Mish's Global Economic Trend Analysis |
- Will Higher Minimum Wages Create Jobs? Who Benefits From Higher Minimum Wages? Demographic Perspective
- Factory Orders Unexpectedly Decline 6th Month; Five Excuses; Orders vs. Shipments
- ECB Ups ELA to Greece; Draghi Announces "End to Eurozone Crisis"; Euro Sinks to Eleven-Year Low
| Posted: 05 Mar 2015 08:12 PM PST Of all the ridiculous notion floating around in the liberal media is the notion that higher minimum wages will create jobs. The theory goes like this: Pay people more, they will have more to spend, and by spending more they will create more jobs. On that basis, proponents argue for a $15 minimum wage at McDonald's. There are several obvious flaws in such arguments. Obvious Flaws
Crash Course in Free Market Economics In regards to point number four, Walmart announced a wage hike because turnover was too excessive. It did so, not because of government mandated minimum wage, but rather because of turnover and the quality of employees it could attract at the wages it was offering. That's a logical way to set minimum wages. I discussed that theory in Crash Course in Free Market Economics and Income Inequality If that does not convince you, please consider Union Group Mobilizes "Against" Pay Hike. Restaurants Mobilize Robots Also in regards to point number four, and something I have noted before, Restaurant Ordering Robots to Replace Human Jobs. Panera is ready to launch the restaurants of its future. Using online restaurant ordering, you will either place your own order on your smartphone or on a tablet device at the restaurant. And then the kitchen staff will just show up with your order after you pay on your phone or on the kiosk.Demographic Perspective The idea that higher minimum wages create jobs is absurd. And let's look at this from one more perspective: demographics. As boomers head into retirement, forced or not, an increasing number of people are dependent on Social Security. The participation rate shows just that.  Precisely what do you think retirees on fixed income think about 0% interest rates and the price of food, especially at places like McDonald's that are already struggling? It is ridiculous to think that raising the minimum wage to $15 for uneducated, low-skill workers will be enough to counteract the number of people who decide "I cannot afford to eat out anymore, especially since it's unhealthy garbage anyway." There will be no increase in jobs as a result of a hike in minimum wages. Any historical attributions otherwise were a result of the increasing participation rate or other economic situations creating an increasing demand for workers in the face of wage hikes. Who Benefits? A hike in minimum wages only benefits marginal employees who retain their jobs. Everyone else loses by paying more for goods and services. Businesses will be forced to pass on costs. No one can possibly benefit from such a spiral. Studies that show jobs rose after hikes in minimum wage, really show jobs rose in spite of minimum wage hikes! Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Factory Orders Unexpectedly Decline 6th Month; Five Excuses; Orders vs. Shipments Posted: 05 Mar 2015 12:41 PM PST Extending the longest streak since the 2008-2009 recession, Factory Orders Unexpectedly Decline 6th Month. New orders for U.S. factory goods unexpectedly fell in January, posting their sixth straight monthly decline, a sign of weakness in the manufacturing sector.Bloomberg Consensus Estimate The Bloomberg Consensus Estimate was also +0.2%, but the forecast range was a very wide -2.5% to 3.0%. New Orders vs. Shipments  Chart from Bloomberg To help explain the chart, Bloomberg notes that "Aircraft orders have a long lead to shipment." Census Report Diving into the Census Report, for January vs. December (seasonally adjusted) we find new orders look like this:
Durable goods rose 2.8% due to jump in commercial aircraft orders. It was not enough to offset everything else. Blame Game In the reports from Reuters and Bloomberg, some blame the rising dollar, some blame weakness in foreign demand, some blame the port strike, and some blame lower oil prices, and some blame cutbacks in the energy sector. No one cited the "slowing global economy". Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| ECB Ups ELA to Greece; Draghi Announces "End to Eurozone Crisis"; Euro Sinks to Eleven-Year Low Posted: 05 Mar 2015 11:20 AM PST Today the euro sunk to a low last seen in August of 2003. One euro is now worth $1.10.  click on chart for sharper image Apparently this is a "success" even though the ECB was hell bent on "saving the euro" in 2012 when one euro was worth $1.20 or so. "End to Eurozone Crisis" Now, With Perfect Timing, ECB's Draghi Calls End to Eurozone Crisis. Mario Draghi's timing looks impeccable. Only six weeks after pushing through quantitative easing in the face of fierce resistance from Germany, the European Central Bank president has now called time on the region's crisis.How Much ELA? A half-trillion euros of emergency liquidity assistance to Greek banks? I believe the Financial times means €500 million. Yep. That 500 billion number was so preposterous I had to look it up. Doing so turned up ECB Raises Greek ELA Funding Ceiling by 500 Million Euros. Greek banks can now access €68.8 billion to cover their liquidity shortages.Even €68.8 billion is enough to worry about don't you think? What about €240 billion in bailout funds? And what about €7 billion in paybacks to the ECB and IMF due between now and August? Not to worry, the Eurozone crisis is over. How do we know? The answer Draghi says so. It's "impeccable timing". Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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