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
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
At their September meeting, the Federal Reserve surprised markets by maintaining their program of monthly Treasury and agency MBS purchases. So the taper is again “on hold.” Our economist Robin Anderson looks at the Fed’s decision and examines what it means for the markets.
Imagine you’re aboard a flight that’s on its final approach into the Indira Gandhi International Airport in Delhi, India. For most of the flight, the plane, a 787, has been traveling at about 903 km/hour (that’s around 560 miles/hour). As the flight attendants collect that last few plastic cups, the plane starts to slow and banks gently to line up with the runway. The man next to you, oddly distraught over the change in airspeed, yelps as the pitch of the engines audibly lowers. Panicking, he unbuckles his seatbelt, stands up and yells, “It’s slowing down!! Why is it slowing down?!? I’m bailing out!!”
While you’d never expect this sort of thing to actually happen on a real flight to India, something similar is happening with emerging market investors. Read more
Did you know that Missouri is the only state that’s home to two Federal Reserve banks? There’s one in St. Louis and there’s one in Kansas City, Missouri over on the western edge. And while KC and St. Louis are only about four hours apart by car, on the surface, their respective Fed presidents seem to be poles apart on the issue of “the Taper.” (Caps because I think “Taper” is the new buzzword – this year’s “Fiscal Cliff.”) Read more
The 2013 Principal Global Investors/CREATE-Research report is due to be launched on June 17th. Each year, a survey focus is chosen after canvassing the views of thought leaders in the investment value chain worldwide. The research topic selected for 2013 is investing in today’s debt-fuelled world. The resulting research report, Investing in a Debt Fuelled World, takes a look at what it means to be an investor in a world where many major economies are trying to cut their debt mountains mostly via a combination of low interest rates and inflation. Read more
Monetary accommodation was on the rise in May. Of the twelve major bank meetings during the month, nine resulted in cuts, two central banks held policy steady, and only one actually increased rates to control inflation.
While the Federal Reserve didn’t change direction, it sent mixed messages regarding its quantitative easing (QE) program. The minutes from the April-May FOMC indicated willingness to “increase or reduce” the pace of QE, a change from previous meetings that were primarily focused on QE reduction aspects. Read more
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