Questions and Observations

Free Markets, Free People

Ignorance is bliss – until you’re out of work

The more I watch this ignorant populist desire to raise the minimum wage (as far as I’m concerned, the minimum wage is $0) to $15 dollars, the more I wonder why people don’t actually think about the issue and its ramifications before staking out a position “for” the hike.

Oh, wait … think.  Yeah, never mind.  It simply doesn’t happen anymore.  And by the way, the thinking one must do isn’t rocket brain surgery.  It’s pretty much common sense.  So, given the local burger flipper wants $15 bucks an hour to keep flipping those burgers, what is at risk.  Well, mostly, his or her job:

Many chains are already at work looking for ingenious ways to take humans out of the picture, threatening workers in an industry that employs 2.4 million wait staffers, nearly 3 million cooks and food preparers and many of the nation’s 3.3 million cashiers.

Of course they are.  Why?

“When I first started at McDonald’s making 85 cents an hour, everything we made was by hand,” Rensi said — from cutting the shortcakes to stirring syrups into the milk for shakes. Over the years, though, ingredients started to arrive packaged and pre-mixed, ready to be heated up, bagged and handed out the window.

So what does that mean?

Crowded. That’s how Ed Rensi remembers what life was like working at McDonald’s in 1966. There were about double the number of people working in the store — 70 or 80, as opposed to the 30 or 40 there today — because preparing the food just took a lot more doing.

That’s right, as automation and packaging and pre-mix advanced, fewer workers were needed.  It had nothing to do with wages, per se, it had to do with efficiency.  What produced the most money for the work involved.

How does one make a profit?  Well one way is by being efficient.  I.e. producing product at a lower cost than your competition.  So how is the fast food business doing in that department?  Not so hot.

The market research company IBISWorld has calculated that the average number of employees at fast-food restaurants declined by fewer than two people over the past decade, from 17.16 employees to 15.28. And restaurants tend to rely more on labor than other food outlets: According to the National Restaurant Association, dining establishments average $84,000 in sales per worker, compared with $304,000 for grocery stores and $855,000 for gas stations.

So, raise double the wage and what happens to the already poor efficiency?  Right, it goes down.

Then add to that the fact that no manager is going to work for the same wages as his employees.  So if management is earning $15 an hour now, what does that have to go to in order to keep good people (it is one of the primary reasons unions back all minimum wage increases – because they get an increase too)?  And what does that do to the price of a burger?

It makes it skyrocket.

Given that, what will employers in an already inefficient market likely choose to do?  Well right up at the top of the list is a note to reduce staff.  And then there’s “introduce efficiencies” to keep costs down.

Like:

The labor-saving technology that has so far been rolled out most extensively — kiosk and ­tablet-based ordering — could be used to replace cashiers and the part of the wait staff’s job that involves taking orders and bringing checks. Olive Garden said earlier this year that it would roll out the Ziosk system at all its restaurants, which means that all a server has to do is bring out the food.

Robots can even help cut down on the need for high-skilled workers such as sushi chefs. A number of high-end restaurants use machines for rolling rice out on sheets of nori, a relatively menial task that takes lots of time. Even though sushi chefs tend to make more than $15 an hour, they could be on the chopping block if servers need to make $15 an hour, too.

A service contract is much less costly than payroll benefits and there’s no sick leave or missed days involved.

As technology advances, even more jobs will be eliminated.  Not necessarily because employers want to eliminate them, but because bird-brained idiots want to force them to pay $15 for a $5 job.    Who gets hurt?  2.4 million wait staff, 3 million cooks and 3.3 million cashiers.  Yes, that’s right, the stupidly conceived push for a $15 minimum wage will jeopardize 8.7 million jobs.

And as we’ve been asking for a long time, what is $15 x 0?

~McQ

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Economic Statistics for 14 & 17 Aug 15

A hectic schedule prevented me from posting Friday’s economic data, so here it is, along with the releases from today.

14 Aug 15

Producer Prices for Final Demand rose 0.2% in July, with PPI-FD less food and energy rising 0.3%. On a year-over-year basis, PPI-FD is down -0.8 at the headline level, but up 0.6% at the core. The remaining set of data for PPI-FD are below:

PPI-FD less food, energy & trade services – M/M change: 0.2%
PPI-FD less food, energy & trade services – Y/Y change: 0.9%
PPI-FD Goods – M/M change: -0.1%
PPI-FD Goods – Y/Y change: -3.7%
PPI-FD Services – M/M change: 0.4%
PPI-FD Services – Y/Y change: 0.6%

The Fed reports that industrial production rose by 0.6% in July, while capacity utilization in the nation’s factories rose 0.3% to 78.0%. The prime factor in the month’s jump was a 10.6% surge in motor vehicle production.

The University of Michigan’s Consumer Sentiment Index index fell -0.2 points to 92.9 in August.

17 Aug 15

The Empire State Manufacturing Survey plunged deeply into negative territory for August, falling from 3.86 to -14.92. This is the weakest reding for this indicator since 2009.

The NAHB’s Housing Market Index rose 1 point to 61 in August, as new homes are becoming a source of strength for the economy.

E-Commerce retail sales in the 2nd Quarter of 2015 rose a strong 4.2%, with a year-on-year gain of 14.1%.

A strong dollar was a plus for foreign investment in Jun, as net foreign demand for US securities rose $10.1 billion to $103.1 billion.


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Is China heading us toward another global recession?

I found this interesting:

Chinese policy makers seem unwilling to accept that downturns are perfectly normal even for economic superpowers, as the U.S. has often demonstrated. Over the past century the U.S. economy experienced a dozen recessions and a Great Depression even as it remained the world’s leading economy. But Beijing has little tolerance for business cycles and is now reviving efforts to stimulate sectors that it had otherwise wanted to see fade in importance, from property to infrastructure to exports. Given the over-investment in these areas and the cloud of debt that still hangs over the Chinese economy, these efforts are unlikely to lead to a sustained upturn. While China reported that its GDP grew exactly in line with its growth target of 7% in the first and second quarters this year, all other independent data, from electricity production to car sales, indicate the economy is growing closer to 5%.

That leaves the global economy perilously close to recession territory. In the first half of 2015, global economic output expanded by barely 2%, making it the weakest two-quarter period since the expansion began in mid-2009. Industrial production and world trade growth were flat, developments that in the past have corresponded with global recessions.

Funny how that “5 year plan” reporting hasn’t changed a bit.  And, of course, we too get that sort of reporting from out government too. Don’t believe it?  Just ask Bernie Sanders about the real unemployment rate.

Yup, if it comes to a global downturn again, as with the last time, it will be caused by … government.

~McQ

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Stray Voltage

As Venezuela slowly starves and the economy has all but shut down, guess who the richest person in the country might be?

The daughter of Hugo Chavez, the former president who once declared ‘being rich is bad,’ may be the wealthiest woman in Venezuela, according to evidence reportedly in the hands of Venezuelan media outlets.

Maria Gabriela Chavez, 35, the late president’s second-oldest daughter, holds assets in American and Andorran banks totaling almost $4.2billion, Diario las Americas reports.

The figure would make Gabriela Chavez wealthier than media mogul Gustavo Cisneros, whom Forbes named the wealthiest Venezuelan earlier this year with $3.6billion in assets.

I know … purely a coincidence.  But it does prove, if true, that socialism does pay … those in charge (I’m sure this wasn’t something he saved up from his army pay).  The rest?  They get stores with nothing on the shelves and hyper-inflation.  Brilliant.

Jazz Shaw is thinking Hillary may shrug off email flap (he’s speaking purely in a political sense, not if someone grows a pair and actually arrests and indicts her):

The bottom line is that there are a significant number of Americans out there – mostly Democrats, but not all – who seem to be telling us, yes, you’ve made your point. Hillary is all those things you said she was. But what the heck. I’ll vote for her. And one of the major reasons for this is that this email server story simply isn’t resonating with people.

Well, to be fair, it’s not resonating with those people.  The reason it isn’t resonating with other people is they really haven’t heard much about it thanks to the media.  But for those that have, they want the allegations investigated.  Look, yellow dog Democrats are going to vote for their particular yellow dog – regardless of the cur’s pedigree, problems or evidence against it.  In this case I think Clinton will find a minion to take the fall, and, in effect, will shrug it off.  But that doesn’t change Shaw’s point … even if she’s in prison orange, those people will vote for her.

Megan McArdle talks about the nonsense that is going on at colleges everywhere.  That is the cosseting of the student body who have become so fearful of ideas that they don’t like that they invoke “safety” as their concern.

Students demanding that campus life be bowdlerized to preserve their peace of mind seem to believe that the best way to deal with trauma is to avoid any mention of it. But Lukianoff and Haidt argue that this is exactly backward; chronic avoidance breeds terror. The current climate on campus is a recipe for producing fearful adults who are going to have difficulty coping in an adult world. It’s as if we were trying to prepare the next generation of American citizens by keeping them in kindergarten until the age of 23.

I’m not sure that anyone should be surprised.  These are the kids who come from the era of everyone gets a trophy and we don’t keep score so the other team won’t feel bad.  Why in the world would any one expect anything else from them.  When they finally gain the halls of ivy, they’re conditioned to eschew competition.  So the idea of competing ideas, especially ideas they’re not comfortable with, is terrifying.

They’ll do great in the real world, won’t they?

Meanwhile, on another planet:

If Vice President Joe Biden makes the leap into the Democratic presidential race, he could promise that he would serve just one term in the White House, journalist and author Carl Bernstein said Friday.

“And one thing that I keep hearing about Biden is that if he were to declare and say, because age is such a problem for him if he does, I want to be a one-term president. I want to serve for four years, unite Washington. I’ve dealt with the Republicans in Congress all my public life,” Bernstein told CNN’s “New Day.”

“I think there’s a conversation going on to that effect among his aides and friends,” he said. “It could light fire to the current political environment.”

It would be a back-fire, if anything.  Anyway, the circus could use one more clown.

~McQ

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Economic Statistics for 13 Aug 15

Retail sales rose 0.6% in July, with sales less autos and sales less autos and gas both up 0.4%. May and June sales were revised upwards as well.

July export prices fell -0.2%, while import prices fell -0.9%. Year over year, export prices are down -6.1% and import prices are down -10.4%.

Business inventories rose 0.8% in June, well ahead of a 0.2% rise in sales. The mismatch lifts the inventory-to-sales ratio to 1.37 from 1.36.

Initial weekly jobless claims rose 4,000 to 274,000. The 4-week average fell 1,750 to 266,250. Continuing claims rose 15,000 to 2.273 million.

The Bloomberg Consumer Comfort Index rose 0.4 points to 40.7 in the latest week.

The Fed’s balance sheet rose $2.9 billion last week, with total assets of $4.489 trillion. Reserve bank credit rose $2.5 billion.

The Fed reports that M2 money supply rose by $1.8 billion in the latest week.


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Hey Fidel, we don’t owe you a single centavo

Got to love how all this stuff blows up in Obama’s face.  Arrogance and naivety will do it every time.

Fidel Castro marked his 89th birthday Thursday by insisting the United States owes Cuba “many millions of dollars” because of the half-century-old American trade embargo.

Of course, given how poorly they negotiated the deal with Iran and understanding how willing they are to bow down to every enemy the nation has had, it shouldn’t surprise anyone that this is the reaction from a totalitarian – it’s your fault US that we’re an economic basket case and it is your duty to fix the problem.

And, my guess is he’ll find a sympathetic ear somewhere, even though the “embargo” was the loosest and most ineffective embargo in the history of embargoes. But in the era of blame shifting, what else would you expect from a failed dictator?

Castro wrote: “Cuba is owed compensation equivalent to damages, which total many millions of dollars, as our country has stated with irrefutable arguments and data in all of its speeches at the United Nations.”

Naturally no word on “compensation” for seized property when Castro took over Cuba.

As for timing – certainly it shows a lack of respect:

Castro spoke out in an essay published in local media a day before US Secretary of State John Kerry makes a historic visit to Cuba to reopen the US embassy as part of the countries’ restoration of diplomatic relations.

Not that this administration has done anything that has gained the respect of friend or foe alike.

~McQ

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Economic Statistics for 12 Aug 15

The MBA reports that mortgage applications rose 0.1% last week, with purchases down -4.0% and refis up 3.0%.

The Atlanta Fed Business Inflation Expectations Index fell -0.2%, with businesses now expecting annual inflation of 1.8%.

The Labor Department’s JOLTS report shows that job openings fell to 5.249 million in June from 5.357 million in May. 

The Treasury reports that July’s budget deficit totaled $149.2 billion. The Fiscal Year to date deficit stands at $428.0 billion vs $460.5 billion a year ago.


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How will Hillary wiggle out of this one?

You know you’re asking yourself that question:

The inspector general for the Intelligence Community notified senior members of Congress that two of four classified emails discovered on the server Clinton maintained at her New York home contained material deemed to be in one of the highest security classifications—more sensitive than previously known.

You may or may not remember this, but in March of this year, she stated flatly, “there is no classified material” on the server.  How she expected anyone to believe she could conduct her job as Secretary of State with that being true is left to you to imagine.  And, it seems, no one did:

The untruth revealed, [Mrs.] Clinton changed her story in July to claim that no email was specifically marked as classified. Not that it matters. Clinton wants Americans to ignore the fact that federal rules put the onus on government officials like the secretary of State to protect classified material, even when it’s not marked as such.

You know, “accountability”?

So now, she’s agreed to “voluntarily” turn over the server and the emails.  James Taranto gives us a little insight into that:

In fairness to Mrs. Clinton, it appears her decision to turn over the server and the thumb drive was “voluntary” in the formal—dare one say Clintonian—sense that she yielded to the investigators’ request rather than wait for an order.

Because, you know, for a Presidential candidate, such an order would have been politically damaging.  So the “voluntary” aspect gives the campaign and the Clintons at least a little “good spin” on a very bad event.  You can almost hear the klaxons sounding and the announcement of “battle stations, battle stations” within the campaign.

But back to that accountability thing:

Fournier notes further that “government officials have been convicted of mishandling unmarked classified material.”

Yes.  Yes they have.  But that’s not how the Princess of the Ozarks figures this should go.  So who does she need?

Mr. Obama, of course:

And at least one critic is now speculating that the possibility that she is in legal jeopardy is influencing Mrs. Clinton’s policy pronouncements.

On Monday, as the Los Angeles Times reports from Manchester, N.H., Mrs. Clinton “made her most forceful defense yet of President Obama’s nuclear deal with Iran on Monday, saying that ‘all bets are off’ if Congress were to reject the deal and warning of the potential impact to America’s standing in the world”:

“The Europeans, the Russians, the Chinese, they’re going to say, ‘We stuck with the Americans. We agreed with the Americans. We hammered out this agreement. I guess their president can’t make foreign policy,’ ” Clinton said at a campaign stop in Manchester. “That’s a very bad signal to send in a quickly moving and oftentimes dangerous world.” . . .

“I’ve gone into this detail because you’re going to hear a lot about it in the weeks ahead,” she told an audience of more than 500 at the foot of a ski slope in New Hampshire’s largest city. “So please, educate yourself. . . . We have to pursue diplomacy if we expect to be able to solve difficult problems with the rest of the world supporting us.”That’s odd. Earlier, as we noted last month, Mrs. Clinton refused to take a position on the Trans Pacific Partnership—of which she was a forceful advocate as secretary—because, as she said, “I thought it was important for the Congress to have a full debate without thrusting presidential politics and candidates into it.” She now gives precisely the opposite reason for taking a clear position, if not a particularly well-argued one, on the Iran deal.

Ah, what a surprise.  It is pleasing to be politically malleable, isn’t it?  Principles … well, she left those at the Watergate hearings.  It is raw politics and “I’ll do what ever it takes” to gain power for her.

One has to wonder how ever the cult of true believers can stomach her paranoia and willful disregard for the law.  This is who they want to be President of the US?

Anyway, is Obama the key to how she wiggles free?  Will her attempt to provide him his much desired legacy find this all to be “much ado about nothing?”  Will she actually ever be held accountable for what others have been jailed for?

~McQ

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