Wednesday, July 23, 2014

Why Seattle’s Minimum Wage Hike Matters to Seniors

By Dennis Miller

The US is gearing up for mid-term elections this November 4—so much so that Rolling Stone announced the relaunch of the “Rock the Vote” campaign last month (according to one of the younger members of my team). And just like clockwork, minimum wage is making headlines again too. It’s déjà vu all over again.

At a breakfast some 20 years ago, I sat next to a prominent, high-ranking US senator now long retired. He showed us data from the Bureau of Labor Statistics indicating that every time the minimum wage went up, more unemployment followed. Businesses were forced to ship jobs offshore—whether they wanted to or not—and started looking for ways to automate low- or unskilled jobs.

This senator and I talked one-on-one later in the day. Annoyed that politicians continued to do something that flat out doesn’t work, I asked him the rhetorical “Why?” He grinned and responded that politicians from all parties pander to the voters—and are more than willing to hurt Americans to get elected. Of course, I already knew that.

Swiss voters made the sane choice recently when they voted down a 22-franc (nearly $25) minimum wage. 76% voted to reject what would have been the world’s highest minimum wage. If only Seattle’s city council were as clearheaded as the Swiss! That city’s new $15 per hour minimum wage—the highest in the nation—will be phased in beginning next April.

The current federal minimum wage is $7.25 per hour. 22 states currently have higher minimum wage rates, and Washington’s wage floor (no surprise here) is the current high at $9.32 per hour. Not for long, though: Vermont just passed legislation that will raise its minimum wage to $10.50 per hour by 2018; Massachusetts is closing in on an $11 per hour rate. And earlier this year Connecticut, Hawaii, and Maryland passed $10.10 per hour minimum wage legislation.

More Jobs for Seniors That Still Don’t Pay That Much

Chances are you don’t live in any of those states. Maybe you even live in a place like Louisiana or South Carolina with no state minimum wage to speak of. Still, these increases affect us all by way of increased production costs and the like, which businesses ultimately pass on to consumers.

Minimum wage increases and the accompanying price hikes disproportionately affect seniors as a group. If you’re still working, your wages should increase with prices. But if you’re not, your income might not keep up, particularly if you depend on Social Security. Simply put, Social Security’s cost of living increases do not keep up with, well, the cost of living. Each time minimum wages go up, they push the buying power of a fixed income down.

Does raising the minimum wage force seniors out of jobs? No, actually. The percentage of seniors in the workforce is rapidly increasing as they look for post-retirement jobs, often in the only place they can find them: low on the totem pole.

The chart below shows the marked increase in the percentage of employed seniors compared to other age groups.


Walk into any Walmart, McDonald’s, Home Depot, or other big-box store and you’ll see a lot of seniors waiting on you with a smile… albeit sometimes forced. Businesses can move manufacturing jobs offshore, but they have to staff in-person retail jobs with live bodies right where their stores are.

Still, retailers have to cut back to cover minimum wage increases as best they can. My wife and I recently went into a fast-food restaurant and stood in line for 10 minutes. Talk about a redefinition of fast food: McDonald’s reported in April that their same-store sales rose 1.2%, and yet their lines and wait times have increased a lot more than that.

And it’s not just fast food. We just went to two different Home Depots to buy an inexpensive area rug and struggled to find a clerk in both. When we finally did, there were lines of antsy customers in front of us three people deep. We stood in line and waited our turn.

Of course, a senior earning minimum wage has a different perspective. Any 70-year-old in Seattle earning $10 per hour must be awfully excited about a 50% pay bump. As the saying goes, though, there is good news and bad news.

At one time, the minimum wage was meant to be “apprentice” pay for young people entering the work force. Young people, however, have the highest rate of unemployment: 15% for workers age 16-24. While this is an ongoing trend—before the 2008 recession, one in eight young workers was unemployed, according to a 2010 joint congressional report—higher minimum wages aren’t helping.

Ask any owner or manager of a retail store whom he or she would rather hire: a young person with no job experience or a senior? The senior wins out almost every time. Employers consider them to be more diligent, harder workers and more likely to show up consistently and on time. With fewer and fewer unskilled jobs out there and a larger labor force to choose from, seniors have a real advantage.

Higher Mandatory Wages Spur Automation

The other side of the coin is that higher minimum wages give retailers a greater incentive to automate unskilled tasks. How many of us now find the self-checkout at Home Depot or the grocery store faster and easier? One retail clerk can look over five to six customers checking out and assist them as needed.

Would you rather folks have jobs paying $10 per hour or this?


I have great empathy for a friend who, at 80 years old, went back to work in a retail store earning minimum wage. He had to in order to make ends meet. He worked 20-25 hours a week and came home exhausted. Certainly another $5 per hour would have helped; it might add $100-125 per week to his take-home pay. From his perspective, the push for a higher minimum wage is certainly understandable.

But consider this: He and his wife live in a small condo in a modest 55-plus community. Once a week, an army of workers descends on the condominium complex to mow the grass and perform the maintenance for the entire community. Those workers would also have to be paid more, and those costs would be passed on to my friend and his neighbors via their association dues.

No matter where they go to spend money—the grocery store, the occasional restaurant, or the gas pump—prices will reflect the minimum wages of others, and the cycle will continue. Soon, $15 per hour will mean the folks in Seattle are no better off than they were before. And what’s worse, young people who need job experience are not going to get it.

Sad to say, the few seniors I know who must work were never poor during their first careers. Many enjoyed excellent salaries, but they never learned to live within their means. Now that lifestyle has caught up with them.

Moreover, nearly every politician running during the upcoming mid-term elections (and every other election) seems to have a plan to “fix” Social Security. That’s a code for reducing benefits, making the minimum wage and subsequent price increases all the more relevant to seniors living on fixed incomes.

Meanwhile, the minimum wage will continue to rise. Some may benefit in the short term, but working seniors and retirees alike will all watch their cost of living rise. My team of Miller’s Money Forever analysts and I have a solution, though: a singular investing approach specifically curated for seniors and savers who want a higher monthly income stream without taking on post-retirement jobs or undue financial risks.

Click here to learn more about my favorite money-making strategy now and start down your path to a rich retirement today.


The article Why Seattle’s Minimum Wage Hike Matters to Seniors was originally published at millersmoney.com.

Monday, July 21, 2014

Central Bank Smackdown

By John Mauldin

Smackdown: smack·down, ˈsmakˌdoun/, noun, US informal
1. a bitter contest or confrontation.
"the age-old man versus Nature smackdown"
2. a decisive or humiliating defeat or setback.

The term “smackdown” was first used by professional wrestler Dwayne Johnson (AKA The Rock) in 1997. Ten years later its use had become so ubiquitous that Merriam-Webster felt compelled to add it to their lexicon. It may be Dwayne Johnson’s enduring contribution to Western civilization, notwithstanding and apart from his roles in The Fast and The Furious movie series. All that said, it is quite the useful word for talking about confrontations that are more for show than actual physical altercations.

And so it is that on a beautiful July 4 weekend we will amuse ourselves by contemplating the serious smackdown that central bankers are visiting upon each other. If the ramifications of their antics were not so serious, they would actually be quite amusing. This week’s shorter than usual letter will explore the implications of the contretemps among the world’s central bankers and take a little dive into yesterday’s generally positive employment report.

BIS: The Opening Riposte

The opening riposte came from the Bank for International Settlements, the “bank for central banks.” In their annual report, released this week, they talked about “euphoric” financial markets that have become detached from reality. They clearly – clearly in central banker-speak, that is – fingered the culprit as the ultralow monetary policies being pursued around the world. These are creating capital markets that are “extraordinarily buoyant.”

The report opens with this line: “A new policy compass is needed to help the global economy step out of the shadow of the Great Financial Crisis. This will involve adjustments to the current policy mix and to policy frameworks with the aim of restoring sustainable and balanced economic growth.”

The Financial Times weighed in with this summary: “Leading central banks should not fall into the trap of raising rates ‘too slowly and too late,’ the BIS said, calling for policy makers to halt the steady rise in debt burdens around the world and embark on reforms to boost productivity. In its annual report, the BIS also warned of the risks brewing in emerging markets, setting out early warning indicators of possible banking crises in a number of jurisdictions, including most notably China.”

“The risk of normalizing too late and too gradually should not be underestimated,” the BIS said in a follow-up statement on Sunday. “Particularly for countries in the late stages of financial booms, the trade-off is now between the risk of bringing forward the downward leg of the cycle and that of suffering a bigger bust later on,” the BIS report said.

The Financial Times noted that the BIS “has been a longstanding sceptic about the benefits of ultra-stimulative monetary and fiscal policies, and its latest intervention reflects mounting concern that the rebound in capital markets and real estate is built on fragile foundations.”

The New York Times delved further into the story:

There is a disappointing element of déjà vu in all this,” Claudio Borio, head of the monetary and economic department at the BIS, said in an interview ahead of Sunday’s release of the report. He described the report “as a call to action.”

The organization said governments should do more to improve the performance of their economies, such as reducing restrictions on hiring and firing. The report also urged banks to raise more capital as a cushion against risk and to speed efforts to deal with past problems. Countries that are growing quickly, like some emerging markets, must be alert to the danger of overheating, the group said.

The signs of financial imbalances are there,” Mr. Borio said. “That’s why we are emphasizing it is important to take further action while the time is still there.”

The B.I.S. report said debt levels in many emerging markets, as well as Switzerland, “are well above the threshold that indicates potential trouble.” (Source: New York Times)

Casual observers will be forgiven if they come away with the impression that the BIS document was seriously influenced by supply-siders and Austrian economists. Someone at the Bank for International Settlements seems to have channeled their inner Hayek. They pointed out that despite the easy monetary policies around the world, investment has remained weak and productivity growth has stagnated. There is even talk of secular (that is, chronic) stagnation. They talk about the need for further capitalization of many banks (which can be read, of European banks). They decry the rise of public and private debt.

Read this from their webpage introduction to the report:

To return to sustainable and balanced growth, policies need to go beyond their traditional focus on the business cycle and take a longer-term perspective – one in which the financial cycle takes centre stage. They need to address head-on the structural deficiencies and resource misallocations masked by strong financial booms and revealed only in the subsequent busts. The only source of lasting prosperity is a stronger supply side. It is essential to move away from debt as the main engine of growth.

“Good policy is less a question of seeking to pump up growth at all costs than of removing the obstacles that hold it back,” the BIS argued in the report, saying the recent upturn in the global economy offers a precious opportunity for reform and that policy needs to become more symmetrical in responding to both booms and busts.

Does “responding to both booms and busts” sound like any central bank in a country near you? No, I thought not. I will admit to being something of a hometown boy. I pull for the local teams and cheered on the US soccer team. But given the chance, based on this BIS document, I would replace my hometown team – the US Federal Reserve High Flyers – with the team from the Bank for International Settlements in Basel in a heartbeat. These guys (almost) restore my faith in the economics profession. It seems there is a bastion of understanding out there, beyond the halls of American academia. Just saying…


To continue reading this article from Thoughts from the Frontline – a free weekly publication by John Mauldin, renowned financial expert, best-selling author, and Chairman of Mauldin Economics – please click here.


The article Thoughts from the Frontline: Central Bank Smackdown was originally published at mauldineconomics.com.

Saturday, July 19, 2014

Doug Casey: “America Has Ceased to Exist”

By Doug Casey, Chairman

“America is a marvelous idea, a unique idea, fantastic idea. I’m extremely pro-American. But America has ceased to exist,” says Doug Casey. Watch him in this fascinating interview with Reason TV’s Nick Gillespie discuss the political, social, and economic challenges the US must conquer as well as lessons we can learn from failed states.



A severe economic and/or political crisis can sneak up on you before you know it. Learn from the three harrowing stories of international crisis survivors—and the insightful comments of experts like Doug—how to recognize a crisis in the making. You may need those skills soon because it can, and will, happen here… Watch Meltdown America, a 30-minute free documentary that predicts the economic and political unraveling of the US.


The article Doug Casey: “America Has Ceased to Exist” was originally published at caseyresearch.com.

Thursday, July 10, 2014

Using Supply and Demand to Beat the Market: An Interview with Fund Manager Charles Biderman

By Dan Steinhart, Managing Editor, The Casey Report


It’s an investing strategy so simple, you’ll wonder why you didn’t think of it.
Like any other market, the stock market obeys the laws of supply and demand. Reduce supply, and prices should rise.

Therefore, companies that reduce their outstanding shares by buying back their own stock should outperform the market.

That’s the basic theory that Charles Biderman, who was recently featured in Forbes and is chairman and founder of TrimTabs Investment Research, follows to manage his ETF, TrimTabs Float Shrink (TTFS).

And it works. Since its inception in October 2011, TTFS has beaten the S&P 500 by 15 percentage points. That’s no small feat, especially during a bull market. Most hedge fund managers would sacrifice their firstborns for such stellar performance.

There are, of course, nuances to the strategy, which Charles explains in an interview with Casey Research’s managing editor Dan Steinhart below.. For example, companies must use their own money to buy back shares. Borrowing for buybacks is a no-no.

It’s also worth mentioning, you can meet and learn all about Charles’ strategy in person. He’ll be available at  Casey Research’s Summit: Thriving in a Crisis Economy in San Antonio, TX from September 19-21 where he’ll be working with attendees to teach them how to beat the market using supply and demand analysis.

And Charles is just one of many all-stars on the faculty for this summit—click here to browse the others, which include Alex Jones, Jim Rickards, and, of course, Doug Casey.

Also, you can still sign up for this Summit and meet some of the world’s brightest financial minds and receive a special early-bird discount. You’ll save $400 if you sign up by July 15th. Click here to register now.

Now for the complete Charles Biderman interview. Enjoy!

Using Supply and Demand to Beat the Market: An Interview with Fund Manager Charles Biderman


Dan: Thanks for joining us today, Charles. Could you start by telling us a little bit about your unique approach to stock market research?

Charles: Sure. I’ve been following the markets for 40 years. Everybody talks about earnings and interest rates and growth rates and what the government is doing. But here’s the thing: the stock market is made up of shares of stock. That’s it. There is nothing else in the stock market.
So my firm tracks the supply and demand of the stock market. The number of shares outstanding is the supply. Money is the demand. We discovered when more money chases fewer shares, the market goes up. Isn’t that shocking?

Dan: [Laughs] Not very, when you put it that way.

Charles: Whenever I talk with individual investors, I tell them that there’s only one reason for them to listen to me: that they think I can help them beat the market. I’ve spent 40-some years looking at markets in a different way than other people. I’ve found that the market is like a casino: it has a house and players. You know the house has an edge, because if it didn’t, the stock market wouldn’t exist.

Who is the house in the stock market? Not brokers, or even high-frequency traders. Companies are the house. As investors, we’re playing with their shares, and the companies know more about them than we do.

I’ve discovered that companies buy back their own shares because they think the price is heading higher. So when a company buys back its own shares using its own money, you should buy that stock too. But only if the company uses its own money. Borrowing money to buy shares is a no-no.

Conversely, when companies are growing their shares outstanding by selling stock to raise money, they don’t like where their stock price is headed. If they don’t want to own their own stock, you shouldn’t either.

My basic philosophy is to follow supply and demand of stocks and money, and you can’t go wrong.

Dan: Your theory has worked very well in practice. Your TrimTabs Float Shrink ETF (TTFS) beat the S&P 500 by an impressive 12 percentage points in 2013. And that’s really saying something, considering how well the S&P 500 performed.

Charles: Yes, and we’ve outperformed the S&P 500 over the past year as well.

Dan: What specific investment strategies did you use to generate that return?

Charles: Our fund invests in 100 companies that are growing free cash flow—which is the money left over after taxes, R & D, capital expenditures, and dividends—and using it to buy back their own shares.

We modify our holdings every month because we’ve discovered that the positive effects of buybacks only last for a short time. So when a company stops shrinking its float, we kick it out. Our turnover is about 20 stocks per month.

Dan: The supply side of the equation seems pretty straightforward. What do you use to approximate demand? Money supply numbers?

Charles: Sort of. Institutions own around 80% of the shares of the Russell 1000, so we track the money that flows through them into and out of the stock market.

We also track wage and salary growth. We’re not interested in income generated by government actions, but rather by the wages of the 137 million Americans who have jobs subject to withholding. Money for investment comes from income. People can only invest the money they have left over after they cover expenses.

Income in the US is currently around $7.5 trillion per year. That’s an increase of around $300 million over last year, or a little under 3% after inflation. That’s not sufficient to generate money for investment.

However, the Fed’s zero interest-rate policy has showered companies with plenty of cash to improve their operations. As a result, many industries have record-high profit margins. But at the same time, most management teams are still afraid to reinvest their profits into expanding their businesses because they don’t see final consumption demand growing. So these companies have been buying back their shares instead. The total number of shares in the market has declined pretty much consistently since 2010.

An investment institution typically targets a specific percentage of cash to hold, say 5%. So when a company buys back its own stock from these institutions, the institutions now have more money and fewer shares. To meet their cash allocation target, they have to go out and buy more shares. So the end result is more money chasing fewer shares.

This is why we’ve been experiencing a “melt-up” in the market. It has nothing to do with the economy—it’s solely due to supply and demand. And as buybacks continue, stock prices will continue to rise.

The caveat is that unless the economy recovers in earnest, the gap between stock prices and the real-world economy will continue to grow. At some point, it will get too wide, and we’ll get a bang moment similar to the housing crisis, when everyone realized that housing prices were too far above their underlying value in 2007.

Dan: Do you monitor macroeconomic issues as well?

Charles: Yes, but as I like to say, all macro issues manifest as supply and demand eventually. Supply and demand is what’s happening right now. All of those other inputs get us to “now.”

Dan: I understand. So you’re more concerned with the effects of supply and demand than the causes.

Charles: Right. Price is a function of the world as it exists right now. If you don’t have cash, it doesn’t matter how fantastic stock market fundamentals look. Without cash, you can’t buy, no matter how compelling the value.

Dan: Could you share a preview of what you’ll be talking about at the Casey Research Summit in San Antonio?

Charles: I’ll be giving specific advice to individual investors on how to beat the market. Outperforming the overall market is very difficult to do, and earnings analysis and graphic analysis has never been proven to do it over a long period. Supply and demand analysis has. So I will work with attendees and show them how to apply those strategies to beat the market going forward.
Dan: Great; I look forward to that. Is there anything else you’d like to add?

Charles: The phrase “disruptive technology” is popular today. I think investing on the basis of supply and demand is a disruptive technology compared with other investing strategies, most of which have never really worked. Cheap, broad-based index funds are so popular because very few investing strategies offer any real edge. I believe supply and demand investing gives me an edge.

Dan: Thanks very much for sharing your insights today. I’m excited to hear what else you’ll have to say at our Thriving in a Crisis Economy Summit in San Antonio.

Charles: I’m looking forward to the Summit as well. I hope the aura of the San Antonio Spurs’ victory will rub off on all of us.

Dan: Me too. Thanks again.

Tuesday, July 8, 2014

Half of the U.S. Gold Exports Head to Hong Kong

In the first three months of the year, Hong Kong received half of total U.S. gold exports.

This was an interesting change of events as Switzerland held the number one spot as the largest importer of U.S. gold during the same period in 2013.

According to the USGS Gold Mineral Industry Surveys, Hong Kong received 78 mt. (metric tons) of gold from the U.S., while Switzerland came in second at 51 mt...

- Source, The Silver Doctors, read more here:


Sunday, July 6, 2014

All Hail the Blockchain!


In this episode of the Keiser Report, Max Keiser and Stacy Herbert ask, "What financial system ever existed a century and a half without a rebellion? And what banking system can preserve it's liberties if the bankers are not warned from time to time that their people preserve the spirit of resistance?" And while many billionaires and plutocrats worry that the pitchforks are coming, Max and Stacy suggest that the revolution is already well under way, as crypto, blockchain and peer to peer technologies and systems have put a pitchfork in the corrupt financial system. In the second half, Max interviews Joel Dietz of SwarmCorp.com and Simon Dixon of BankToTheFuture.com about crowdfunding, bitcoin 2.0 technologies like Swarm and the future of cryptofinance innovation.

Friday, July 4, 2014

Minimum Wage, Maximum Stupidity

By Doug French, Contributing Editor


The minimum wage should be the easiest issue to understand for the economically savvy. If the government arbitrarily sets a floor for wages above that set by the market, jobs will be lost. Even the Congressional Budget Office admits that 500,000 jobs would be lost with a $10.10 federal minimum wage. Who knows how high the real number would be?

Yet here we go again with the “Raise the minimum wage” talk at a time when unemployment is still devastating much of the country. The number of Americans jobless for 27 weeks or more is still 3.37 million. And while that’s only half the 6.8 million that were long-term unemployed in 2010, most of the other half didn’t find work. Four-fifths of them just gave up.

So, good economics and better sense would say, “make employment cheaper.” More of anything is demanded if the price goes down. That would mean lowering the minimum wage and undoing a number of cumbersome employment regulations that drive up the cost of jobs.

But then as H.L. Mencken reminded us years ago, “Nobody ever went broke underestimating the intelligence of the American public.” Which means the illogical case made by Republican multimillionaire businessman Ron Unz is being taken seriously.

We Don’t Want No Stinkin’ Entry Level Jobs

Unz says the minimum should be $12 and recognizes that 90% of the resistance is that it would kill jobs. So what’s his answer to that silver bullet to his argument? America doesn’t want those low-paying jobs anyway. In his words, “Critics of a rise in the minimum wage argue that jobs would be destroyed, and in some cases they are probably correct. But many of those threatened jobs are exactly the ones that should have no place in an affluent, developed society like the United States, which should not attempt to compete with Mexico or India in low-wage industries.”

He doesn’t think much of fast-food jobs either. But he knows that employment can’t be shipped overseas, so Mr. Unz’s plan for those jobs is as follows:

So long as federal law requires all competing businesses to raise wages in unison, much of this cost could be covered by a small one-time rise in prices. Since the working poor would see their annual incomes rise by 30 or 40 percent, they could easily afford to pay an extra dime for a McDonald’s hamburger, while such higher prices would be completely negligible to America’s more affluent elements.


The Number of Jobs Isn’t Fixed


He believes that if all jobs pay well enough, legal applicants will apply and take all the jobs. This is where Unz crosses paths with David Brat, the economics professor who recently unseated House Majority Leader Eric Cantor.
Brat claims to be a free-market sympathizer and says plenty of good things. However, in his stump speeches and interviews, Brat says early and often, “An open border is both a national security threat and an economic threat that our country cannot ignore. … Adding millions of workers to the labor market will force wages to fall and jobs to be lost.”

That would make sense if there were a fixed number of jobs, but that’s not the case. An economics professor should know that humans have unlimited wants and limited means, which, as Nicholas Freiling explains in The Freeman, “renders the amount of needed labor virtually endless—constrained only by the economy’s productive capacity (which, coincidentally, only grows as the supply of labor increases).”

An influx of illegal immigrants may or may not drive down wages, but even if it does, that’s a good thing. Low wages allow employers to invest in other things. More efficient production lowers costs for everyone, producers and consumers, allowing for capital creation. In the long run, it is capital investment that creates jobs.

Employers Bid for Labor Like Anything Else

Mr. Unz claims that low-wage employers are being subsidized by the welfare state. “It’s a classic case of where businesses manage to privatize the benefits of their workers—they get the work—and socialize the costs. They’ve shifted the costs over to the taxpayer and the government,” writes Unz.

It makes one wonder how the businessman made millions in the first place. Wage rates aren’t determined by what the employee’s expenses are. “Labor is a scarce factor of production,” wrote economist Ludwig von Mises. “As such it is sold and bought on the market. The price paid for labor is included in the price allowed for the product or the services if the performer of the work is the seller of the product or the services.”

Mises explained that a general rate of wages does not exist. “Labor is very different in quality,” Mises wrote, “and each kind of labor renders specific services. each is appraised as a complementary factor for turning out definite consumers’ goods and services.”

Not every job contributes $12 an hour in production benefits toward a finished good or service. And many unskilled laborers can’t generate $12 an hour worth of output. The Congress that created the minimum wage knew this and carved out the 14(c) permit provision in the Fair Labor Standards Act of 1938, allowing an exemption from minimum wage requirements for businesses hiring the handicapped.

That Congress included in the act this language:

The Secretary, to the extent necessary to prevent curtailment of opportunities for employment, shall by regulation or order provide for the employment, under special certificates, of individuals ... whose earning or productive capacity is impaired by age, physical or mental deficiency, or injury, at wages which are lower than the minimum wage.

Entrepreneurs must purchase all factors of production at the lowest prices possible. No offense to labor—that’s what customers demand. All cuts in wages pass through to customers. If a business pays more than the market wage rate, the business “would be soon removed from his entrepreneurial position.” Pay less than the market, and employees leave to work somewhere else.

Who Picks Up The Tab?

First, Unz says, “American businesses can certainly afford to provide better pay given that corporate profits have reached an all-time high while wages have fallen to their lowest share of national GDP in history.” So, instead of taxpayers supporting the poor, Unz wants business to pay. No, wait: later he writes that consumers will support the poor by paying higher prices.

“McDonald’s and fast-food places would probably have to raise their prices by 8 or 9 percent, something like that. Agricultural products that are American-grown would go up by less than 2 percent on the grocery shelves. And those sorts of price increases are so small that they would be almost unnoticed in most cases by the consumer.” Walmart would cover a $12 minimum wage with a one-time price increase of 1.1%, he says, with the average Walmart shopper paying just an extra $12.50 a year. So it’s consumers—who are also taxpayers—who get to be their brother’s keeper either which way with Unz’s plan.

Walmart Must Be Offering Enough


Fortune magazine writer Stephen Gandel appeared on Morning Joe this week, making the case that Walmart should give its employees a 50% raise (his article in Fortune on the subject appeared last November). According to him, the company is misallocating capital by not paying higher wages. He says investors are not giving the company credit for the lower pay in the stock price, so they should just do the right thing and pay their employees more.

But Walmart does pay more when it has to compete for employees. In oil-rich Williston, North Dakota, the retail giant is offering to pay entry-level workers as much as $17.40 per hour to attract employees.

Walmart isn’t alone. McDonald’s is paying $300 signing bonuses to attract workers. The night shift at gas stations in Williston pays $14 an hour.

By the way, whatever Walmart is paying, it must be enough, because it has plenty of applicants to choose from. In 2005, 11,000 people in the Bay Area applied for 400 positions at a new Oakland store. Three years later near Chicago, 25,000 people applied for 325 positions at a new store.

Last year a new Walmart opened in the DC area. Again, the response was overwhelming. Debbie Thomas told the Washington Post, “It’s hard to live in this city on $7.45 or $8.25 an hour. I’ve lived here all my life, and I want to stay here. In the end, I’m just glad Wal-Mart’s here. I might get a job.”

Throughout history, people have had to relocate to find work. Today is no different.

In the long run, as the minimum wage increases, capital will be invested to replace labor. We’ve seen it for years. Machines don’t call in sick, sue for harassment, require health insurance, or show up late. Now patrons pour their own drinks. Shoppers scan their own groceries and pump their own gas. Soon we’ll be ordering from electronic tablets at our tables in sit-down restaurants to cut down on wait staff, and the cooks will be replaced by automated burger makers.

Unz may well believe what he proposes would be doing good; however, it means kids and the unskilled go unemployed and in the end, are unemployable.

You read an excerpt from the Daily Dispatch, Casey Research’s wildly popular e-letter. Stay in the loop on big-picture trends, precious metals, energy, technology, and more. Sign up here to receive the Daily Dispatch free of charge in your inbox.

The article Minimum Wage, Maximum Stupidity was originally published at caseyresearch.com.

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