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Tradewinds March 2015 Web Final

March 2015

Labor, Wages, and Prices

Labor, Wages, and Prices by Matt Morrison Recently, a friend of mine commented on the trend of fast food workers demanding $15 an hour. His contention was that if no one was laid off, the food prices at restaurant chains would have to increase so much to support these high paying jobs that far fewer customers would walk in the door (or, well, drive through the human cattle chute). He was right to make such an argument - wages are only worth as much as their purchasing power. If everyone were paid at least $50 per hour tomorrow, poverty would not disappear, but inflation would increase, adversely affecting the entire economy. Mathematics dictate that profits, jobs, or prices must be changed to support raises, and public/investor opinion usually dictates that it’s not the first two. Workers near the bottom of the pay scale may see some net benefit from an increased minimum wage, but everyone else already making more than the new rate would suffer from inflation. High prices hurt everyone because they don’t discriminate based on income – if you make less than $20,000 a year, go to a Starbucks sometime and try asking for a discounted Frappuccino. Furthermore, wages are very slow to catch up to inflation because employers often have to start losing workers before raising their pay. If gas prices went to $5 a gallon tomorrow, do you think your boss would give you a raise the next day (or month)? If you said yes, write in to this publication letting me know where I can submit an application. If you said no, you now know what the sticky wage principle is. TJ Maxx and Walmart recently announced a wage increase for their lowest paid workers. TJ Maxx announced this would come with a concurrent decrease in their projected earnings. To me this demonstrates two things: funding wage increases always results in some change to prices, jobs, or dividends; and minimum wages always make themselves obsolete. Eventually, inflation and competitive job markets create a higher effective wage floor than what the government has set. Some of that inflation is caused by the minimum wage; ironically, the minimum wage contributes to making itself irrelevant and far below the market value of labor. Anytime someone calls on an increase in the minimum wage, you can guarantee in five to ten years they’ll be asking for another. Part 2 next Month Halstead @ GAATS, You Relax, We do the Tax el CinoCa eHringHaus MCCartHur Mall 1502 Ehringhaus St. Bookkeeping, Payroll Services Income Tax, IFTA, etc. Free ITIN # w/paid Tax Return “LIBRE ITIN” 10% DIScouNT GAATS, LLC Godwin and Associates Tax Service, LLC TAX SERVICE 252-331-5859 Call office for details! We are next to Dunkin’ Donuts. Phone # : 252-771-0200 Circa 1928-1931 Model “A” wheel and tire Located at 2nd Tyme Around 102 Mullen Rd. South Mills. 12 Albemarle Tradewinds March 2015 albemarletradewinds.com

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