aggregate GDP.
If output per-hour has increased 6%, and currency has been debased by 8%, then hourly compensation obviously would decline about 2% in real terms, and it has.
It's arithmetic, not voodoo folks.
Yet the same left argues for "stimulus", that is deficit spending, which is why inflation-adjusted hourly compensation is depressed in the first place.
Increasing the minimum wage is somewhat like cutting your leg off and then arguing that you should put on an artificial limb because you are now incapable of walking. The real problem began with your misuse of a saw for self-destructive reasons.
You can't solve this problem by hiking the minimum wage. Doing so is doomed to fail as this is nothing more or less than an attempt to pretend that you can shift the monetary cost of debasement from one part of the population to another through less-than-honest means.
But all taxes, whether direct and obvious or indirect as is the case here, are paid by people, not corporations. If you raise the minimum wage then the price of goods and services will rise in order to cover the additional expense. If the market supports those higher prices then the net impact of your raise of the minimum wage is zero, as the cost of living goes up in the same proportion!
If the market cannot support those higher prices then the result is that those individuals become former employees, and now their income is zero.
The solution to this problem is to stop debasing the currency and stop destroying purchasing power.
But that means a cessation of the lies, and that's politically "inconvenient."
Our policy on reciprocal links: Send us an email with your
information and why you think your blog or news site would make a
good addition - in most cases reciprocal link requests will be
granted.
Legal Disclaimer
The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.
NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES.
The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.
Looking for "The Best of Market Ticker"? Check out Ticker Classics.
Visit the forum to discuss this and other investing-related topics; see the FAQ on the forum for information about Gold Donor status including access to our technical analysis video server.
Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.
Market Ticker content may be reproduced or excerpted online provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media.
Submissions may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.
Leads on stories of current economic and political interest are always
welcome. Our fax tip line is 850-897-9364; please include contact information
with your transmission.
U.S. President Barack Obama is seeking to resurrect an idea that he set aside during his first term: Raise the minimum wage to help lift working families out of poverty. The proposal, which would take the minimum to $9 an hour from the current $7.25, is far from ideal. Still, it’s the right thing to do.
I've looked up the minimum salary up here in Canada... and EVERY YEAR they raise it. EVERY SINGLE YEAR. And they wonder why our economy is a big bubble...
----------
"Every normal man must be tempted at times to spit upon his hands, hoist the black flag, and begin slitting throats." -- H.L. Mencken
But all taxes, whether direct and obvious or indirect as is the case here, are paid by people, not corporations.
It is amazing how many people have trouble with that simple statement.
I would go one further and add that all costs are paid by people, not corporations or government. So many people believe in the free lunch via corporations paying taxes or government providing services that it has totally warped voting and thus our Republic.
Flap
----------
Here are my predictions for everyone to see: S&P 500 at 320, DOW at 2200, Gold $300/oz, and Corn $2/bu. "You can't build a house of cards on a shaking table." - Tony Johns The January 2015 AMZN put at $130 (cost $4.25) will be a winner.
Visualcsharp
Posts: 343
Incept: 2009-12-19
Round Rock, TX
Because--don't you know--jobs that used to only be worth $7.25/hr are now worth $9/hr! It's magic! Flipping burgers at McDonald's just became more valuable to McDonald's, and all by government decree!
All it means is that my professional services as an independent software developer contractor just went up because I need to ensure I extract the same value from the economy that I was extracting before the hike.
Visualcsharp
Posts: 343
Incept: 2009-12-19
Round Rock, TX
I just realized something:
The minimum wage is nothing more than redistributionism, except that the money is redistributed directly from employer to worker. The amount being redistributed by force of law is equal to (worker wage per hour - true market wage per hour), so if a worker is paid $9/hr due to minimum wage laws but, in a free market, would be paid $4/hr, the government is effectively forcing a $5/hr redistribution from the employer to that worker.
Trades50
Posts: 4214
Incept: 2007-10-30
Land of Tax and Spend
Quote:
Average hourly compensation has fallen in inflation- adjusted terms since the economy hit bottom in mid-2009, something that has never happened in any recovery on record, going back to 1947
Bloomberg is part of the disinformation. What recovery? Demand created by flooding the banks and equities with unproductive money.
----------
When the people fear the government, there is tyranny. When the government fears the people, there is liberty. - Thomas Jefferson
So many people believe in the free lunch via corporations paying taxes or government providing services that it has totally warped voting and thus our Republic.
Yup...even many on the right actually think that businesses "pay" taxes...the stupidity of this goes VERY deep. When I explain to someone that any increase in costs to a business is immediately transferred to the consumer (assuming the consumer can eat the cost, otherwise, the business cuts its "expenses"), either they yell that it shouldn't be allowed (left and their "profit is immoral" bs), or they have a blank look on their face unable to comprehend.
----------
Every normal man must be tempted at times to spit on his hands, hoist the black flag, and begin to slit throats. H. L. Mencken
But it's not from the employer. It's from the economy as a whole (that is, everyone) because you can't force an employer to pay anything to anyone.
No company ever is the source of anything. Those who have never run a company don't understand this, but those who have do.
Not one penny of what MCSNet earned during my years of running it was mine or the company's. Every penny of it came from our customers, less the paid-in capital from the shareholders (which, in terms of the total cash flow through the business over its operating life, was in fact a tiny percentage of the whole.)
So you can't force a company to pay a higher minimum wage. What you can do is attempt to force the rest of the economy to pay a higher minimum wage.
If that attempt succeeds then the purchasing power of everyone in the economy goes down, and net-net (across the entire economy) you did nothing.
If the attempt fails then you just created a former employee.
----------
I don't care if it makes sense -- only if it makes money. -- Me Bank (n): See scam, fraud and theft.Eat a bankster -- they're low-carb. What part of "shall not be infringed" was unclear?
You only beat the inflation game if you work for the government where pay increases are practially automatic. In the last decade the average cop's salary and benefits (pension, medical, premium pay, etc..) has gone up 100%. While the compensation for the average working schmuck in the private sector has remained stagnant.
So I guess the best career path a parent could wish for his child, as far as living a financially fruitful life, other than theft, would be a career in what they laughingly call "public service".
And they make no bones about the incentive discrimination - whereas if you work for the government your student loans are forgiven after 10 years or so. As if that makes any sense at all. Like working for the government is some big sacrifice. heh. It's a lazy man's way out or actually working for a living while receiving premium pay for your laziness. heh.
----------
"Ammunition beats persuasion when you are looking for freedom." Will Rogers, 4 Nov 1879 - 15 Aug 1935
Matt_bear
Posts: 6324
Incept: 2008-07-15
a week early on spy puts
Obama thinks he can play Robin Hood. He thinks raising the minimum wage will give to the poor and take from the rich and corporations.
The only way it would work is if companies couldn't fire people or raise prices on their products.
But that's not how it works. It will just read to andjusted staus quo/declining purchasing power, and more unemployed folks.
----------
In terms of real-world fundamentals, I expect that most of the people around me, whom I work with day to day, and whom I pass on the street ... will be dead within five years.
I remember growing up all the grocery stores had bag boys and they did something with the minimum wage and all the bag boys disappeared. They would bag your groceries and take your stuff out to the car. I think they worked for a small wage plus tips. Mostly young kids. Those jobs went poof.
----------
Dear Euroland: Relax, Germany has a plan for your money!
Political Capital Defined: We are out of money but will tax our citizens for whatever it takes to "SAVE" the Euro.
The only way it would work is if companies couldn't fire people or raise prices on their products.
As disastrous as this would be, I expect some form of "legislation" addressing this issue to come around soon.
That never works. Been tried elsewhere. When the government freezes prices, if the prices are too low to allow businesses to earn money, they will pull their stuff from the shelves - they would rather not sell anything, than sell at a loss.
If the government makes it impossible for businesses to fire people, then they won't hire them in the first place.
Basically, if you enact such laws that will make it impossible for those who actually produce something to make reasonable income from it, they will stop producing. Why work if (the most of) it is going to be taken away from you anyway?
At $9/hr the min wage would be nearly half the AVERAGE wage. Without fully researching this, I would bet that this would be an all time high ratio. I remember working for min wage back in the 70's and I bet then it was about a fourth of the average wage.
I think that libs believe that the minimum wage should be a "living wage" while it really has been an entry level wage for low skill labor.
Bagbalm
Posts: 4247
Incept: 2009-03-19
Just North of Detroit
When this doesn't work they try to freeze prices. This is the political mind. Nixon did it for a disastrous year and a half. In extreme cases the shelves go bare because nobody will sell at government prices.
Do you notice they NEVER try to set a maximum wage?
Aztrader
Posts: 6648
Incept: 2007-09-10
Scottsdale, AZ
Just another dog and pony show that he can add to his immigration push. He knows it will never pass, but it looks good to the poor and morons that believe everthing he says.
This guy is nothing but a crap preacher that the impoverished want to believe in. Everyone is made to believe that the business owners are all rich and greedy. If anyone really knew what it costs to run a business with overhead and inventory, then they may change their tune. This minimum wage BS will finish off what's left of the middle class business owner and this is exactly what Obama wants. More people on the govt tit so that he owns them.
I think your wages problem goes back to my thread in the bar about wanting a new single cup coffee brewer. I didn't want another piece of **** Keurig made in China. Well guess what??? They're all made in China. And I guarantee you they are all a piece of ****. Why do we do this when they make crap with near slave labor and pollute their environment at will. Enforce our labor and environmental laws on imports and our wage problem goes away pronto. And maybe I can buy a quality made coffee maker but it costs me 50% more. Well I'll pay it. And happily there will be more people with decent jobs wanting to buy a house. And then I get paid. We're eating our seed corn in this country.
----------
I'm already visualizing you with duct tape over your mouth.
