Mish's Global Economic Trend Analysis

---

• Why Work for $7.25 When Welfare Pays $15.00 in 12 States and $8.00 in 33 States? Is a Low Minimum Wage the Problem?
• Socialist Delusion: France Promises Full Employment, a Third Industrial Revolution, an Affordable Housing Utopia in 10 Years
• Surprise Awakening Awaits Merkel in September Election: No Stable Government

Why Work for $7.25 When Welfare Pays $15.00 in 12 States and $8.00 in 33 States? Is a Low Minimum Wage the Problem? Posted: 20 Aug 2013 12:47 PM PDT Michael Tanner at the Cato Institute notes Welfare Pays Better than Work in 33 states. The federal government funds 126 separate programs targeted towards low-income people, 72 of which provide either cash or in-kind benefits to individuals. (The rest fund community-wide programs for low-income neighborhoods, with no direct benefits to individuals.) State and local governments operate more welfare programs.Of course, no individual or family gets benefits from all 72 programs, but many do get aid from a number of them at any point in time. In the Empire State, a family receiving Temporary Assistance for Needy Families, Medicaid, food stamps, WIC, public housing, utility assistance and free commodities (like milk and cheese) would have a package of benefits worth $38,004, the seventh-highest in the nation. Welfare is slightly more generous in Connecticut, where benefits are worth $38,761; a person leaving welfare for work would have to earn $21.33 per hour to be better off. And in New Jersey, a worker would have to make $20.89 to beat welfare. Nationwide, our study found that the wage-equivalent value of benefits for a mother and two children ranged from a high of $60,590 in Hawaii to a low of $11,150 in Idaho. In 33 states and the District of Columbia, welfare pays more than an $8-an-hour job. In 12 states and DC, the welfare package is more generous than a $15-an-hour job. People Aren't That Stupid While it's beneficial to have a job, assuming there is hope of advancement, for those with no special skills there is little to no hope of advancement. Moreover, wages are taxed, welfare benefits are not. And what about day-care costs for single mothers? What about transportation costs? What about the value of extra leisure time? Add it all up and it makes perfect sense for many to remain on welfare for as long as they can. Minimum Wage Fallacy Given welfare benefits exceed minimum wage, it should not be surprising to find socialists arguing for higher minimum wages. And they are. In Seattle, a Campaign Seeks to Push Minimum Wage to $15. How successful would that be? Not very. The higher the minimum wage, the more incentive businesses have to get rid of employees and use hardware and software robots. And with the Fed suppressing interest rates, companies can borrow with miniscule interest rates and do just that. Should minimum wages rise, the recipient workers would benefit, but at the expense of millions of others who would lose a job or not get one. Then when prices rose in response, the socialists would ask for increased welfare benefits to keep up with the rising cost of living! More Minimum Wage Nonsense The socialists are out in force. Heidi Moore on the Guardian writes How low can you get: the minimum wage scam. Wonder why benefit spending is rising? Simple: corporations get away with crappy wages, so government has to make up the rest. The grim irony of minimum-wage America is that many who work in the fast-food industry need food stamps to get by. You'd think the exceptionally low minimum-wage – $7.25 an hour – would be the shame of a country like the United States that prides itself on its economic leadership. Half of minimum-wage jobs are held by adults over 25 years old, and asking adults to live on $7.25, or $14,500 a year, doesn't leave them with enough to rent an apartment, commute to work, raise a child and participate in society in any meaningful way. No Heidi, the sad state of affairs is that socialist fools have no idea what is going on. As Michael Tanner at the Cato Institute points out, it does not pay to work. So people don't. Don't blame low wages, blame high prices. The Fed, the ECB, the Bank of England, and the central bank in China are all printing money hand over fist hoping to spur job growth. Instead, they fueled another stock market bubble, a bond market bubble, and revived the property bubble. Congress enacted hundreds of affordable housing programs. The one and only thing those programs did was create a housing bubble. When prices crashed, government and the Fed stepped in with attempts to reblow the housing bubble (proving of course no one really wanted affordable housing in the first place). Rather, the Fed wanted a stock-market party and Congress wanted a vote-buying party). Is Low Minimum Wage the Problem? Perceived low wages are a symptom of the problem, not the problem. The problem is socialist fools, progressives, and war mongers sloshing other peoples' money around. For that, place the blame where it precisely belongs: on central bankers, on fractional reserve lending, and on government bureaucrats who interfere in the free market. We do not need higher wages, we need lower prices. With productivity advancements we would have just that, absent of course the socialist fools, the progressives, the war mongers, and the central bankers. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Socialist Delusion: France Promises Full Employment, a Third Industrial Revolution, an Affordable Housing Utopia in 10 Years Posted: 20 Aug 2013 09:37 AM PDT If you are looking for a good laugh today, simply read Ministers set out utopian but hazy vision of a strong France France's Socialist government has set out a gleaming vision of the future marked by full employment and cutting-edge factories thanks to "a third industrial revolution". The France of tomorrow would be a safer place where justice was quicker and cheaper and where today's stressful experience of finding affordable housing would be transformed into "a pleasant moment in one's life", cabinet ministers said on Monday. In a speech that ranged from social inclusion to global warming and industrial policy, President François Hollande said at the event that such a long-term vision was necessary because "a decade is time to bring about change". By 2025, it was a "realistic" target for the country to reach technical full employment and have "recovered fully its budgetary sovereignty", according to the reports. Among other things, France would have no problem placing debt, he reportedly said. Manuel Valls, Mr Hollande's interior minister, talked of closing the gap between the state and the population by upgrading today's police force to a 3.0 version. Details appeared scarce. On Monday, he [Hollande] tried to reassure the sceptics by acknowledging the most pressing challenges following the break: the budget; the economic recovery's effects on the jobless rate; and pensions. "Answers [on how Hollande will achieve his socialist utopia vision of full employment, a third industrial revolution, and tackle global warming, complete with a pleasant moment of affordable housing] will be provided by the government between now and the end of the month." I can hardly wait for for the laughs. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Surprise Awakening Awaits Merkel in September Election: No Stable Government Posted: 20 Aug 2013 08:42 AM PDT In response to my August 13 post Tale of Colours, All in Denial; Assessing Merkel's Chances reader Bernd from Germany (not AfD chairman Bernd Lucke) offered these comments ... Hello Mish Main stream parties have had success pushing AfD into the "right wing" corner. It would appear that many voters or potential voters are "embarrassed" to be seen in that environment, rightly or wrongly. As is tradition in Germany, under such circumstances potential voters will lie to polls and pollsters. Internal polls by AfD – professionally done by independent pollsters – show AfD consistently at above 8%. Correspondingly CDU/CSU is lower by approximately that same figure. I do not say AFD will be in the next Parliament with 8% of seats, however, I believe AfD will do a lot better than expected by anyone in main stream at this moment. I also believe that "other parties" will clock  much better results than polled right now. A party to watch are "Die Piraten", which are coming out of their very low figures. If there is a  considerably higher voter turnout than expected (expected is 60%), it might be a "blood bath" for main stream parties. Please note: there are about 20 additional parties on the election ticket, more than at any time before. If 2 of them get 4% and the remainder  each get 0.5% you will have 17% of voters not represented in Parliament due to Germany's 5% hurdle. If that outcome comes true, all current predictions are out the window, irrespective of who made them, especially for coalition possibilities. I maintain it will be a surprise awakening by Mm Merkel and her CDU/CSU as well as by many other "main stream" parties. I stick to my predictions made months ago. There will be no stable Government in Germany after the elections, save for the CDU/CSU-SPD one (grand coalition). I doubt such a coalition can happen under Mm Merkel's leadership. Best wishes Bernd AfD appears unlikely to get to the 10% I thought possible a few months ago, but even 5% will prove very problematic to Merkel, even more so if FDP does not get the 5% it needs. The September election will be interesting to say the least. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

You are subscribed to email updates from Mish's Global Economic Trend Analysis To stop receiving these emails, you may unsubscribe now.	Email delivery powered by Google
Google Inc., 20 West Kinzie, Chicago IL USA 60610