McDonalds and the $15 minimum wage

$15 Minimum Wage – The Cost of Going Out of Business

The $15 minimum wage is all the new buzz in the political realm today. Given the income rate versus the cost of living I understand the argument so I wanted to dig a little deeper to find out where we really are and what I found scares me. First of all, the raise to $15 an hour as a new minimum wage is like the Dutch Boy putting his fingers in a dyke to stop the leaks from pouring through.

This is a typical government response to fixing problems – put a bandaid on a severed limb and kick the can down the road. CA Governor Jerry Brown was hailed as a hero in the eyes of minimum wage earning adults while being viewed as the devil by all business owners and those who understand the true impact of a $15 minimum wage. First of all, with the exception of a few cities who have already adopted a $15 per hour minimum wage, the wage goes up on a gradual scale until it reaches $15 per hour in 2023.

I understand the argument from both sides, I have been a business owner and have written the payroll checks from my own pocket. I also understand the income increase over the years vs the cost of living increase. A new minimum wage however, is just another nail in the coffin for small biz owners, but it is only one nail. Between the state and feds (especially in CA), honestly the nails no longer matter because they put the coffin in the ground a long time ago.

While Entrepreneur Magazine shows that small business failure rate has actually declined since 1977, if you look at the numbers closely, you will notice that, hidden in the details, so has the ratio of small business creation. Entrepreneurs understand that it is harder to start a small business and survive in today’s economic environment so fewer people start their own company. On the opposite side of this factor is the micro-business explosion. These one to two person operations are the result of the economy and people trying to survive. Participants in this market have driven down the small business failure rate because many of these float in and out of business with little or no tracking. So how do we get an accurate picture? We look historically and according to the SBA, about 33% of small businesses will survive 10 years and only about 25% will survive past the 15 year mark. Not the best odds, but guess what, we just made them worse.

Here is where the primary disconnect between proponents and opponents of the $15 minimum wage exists. When you step in and ‘subsidize’ the minimum wage, what the population may or may not realize is that for every dollar the wage goes up, people receiving that dollar are affecting the supply / demand curve of labor. So if an employee costs $15 plus SS and FICA, I have raised the COGS by that labor cost and rule of free market says that I will naturally find a way to lower that cost, whether it is by replacing humans with automation (today’s technology makes it pretty easy to do) or by determining that my costs outweigh my minimum acceptable profit margin so then it makes no sense for me to be in business.

We are looking at two diametrically opposed forces moving against each other – the cost of living vs the survivability of businesses in the USA. From the viewpoint of the wage earner here is the part that is truly scary, we have to feed our families and, although the unemployment rate shows that it is low (currently hovering around 5%), everyone knows that this is a fictitious number that has little meaning. Under-employed and non-reporting far exceed the rate whose only objective is to make the administration look good. Because we allow it, government is once again stepping into our lives and regulating how we should live – on $15 minimum wage. That is, if we can get a job.

Will $15 Minimum Wage Even Help?

Okay, here is the really scary part and it is already happening in parts of our country. $15 minimum wage does nothing because adults still cannot survive or feed their families on minimum wage, but the government keeps trying to impose their means of making minimum wage survivable. It will never happen and until we attack the true problem we will continue in the opposite direction of where we should be headed. The only thing that will increase is the propensity to poverty and you can see the numbers that are already moving in that direction below.

Small business and enterprise is the backbone of our economy and, until we quit penalizing capitalism and entrepreneurial activity, our gap will continue to grow. Wage earners – If you are working class America (the forgotten middle class), ask yourself, “Is my life better or worse than it was five years ago? Ten years?” The answer is obvious, but the choice not so much so. Without going into depth on growing class inequalities and the disappearance of the middle class, we can safely surmise that manufacturing, mid-level and management jobs (the backbone of the middle class) are disappearing at an alarming rate while lower class and upper class continue to grow.

$15 Minimum Wage - PEW Research - Middle Class Losing Ground

Still a proponent of the $15 minimum wage? Talk about shooting yourself in the foot. What happens when there are no more jobs?

Still an opponent of the $15 minimum wage? Don’t worry, you won’t be for long because those will be the only jobs that exist as the socialization of our country continues. Unless we shed the burden of imposed expense on our small and medium-sized businesses, until we actively and aggressively promote entrepreneurship and unless we become business friendly and entice our companies to come back home from overseas, we are on a doomsday path to a socialized destiny. Why do we think the Bernie Sanders movement has become so popular? Same for Trump. Americans are fed up and have nowhere to turn.

It is time for us as citizens and as leaders to take responsibility, to become accountable once again for our destiny and that of our children. We are in the middle of a peaceful, but serious revolution. It is time to listen and time to take decisive action to recapture our greatness as a country.

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Currency Projections and Forecast - TownSpeaks

2016 Currency Projections

Global Currency Trends and 2016 Currency Projections

2016 has not started off great for currencies around the world given the free fall of the China market and given that their volatility is supposed to continue throughout the year. This will prove a challenge to currency values and will make 2016 currency projections difficult, but will provide tremendous opportunity to trade volatility. The market itself is an issue with regard to economic stability in China as their growth continues to slow, but there is potentially an underlying issue that may shape trends and projections in both the equity and currency markets.

All economies slow, but the depth of impact is based on the size of the economy and the reach it has in global markets. China is #2 so the impact has the potential to be severe. Similar to that of the Great Recession in the United States, China’s economic stability is on the verge of collapse into a mirror image of our own financial crisis. Alone, this is bad due to the economic impact, but is at least predictable for purposes of trading.

Where there is potential for dramatic difference between the illusion of China’s slowing and what is reality lies in their currency policies. Specifically, the renminbi has been devalued multiple times by the government and this is cause for warning signs in both the currency and equity markets. Any time a country attempts to stave off financial crisis by manipulating its own currency, things are usually worse than they appear.

By devaluing currency, the government is working to pump money into the system and to provide liquidity to starving markets. Sound familiar? The currency manipulation is not necessarily the issue since most governments use this as a tool to provide liquidity. Where the real issue lies is that we do not know the depth of China’s difficulties and, given the size of their economy and the global weight that it carries, unknown is not good. We won’t know how far down the rabbit hole we will have to go to get to the bottom. Equity markets understand this and the result is 400 point slides.

The problems arise when you combine fiscal weight abroad with overaggressive interest rate hikes here at home coupled with extremely low inflation rates and stagnant growth. Add in a dash of unknown presidential candidates and you have the recipe for potential disaster.

For currency markets and currency projections, 2016 will be highly volatile with a propensity for the dollar to climb against most other currencies due to flight to safety. Additionally, currency manipulation will continue to hamper trade deficits as our trading remains purposefully unbalanced. Bond interest rates are already decreasing as the demand for investor safe haven climbs. Should the pattern continue as expected, traders will see growth in the value of the dollar with downward pressure on the Euro and related currencies. Also, should this trend continue, expect to see government intervention along the way working to inject liquidity, especially if the downward trend on China’s economy continues.

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Stockholm Terror Attack

TFlash – Stockholm Terror Attack

Subject – Stockholm Terror Attack

A man suspected of driving a carjacked truck into a crowd of shoppers at a local department store has been arrested and has confessed to local authorities. Police have confirmed that at least 4 people have been killed and 15 people injured (9 seriously) in the Stockholm Terror Attack. Images of the man were distributed by police as the short manhunt came to conclusion.

Swedish Prime Minister Stefan Lofven stated that the attack appeared to be terror related and this was later confirmed by police. Sweden and neighboring countries are attributing the spike in crime to the influx of refugees from states known to have radical terrorist ties. The Stockholm Terror Attack is another in the wave of so called Lone-Wolf attacks in the region.

Stockholm Terror Attack occurred at approximately 3:16PM local time.

Stockholm Terror Attack

Swedish Police release images of the suspect later arrested in the horrific attack at a local department store

Stockholm Terror Attack

Police release images of man suspected and later apprehended in Stockholm Terror Attack

Stockholm Terror Attack

Scene outside the local department store where a carjacker used a truck to run over shoppers. Courtesy AFP