A Different Kind Of Wage Inflation Heralds This Cycle’s End

By John Rubino – Re-Blogged From Dollar Collapse

Towards the end of long expansions (this one is the longest on record) things get tight. Factories operate flat-out and start raising prices. Good workers become harder to find and companies start competing for them with higher wages and other perks.

This story is about the “other perks” which, because they don’t show up in wages aren’t directly inflationary. But they do cost money, which means they shrink corporate profits nearly as much as would a big wage increase. From today’s Wall Street Journal:

Factories Tire of Wage Wars; Give Fridays Off, Spiff Up Bathrooms

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Does Government R&D Policy Mainly Benefit Scientists and Engineers?

By Larry Kummar – Re-Blogged From WUWT

Does this apply to Climate Science?

Paper By Austan Goolsbee

NBER Working Paper No. 6532, Issued in April 1998

Conventional wisdom holds that the social rate of return to R&D significantly exceeds the private rate of return and, therefore, R&D should be subsidized. In the U.S., the government has directly funded a large fraction of total R&D spending.

This paper shows that there is a serious problem with such government efforts to increase inventive activity. The majority of R&D spending is actually just salary payments for R&D workers. Their labor supply, however, is quite inelastic so when the government funds R&D, a significant fraction of the increased spending goes directly into higher wages. Using CPS data on wages of scientific personnel, this paper shows that government R&D spending raises wages significantly, particularly for scientists related to defense such as physicists and aeronautical engineers. Because of the higher wages, conventional estimates of the effectiveness of R&D policy may be 30 to 50% too high.

The results also imply that by altering the wages of scientists and engineers even for firms not receiving federal support, government funding directly crowds out private inventive activity.

Full paper here.

H/T Larry K of the FabiusMaximus website.

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New Study Drives a Stake Through the Gender Wage Gap Myth

Re-Blogged From Total Conservative

Harvard University researchers Valentin Bolotnyy and Natalia Emanuel have published a new study of the Massachusetts Bay Transportation Authority that could give us the best argument yet against the left-wing, feminist myth of the gender wage gap. In their groundbreaking work, the researchers found that while they did indeed find a wage disparity between men and women at the MBTA, this could be wholly explained by real-world factors that have absolutely nothing to do with sexism, either individually speaking or institutionalized.

“Female workers earn $0.89 on the male-worker dollar,” at the MBTA, reported the researchers in their paper. “The weekly earnings gap can be explained by the workplace choices that women and men make.”

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Why Are Wages So Low

By Keith Weiner – Re-Blogged From Gold Eagle

Last week, we talked about the capital consumed by Netflix—$8 billion to produce 700 shows. They’re spending more than two thirds of their gross revenue generating content. And this content has so little value, that a quarter of their audience would stop watching if Netflix adds ads (sorry, we couldn’t resist a little fun with the English language).

So it is with wry amusement that, this week, Keith heard an ad for an exclusive-to-Pandora series. The symptoms of falling-interest-disease are ubiquitous.

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Why Aren’t Widespread Labor Shortages Translating Into Roaring Wage Inflation?

By John Rubino – Re-Blogged From Dollar Collapse

Google “labor shortage” or “wage hikes” and the result is a picture of an overheating economy. Some examples from August 10:

Why Disneyland’s $15-an-hour labor deal is a win for workers everywhere

Colorado small businesses seek help with labor shortage

Washington growers struggle with labor shortage

Now hiring: teenagers (and anyone else willing to work)

You can’t read these headlines and not expect wages to climb dramatically as desperate companies pay what they have to in order to keep their customers happy. But the macro numbers tell a different story. Here’s the change in average hourly earnings over the past decade:

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Rising Wages = Shrinking Corporate Profit Margins … And Falling Stock Prices?

By John Rubino – Re-Blogged From Dollar Collapse

Today’s Wall Street Journal contains a couple of charts that illustrate a relationship that’s not getting much media attention these days: The fact that tightening labor markets are forcing companies to raise wages, in the process squeezing their own profit margins.

Historically this margin compression has been either a cause of or contributor to cyclical turning points — in other words it coincides with recessions and equity bear markets.

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Inflation Is Back: Maybe The Phillips Curve Was “Just Resting”

By John Rubino – Re-Blogged From Dollar Collapse

Economists have been struggling to explain how unemployment can fall to 4% without wages starting to accelerate. The following chart shows paychecks rising at about the rate of inflation over the past five years, which means the average worker’s earnings don’t buy much more now than in 2013.

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Consumer Prices Soar as Core Inflation Posts Largest Gain in Year

By Thomson/Reuters – Re-Blogged From Newsmax

U.S. consumer prices rose more than expected in January, with a measure of underlying inflation posting its biggest gain in a year, strengthening expectations that price pressures will accelerate this year and prompt a faster pace of interest rate increases from the Federal Reserve.

The fairly strong inflation report from the Labor Department on Wednesday could put more pressure on U.S. financial markets, which were spooked by a surge in annual wage growth in January. Inflation concerns sparked a sell-off on Wall Street and boosted benchmark U.S. Treasury yields to a four-year high.

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Jobs Galore but When Will Wages Finally Pick Up?

By Thomson Reuters – Re-Blogged From Newsmax

In 2014, a few days after she took over as chair of the U.S. Federal Reserve, Janet Yellen admitted that she could not fathom the “very worrisome” trend of weak wage growth for American workers.

Now, as she nears the end of her four-year term, the problem remains a mystery, and not only in the United States.

In many countries, more people are in work than before the global financial crisis as the world economy racks up its strongest growth since 2010.

But pay, which would normally rise more quickly as employers compete for staff, is rising painfully slowly for many.

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Rob From The Middle Class Economics

By Gary Christenon – Re-Blogged From http://www.Gold-Eagle.com

Much of our financial world functions as a “Rob from the Middle Class” economy. The system robs from the middle class and poor via “money printing” and inflation of the currency supply!

The rich get richer and the poor get poorer.

Mazda Crossovers For Moms

After a 15 year love affair with my Mom SUV, it’s time to think about another. I attended the Houston Auto Show to try on cars like shoes.

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Marc ‘Dr. Doom’ Faber: ‘We Have a Bubble in Everything’

By Rob Williams – Re-Blogged From Newsmax

Marc Faber, editor of The Gloom, Boom & Doom Report who has earned the nickname “Dr. Doom” for his pessimistic forecasts, said he wouldn’t buy stocks even if the S&P 500 dropped 20 percent.

“We have a bubble in everything,” Faber said on CNBC. “We have global debt as a percent of global GDP that is 30 to 40 percent higher than it was in 2007. All of us and I also own lots of assets. We’re going to lose 50 percent. Either the government will take it through taxation or expropriation, or there’ll be a deflation in asset prices that is surprising most people on the downside.”

Major stock indexes have risen to record highs in the months since Republican Donald Trump won the November presidential election on a pro-business platform. Investors piled into stocks on the possibility of tax cuts, less regulation and billion-dollar spending on roads, bridges and airports.

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Silver Price Massively Undervalued From Historic Perspective

By Mark O’Byrne – Re-Blogged From http://www.Silver-Phoenix500.com

– What wages in ancient Athens can tell us about the silver price today

– Wages paid in silver in ancient Athens compared to wages today

– Silver massively undervalued compared to the past few thousand years

The cost of building the Parthenon was 469 silver talents, or about £5.6m.

by Dominic Frisby

Today we look at the wages paid to oarsmen on warships in ancient Athens in 450BC.

I bet you’ve never read a Money Morning that began like that before.

Why on earth would I want to do such a thing?

Because it tells us a great deal about the silver price today…

How Wages In Ancient Athens Compare To Today

In The Economy of Ancient Greece, historian Darel Engen describes how the Athenian unit of money – the talent (about 26kg of silver) – could purchase nine years of a skilled man’s labour. If we assume 250 working days in a year, that works out at about 11.5g of silver per day – a little under 0.3 of a troy ounce.

A kilo of silver today is about £460, so nine years’ skilled labour would amount to about £12,000 in today’s money. That makes a year’s skilled labour about £1,333, and a day’s £5.29.

Fast forward to today. The average wage in the UK construction industry, which I’ll use as an equivalent, is about £30,000 per annum, or £120 per day. It seems that today’s British labourer is earning considerably more than his ancient Athenian counterpart.

We must, however, factor taxation into our calculations in order to appreciate what the worker actually took home with him. Enlightened souls that they were, there was no direct taxation on income in ancient Greece. The large part of the expenses of the city were shouldered by the rich, who made their donations voluntarily – sort of – through the system of liturgy.

In the UK today, on the other hand, somewhere between 40% and 55% of the average worker’s income is taken, one way or the other, to pay for the state, depending on whose figures you use (and that’s before you factor in inflation taxes).

For the sake of simplicity, let’s use a 40% figure and go with an after-tax income of £72 per day – or £18,000 per annum. So even after taxes, the modern labourer would seem to be earning considerably more than the ancient – over ten times as much.

As Greece was the most advanced civilisation in 450BC, perhaps we should only be comparing it to the developed world. But even if we factor in less developed nations, the modern worker appears to be earning more than the ancient.

Globally, according to the United Nations International Labour Organisation (ILO), the average salary is $18,000 – say £14,000, or £56 per day. That would be £34 after 40% taxes.

An Athenian warship, the trireme, cost about a talent to build (£12,000). A trireme’s unskilled oarsman would be paid 4.3g of silver each per day (£2). The cost of building the Parthenon was 469 talents, according to Professor Thomas Sakoulas. That works out, according to my maths (469 x 26 x 460) at about £5.6m. The cost of building the Shard, by way of comparison, seems to have been around £435m.

Silver Price Is Dirt Cheap Compared To The Past Few Thousand Years

To compare modern and ancient prices might seem like a ridiculous and redundant exercise – the two worlds are so different – but there is a point to all this. Measured in silver, salaries actually remained fairly constant until the 20th century.

The Babylonian worker might have been looking at 2g of silver (92p). The Roman unskilled worker, like the Greek, might have been on around 4.2gs of silver, at least until Romans started chipping their coins.

The wages of the medieval English worker seemed to have fallen back towards Babylonian levels by 1300. He got 2.8g, while a skilled city craftsman might have expected 5.6g – about half what an Athenian was paid.

That would grow, however, over the next 500 years, until by the 19thcentury the skilled labourer might be looking at around 24g of silver per day, according to author David Zucherman, and an unskilled between a third and half that. The labourer in the 19th century was getting around double the pay of his 450BC Athenian counterpart. It’s more, but it’s not that much more.

Compare that to today. I used the figure of £30,000 earlier – the average wage of a construction worker – £120 per day. That amounts to 260g of silver, compared to 11.5g for that Athenian worker. Today’s pay dwarfs that of any pre-20th century worker in history.

Wages have risen, of course they have – but not by this much relative to the cost of living, status and so on within a society.

The issue is not that wages have soared. It’s that silver – now that it no longer has any monetary role – has fallen to absurdly cheap (on a historical basis) levels. (It’s also absurdly cheap on a geological basis, as I argued here

If today’s wages of £120 were to equal the Athenian equivalent of 11.5g (say 12g for simplicity’s sake), you could make the argument that silvershould be £10 per gramme (currently 46p per gramme). That’s over 20 times higher than today’s silver price of $18.50 an ounce – more like $400 per ounce.

At $400 per ounce, not only do wages correspond, but so does the cost of building a ship or a landmark city building.

One day we will get some kind of silver reversion to its historical mean. Does that mean we should all go out and buy shedloads of silver with the expectation of making 20 times our money?

Not really. That day of historical mean reversion probably won’t come in our lifetime and most of us invest within three to five year time frames. But you should all own a little bit, just in case it does.

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What Creates and Sustains Jobs?

By Dale Netherton – Re-Blogged From iPatriot

The politicians mutter the word “jobs” as if they understood where jobs come from and what conditions are necessary to sustain jobs.

First, without revenue to pay wages no job can exist or if created continue to exist.  The question then becomes, where will the revenue come from?  There are two sources of revenue for jobs.  One is the direct granting of revenue by the government which funds government jobs.  If there is funding available the job can continue until the funding disappears.  The other source of revenue is profit.  If a job is created to supply a good or service and it is sustained by paying for itself, this job is sustainable as long as it is competitive.  This is the only job that can exist that doesn’t rely on confiscation and redistribution.  Jobs that rely on “government funding” are not self sustaining since they must have confiscation and redistribution.  Government cannot create wealth, it has nothing it doesn’t confiscate or borrow.

All government created jobs are necessarily temporary.  Debt and eventual inflation destroys the foundation for government funding of jobs as the private sector that supports sustainable jobs shrinks under the regulation and taxes that eventually destroys the profit motive and therefore the only source of self sustaining jobs.  The CCC camps could not have been retained as permanent jobs.  The demise of the Post Office and Amtrak are examples of where government “jobs” must eventually falter.  The source of these two government jobs comes from the government subsidies.  Neither is self sustaining based on the income they generate.  This means a private sector is being taxed and the confiscation of their earnings is being channeled to the subsidy the government is supplying.

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Why Inflation Is Unlikely To Return

By Rick Ackerman – Re-Blogged From http://www.Silver-Phoenix500.com

Is it possible that wage inflation is re-emerging in the US after a 35-year hiatus? That’s what the experts seem to believe, but there are good reasons to think they will be wrong. Consider the substantial pay increase that minimum-wage workers received in many cities and states where this issue was on the ballot in November. In theory, they will have more money to spend, and this will push the prices of goods and services higher.  In practice, because their employers, particularly those in the fast food business and brick-and-mortar retail, are in a last-ditch fight for survival, it is far more likely that a vast number of low-wage jobs will be eliminated. Even now, we are seeing workers who received raises in 2017 ask their employers to reduce their hours so that they can continue to qualify for food stamps and Obamacaid.

This is the reality of the minimum wage world, and arbitrarily boosting hourly pay to $15/hour will only make things worse for employers and employees.  At best, the economic result will be a push with the broad benefits of higher wages offset by a reduction in entry-level and low-paying jobs. In any event, the day is surely coming when McDonald’s will be able to operate a busy franchise with just two or three employees behind the counter. Amazon is already making similar strides in the grocery-store business. And Uber, having already made taxicab medallions worthless in many cities, could someday displace half the taxi drivers in America with driverless fleets like the one they are testing in Pittsburgh.

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The Benchmark Unions and Government’s Ignore

By Dale Netherton – Re-Blogged From http://www.iPatriot.com

If you look at the structure of our government and compare it with how unions are structured you see one fundamental similarity.  The government and the unions do not target a bottom line.  Both of these organizations have nothing to rein in their spending in the case of government and nothing to rein in their demands in the case of the unions.  This oversight by these organizations places them on an eventual clash with the reality of fiscal sanity.

We have seen the unions that have bankrupted the companies they have infiltrated by making demands for wages and benefits that eventually became unaffordable.  We are seeing that phenomena played out in the state of Wisconsin. Likewise the government has reached a point where it too cannot just spend with impunity as it has done in the past.  The reality of living off of borrowed money has appeared as the fact that creditors that don’t get paid don’t continue to loan money. When the source of loans dries up there is no longer an alternative for the government to acquire money.  The illusion that the government can always tax the citizens reaches a point of diminishing returns not only by the unavailability and the affordability but also by political unpopularity.  This in the world of finance is bankruptcy whether the government wants to declare it or not.

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Trumped! Why It Happened And What Comes Next

By David Stockman – Re-Blogged From Stockman’s Contra Corner

Donald Trump’s patented phrase “we aren’t winning anymore” lies beneath the tidal wave of anti-establishment sentiment propelling his campaign and, to some considerable degree, that of Bernie Sanders, too.

As we demonstrated in Part 1, what’s winning is Washington, Wall Street and the bicoastal elites. The latter prosper from finance, the LA and SF branches of entertainment ( movies/TV and social media, respectively) and the great rackets of the Imperial City—including the military/industrial/surveillance complex, the health and education cartels, the plaintiffs and patent bar, the tax loophole farmers and the endless lesser K-Street racketeers.

But most of America’s vast flyover zone has been left behind. Thus, the bottom 90% of families have no more real net worth today than they had 30 years ago and earn lower real household incomes and wages than they did 25 years ago.

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58 Facts About The U.S. Economy From 2015 That Are Almost Too Crazy To Believe

By Michael Snyder – Re-Blogged From http://freedomoutpost.com

The world didn’t completely fall apart in 2015, but it is undeniable that an immense amount of damage was done to the U.S. economy.  This year the middle class continued to deteriorate, more Americans than ever found themselves living in poverty, and the debt bubble that we are living in expanded to absolutely ridiculous proportions.  Toward the end of the year, a new global financial crisis erupted, and it threatens to completely spiral out of control as we enter 2016.  Over the past six months, I have been repeatedly stressing to my readers that so many of the exact same patterns that immediately preceded the financial crisis of 2008 are happening once again, and trillions of dollars of stock market wealth has already been wiped out globally.  Some of the largest economies on the entire planet, such as Brazil, and Canada have already plunged into deep recessions, and just about every leading indicator that you can think of is screaming that the U.S. is heading into one.  So don’t be fooled by all the happy talk coming from Barack Obama and the mainstream media.  When you look at the cold, hard numbers, they tell a completely different story.  The following are 58 facts about the U.S. economy from 2015 that are almost too crazy to believe…

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The War on Cars Is a War on Workers and the Poor

By Gary Galles – Re-Blogged From Mises.org

A just-released poll of Los Angeles residents found that 55 percent of respondents indicated their greatest concern was “traffic and congestion,” far ahead of “personal safety” — the next highest area of concern — at 35 percent. So if their city government was working in their best interests, it would be doing something about automobile congestion.

It is. Unfortunately, it will make things worse.

Los Angeles’s recently adopted Mobility Plan 2035 would replace auto lanes in America’s congestion capital with bus and protected bike lanes, as well as pedestrian enhancements, despite heightening congestion for the vast majority who will continue to drive. Even the City’s Environmental Impact Report admitted “unavoidable significant adverse impacts” on congestion, doubling the number of heavily congested (graded F) intersections to 36 percent during evening rush hours.

Driving Saves Time and Offers More Opportunity

Such an effort to ration driving by worsening gridlock purgatory begs asking a central, but largely ignored, question. Why do planners’ attempts to force residents into walking, cycling, and mass transit — supposedly improving their quality of life — attract so few away from driving?

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Who Exactly Is Government Helping?

By Doug Bandow – ReBlogged From FEE: The Foundation for Economic Education

Almost everyone believes that government is an essential institution, necessary to protect us from those threats we cannot counter on our own. But even if we accept that justification, it rarely describes what American government actually does, whether at the local, state, or federal level.

What exactly is the government protecting — and from whom?

Local Protection from Food Trucks

Late last year, Rachel Kennedy wanted to bring a Cuban food truck to North Kansas City, Missouri, a town of four square miles and 4,500 people. That shouldn’t have been controversial. The city agreed to allow the trucks to operate during lunchtime, and several other operators came, too. There was no reason to restrict the trucks to lunchtime, but never mind. At least for one meal a day, consumers enjoyed more choices at less cost. What could possibly go wrong?

The restaurant owners might lobby to expel the food trucks, that’s what. Choice and competition are good, except when you are an incumbent provider. Monte Martello, a local Dairy Queen operator, complained, “They bring the truck in, they compete against us for four hours, and then they drive away.” Outrageous!

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NLRB Joint-Employer Cases

By Aloysius Hogan – Re-Blogged From Competitive Enterprise Institute

Your salary, purchasing power, and job are on the line as an independent federal agency takes the core American business concepts of franchising, temporary staffing, contracting, sourcing, and outsourcing to court.

Regular Americans stand to lose a lot as some franchises are regulated out of existence. Franchise businesses provide us food, tax preparation, day care, gasoline, and many other products and services. We all know someone who has worked in a temp agency. Businesses commonly outsource accounting and cleaning. Our cars are manufactured with parts sourced from smaller businesses. Our homes are constructed with subcontractors plumbing the bathrooms and wiring the fixtures. All are at risk.

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Falling Interest Causes Falling Wages

By Keith Weiner – Re-Blogged From http://www.Silver-Phoenix500.com

Interest rates have been falling for over three decades. Conventional economics has two things to say about this. One, inflation expectations are falling. Monetarists believe that the interest rate is set based on bond traders’ predictions of future price increases. Two, if employment and GDP are weak, then the central bank should increase the money supply. By increasing the money supply, it will cause rising prices, and somehow that causes workers to get hired. Federal Reserve Chair Janet Yellen wrote a paper defending this absurd claim (which I criticized).

Monetary policy is actually putting the hurt on labor. Let’s look at why.

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