On the occasion of the scheduled fast food-workers strike today (Thursday, December 5), I thought I’d dip into the vault and repost something from earlier this year on a proposal to hike the federal minimum wage. Workers in around 100 U.S. cities are striking on demands that their wages be moved from the current federal minimum of $7.25 per hour to $15 per hour – that’s well ahead of what President Obama suggested in a State of the Union address back in February. What we look at in this post is why basic economics breaks down when talking about increasing the cost of labor. While you’re looking, you might want to check out a couple other posts I did on minimum wages: one on Washington state (who’s minimum wage is above the federal one) and one on the relationship between minimum wage and federal assistance.
Minimum Wage Hikes – or – What Econ 101 Didn’t Teach You
Your entry-level economics class taught you (or should have) that when the price of something goes up, less of it is consumed. This holds for cars, interest rates, widgets, and wages. So, during this week’s State of the Union address, when President Obama called for raising the federal minimum wage from its current level of $7.25 per hour to $9.00 per hour, and tagging the minimum wage to the cost of living, it drew a decent amount of criticism. Read more
Much has been made throughout 2013 about the three “arrows” of Japanese Prime Minister Shinzo Abe. While this deflation-fighting plan of monetary loosening, fiscal stimulus, and structural reforms has been broadly successful, I believe it will be the strength or weakness of the yen that will determine whether Japan’s economy emerges convincingly from its deflationary period in 2014.
Tapering is coming. And markets know it. The mere thought that tapering of the Federal Reserve’s quantitative easing (QE) program was due in September was enough to push many markets and currencies (especially emerging markets) significantly lower. So the question arises for the occasion of the actual tapering that’s likely to begin in 2014: have markets already reacted to tapering or is there more to come? Read more
Our research* shows that since 2008, European investors increasingly favour real assets, such as infrastructure and property. Before then it was mainly the preserve of large Australian and Canadian funds.
The search for yield and safe havens has created new patterns in investor behaviour, and these have grown stronger since.
Investors now recognise the value of real assets as vehicles generating real returns. Historically many investors shied away from such assets because of their lack of liquidity. However, the demand for yield is such that they are prepared to forego liquidity on larger parts of their portfolio to meet their investment targets, whether they are seeking return or inflation protection. As a result, institutional demand for infrastructure and utilities is on the rise. Read more
Back in the 1990s, the concept of 360-degree feedback really started to resonate with those in the human resources industry, particularly in the United States. The idea is fairly simple – that the true gauge of an employee’s performance should be based not solely upon the opinion of their manager, but rather on an amalgam of feedback from superiors, subordinates, and peers. The intent is to create a circle of input from those above, below, and around the employee to provide valuable feedback that will allow the employee to improve. As we now stride towards the midpoint of the Twenty-First Century’s second decade, it is the U.S. retirement industry that must adapt this concept to build upon successes of the Pension Protection Act of 2006 (2006 Act) in the goal of creating better retirement outcomes for U.S. savers. This is the primary finding of “A 360 Degree Approach to Preparing for Retirement,” a report authored by my firm, CREATE-Research, and sponsored by the Principal Financial Group. Read more
The September jobs report was late. The shutdown of the U.S. federal government put the release back by several weeks. Then, when the data finally showed up, it was uninspiring…at best. Some might say, “meh.” (For the uninitiated, “meh” is an exclamation used to express a lack of enthusiasm). At only 148,000, the headline payroll-growth number disappointed. The pace of U.S. payroll growth has definitively slowed in the last six months, which strengthens the argument for the Fed to postpone tapering their QE program into 2014.
The mediocre details of September’s late report broke down like this. Private sector payrolls increased by only 126,000. Definitely “meh.” Read more
If you need something from the Commerce Department or the Department of Labor this week, it’s probably best not to hold your breath. According to analysis from the New York Times, the government shutdown that is now a reality is keeping 87% of the Commerce Department’s staff furloughed at home and 82% of the Labor Department. Most essential federal employees will be at work, but estimates put the number of furloughed government employees around 800,000, with another million or so being asked to work without pay.
The government shutdown will have real impacts on the U.S. economy, though the silver lining (if there is one) is that the negative effects may be only transitory. Much of the impact, though, depends on the length of the shutdown and the coming showdown over the debt ceiling.
Based on current estimates, we’d expect between 0.1% and 0.2% to be shaved off of U.S. GDP for every week that a shutdown continues. Read more