Mish's Global Economic Trend Analysis |
- Wal-Mart is not Costco; So Why Should it Pay Like Costco?
- Celebrating Life: Greetings From Germany
- Reflections on Peak Oil, India, Asia, and Global Growth; What's the Mathematical Outcome?
Wal-Mart is not Costco; So Why Should it Pay Like Costco? Posted: 29 Aug 2013 04:15 PM PDT President Obama, the unions, and Democrats in general are attempting to force Wal-Mart to raise its minimum wage. In Seattle, there is an absurd push by activists to raise the minimum wage to $15 per hour for fast food workers, retail clerks, baristas and other minimum wage workers. Venture capitalist Nick Hanauer said there's no time to waste. What the nation needs is money in the hands of regular consumers. "A higher minimum wage is a very simple and elegant solution to the death spiral of falling demand that is the signature feature of our economy". Trader Joe's Lesson Sophie Quinton for The Atlantic says The Trader Joe's Lesson: How to Pay a Living Wage and Still Make Money in Retail Many employers believe that one of the best ways to raise their profit margin is to cut labor costs. But companies like QuikTrip, the grocery-store chain Trader Joe's, and Costco Wholesale are proving that the decision to offer low wages is a choice, not an economic necessity. All three are low-cost retailers, a sector that is traditionally known for relying on part-time, low-paid employees. Yet these companies have all found that the act of valuing workers can pay off in the form of increased sales and productivity.A Different Model Yes, Ton, you are exactly correct. QuikTrip, Trader Joe's, and Costco do have a different model and it would behoove someone at MIT's Sloan School of Management to figure out differences in that model, and why retail sales at Trader Joe's beat those of Wal-Mart by 50% on a square footage basis. Why Wal-Mart Will Never Pay Like Costco Bloomberg writer Megan McArdle hits the nail on the head with her analysis of the situation in Why Wal-Mart Will Never Pay Like Costco. Wal-Mart is trying to move into Washington, a move that said local housing blog has not enthusiastically supported. Hence, we've been treated to a lot of impassioned reheatings of that old standby: "Costco shows it's possible" for Wal-Mart to pay much higher wages. The addition of Trader Joe's and QuikTrip is moderately novel, but basically it's the same argument: Costco/Trader Joe's/QuikTrip pays higher wages than Wal-Mart; C/TJ/QT have not gone out of business; ergo, Wal-Mart could pay the same wages that they do, and still prosper.Think Beyond Minimum Wage Profit per employee at Wal-Mart is $7,428. At Costco it's $10,625. Because of the difference in business model, it is illogical to assume Wal-Mart will have higher profit if only it paid Costco wages. Activitists like Nick Hanauer and Zeynep Ton of MIT's Sloan School of Management need to go beyond their simplistic model of raising minimum wages and actually think about why things are as they are. Neither one of them can distinguish a symptom of a problem from the problem. The problem is not that wages are too low, the problem is the Fed (central banks in general) are hell-bent on causing price inflation (and wages did not keep up). The solution is to get rid of the Fed, not to raise minimum wages (which will only encourage businesses to seek ways to eliminate more employees). Outsourcing Manufacturing employment was devastated by outsourcing to China. Why? Global Wage Arbitration: Unrealistic employee costs made it profitable to move. In Italy, in just this past month, an Italian factory owner moved company to Poland while staff are on holiday Earlier this month, the owner of an electrical components factory in the north of the country waved his employees off on their summer holidays. Then, without informing them, he moved the entire operation, lock, stock and barrel, to Poland.I commend the Italian business owner for his move. The bureaucrats and socialists are of course howling like mad. The difference between manufacturing and fast food, is the latter must occur locally. But force higher minimum wages and you are guaranteed to see more fast-food robots. Robot Wars Those with jobs will benefit from a hike in the minimum wage (but what about everyone else?). What about those on fixed income? What about the marginal worker who loses a job (or cannot get a job in the first place)? If you do not know the answer, here's a hint: Robot Wars in China; Burger Flipping Robots Serve 360 Gourmet Burgers an Hour For further discussion, please see World's Dumbest Idea. Socialist fools never think about such things (until problems arise such as massive outsourcing to China or increasing use of robots instead of humans locally). Then instead of realizing what the real problem is, the socialists and union activists scream for tariffs to protect the jobs and taxes on robots. Somehow, in their twisted minds, its better for everyone in the country to pay twice as much as before for underwear if it saves 500 underwear manufacturing jobs. Technology moves on. I do not claim that getting rid of the Fed will eliminate robots. However, the inflationary practices of the Fed coupled with misguided polices of bureaucrats and the artificial suppression of interest rates have exacerbated the problem. Academic Wonderland Here's the deal. The problem has gotten worse ever since Nixon closed the gold window. Removal of ties to the gold standard allowed central banks to inflate at will, and governments to spend at will (and both did). The result was shrinkage of the middle class and declining real wages for everyone but those in the top 10%. I propose we attack the real problem rather than the symptom of the problem. Unfortunately, Zeynep Ton and thousands of others in Academic Wonderland would rather attack symptoms instead of problems. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
Celebrating Life: Greetings From Germany Posted: 29 Aug 2013 12:00 PM PDT Greetings from Munich and Rothenburg ob der Tauber, in Germany. Actually, I am now back in the states, having returned from a fantastic European trip with Liz, on a delayed honeymoon following our June wedding. Click on any image below for a larger, sharper view. Rothenburg ob der Tauber is rated as the best preserved medieval town in Germany. Stone Walls Surrounding City of Rothenburg ob der Tauber Rothenburg Entry Point Tower Known as the "Burgtor" Rothenburg ob der Tauber - Markusturm Hotel (where we stayed) Rothenburg ob der Tauber - Flowers and colorful buildings Mural at the Pizzeria Italia in Rothenburg Question of Identity: How many people can you identify in the mural below? Answers at bottom of page. Munich New Town Hall part of Marienplatz in Munich, Bavaria, Germany - Passing Storm at Sunset Nymphenburg Palace Picture of Liz in the Nymphenburg Palace Pagodenburg - Royal Tea House at Nymphenburg Palace Dining at an Outdoor Restaurant Question of Identity Answers Link to Rothenburg image in new window: Rothenburg Mural I suspect the hardest person for most people to identify will be the person at the far right. I got it in about 15 seconds. Think out of the box! From Left to Right Laurel and Hardy Elvis Clark Gable John Wayne Charlie Chaplin Marilyn Monroe James Dean Humphrey Bogart Fred Astaire Cary Grant The Pizzeria Owner Celebrating Life I met Liz through Selective Search as noted in my June 17 post Celebrating Life: I Got Married on Friday. Please click on the previous link for more on our story, how we met, and images from some trips we took in June shortly before we were married. Greetings From Prague On the European trip, we also visited Prague. Please see Celebrating Life; Greetings From Prague for some images. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
Reflections on Peak Oil, India, Asia, and Global Growth; What's the Mathematical Outcome? Posted: 29 Aug 2013 08:51 AM PDT In response to Currency Lessons: Think a Sinking Currency is Always Good For Manufacturers? my friend "BC" pinged me with a few comments.
What's the Mathematical Outcome? India wants to maintain 6% growth. China wants to maintain 7.5% growth. The US wants to maintain growth. Europe desperately wants to resume growth. Every country on the planet wants to increase exports relative to imports. Ignoring Turkey, Indonesia, Pakistan, Africa, and the Mideast, the wants and needs of India, China, Europe and the US are mathematically impossible. That every country on the planet wants to increase exports relative to imports is mathematically impossible in and of itself. History suggests that war is the inevitable outcome of such tensions, and clearly tensions are building. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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 |