The recent suggestion to increase the minimum wage to $15 has received some spirited and predictable reactions on both sides of the issue.
I read Felix Salmon's Seeking Alpha article that offers a reasoned analysis of why doing so should be cause for back slapping all around. other than the fact that the lack of legislative backbone would preclude it from ever happening.
Now that I'm no longer in the business of paying employees, I wholeheartedly agree with the need to provide higher levels of pay for those at the bottom of the economic ladder. Perhaps legislating a minimum wage is an entitlement of sorts, but it is also a means of introducing some justice into what can devolve into a merciless system of indenture.
While we've been hearing about trickle down economics for nearly 30 years, the raising of the minimum wage would likely create a "trickle up" phenomenon, as it seems fairly logical that the same amount of money in the hands of people that have basic unmet needs is more likely to be spent on goods and services than is money in the hands of the most wealthy.
Certainly investing newly found money in stocks does nothing to propel the economy forward unless you continue to believe that money will generate dividends and capital gains that themselves find their way into the economy, rather than simply being re-invested.
But we all know that on the whole, that just isn't the case. The money essentially disappears from circulation and adds nothing to economic growth. It often just adds to the tally in the game of "who can die with the most to his name."
Surely the argument that trickle down would create jobs has by now been dismissed. The US population has grown nearly 35% in the past 30 years since the start of the 1982 bull market and the implementation of supply side economic theory. According to the Bureau of Labor Statistics, based upon preliminary May 2013 data, approximately 34% more jobs have been created in that same time span.
Most everyone will agree that the creation of jobs has by and large been in service sectors and increasingly entry level wages have replaced higher wages of many in the workforce, particularly after "right sizing."
As an investor and avid capitalist, I can live with reduced profit margins by the likes of Wal-Mart (NYSE:WMT), McDonald's (NYSE:MCD), Disney (NYSE:DIS) and others. Investors and a market that clings to the gospel of Price/Earnings ratios can learn to re-acclimate, as we get used to the new normal for corporate profit margins and realize that there's really no need to see stock prices adjusted accordingly. How in the world Apple (NASDAQ:AAPL) can call it's store employees "Geniuses" and pay them as they do, is a curious thing. Maybe that's why Einstein couldn't afford a new sweater or a haircut.
But the capitalist in me takes a little different view when it comes to changing the retirement age. Is it really an entitlement if you have paid for it and have further had limitations placed upon how the funds could be invested while you waited some 40 years for their disbursement in tiny aliquots?
Look, to start, I'm already biased on this issue. Not that I've been objective ever before, but for some reason this time I feel compelled to make full disclosure.
I'm 59 and work about zero days a year, down from about 10 days just 2 years ago. My "Sugar Momma," who coincidentally has increased her time away from home as I've devoted my life to staying at home doesn't like it when I refer to myself as being "semi-retired". I just enjoy having moved the retirement age border closer and closer to my current age. Mentally, I retired about 30 years ago, but in some form of transfigurative migration, I had left my soul behind as I dutifully trudged off to work in places past.
Over the past few years we've heard various economists turned social engineers deign to suggest that our society can't afford retirement at its current age levels. They want to raise the age at which workers can retire and collect benefits.
What are they possibly thinking?
The same story has already made its round on the European continent, where citizens are far more capable of genteelly indicating their displeasure with changes in government policy by letting their Molotov cocktails do the talking for them.
In Athens, the cradle of democracy, a nation that arguably, per capita, has contributed more to mankind throughout civilization's history, has sadly been in great turmoil for the past two years. The last thing anyone there wants to do is to keep working longer at a job that they've barely worked on during the span of their lives.
The economic and financial engines in Greece are a mess, but certainly not the only mess in the world. Protesters tossing Molotov cocktails, police firing tear gas, all while in the shadow of the great wonders of the world, are sad. In some other places those events may pass for national reconciliation day activities, but in the civilized world, people take notice and wonder if the same thing could overcome their basic civility.
The idea of significantly raising taxes, dropping social and government services and increasing the retirement age is a hard one to swallow, especially if, as a citizen, you blame external forces for your economic crisis, just as the today's initial market decline was being blamed on China or Ben Bernanke was blamed for the recent precipitous market decline.
I really don't have the motivation to look up the details, but Greek citizens can retire far younger than can the typical American and they certainly have figured out a mechanism to avoid paying taxes. While some pseudo-economists distort the American story and claim that 50% of US citizens pay no income taxes, it isn't quite that skewed.
While I do understand the need to raise revenues and decrease services, as a general strategy during difficult times, it's the retirement issue that bothers me.
I actually have not been effected by the gradual increase in our own social security age eligibility, although my Sugar Momma is effected.
But besides the fact that I didn't really want to work any longer, there are some very pragmatic reasons why increasing the US retirement age may not be the way to go, at least not with the direction that the economy has been headed these past few years. While the markets were wildly enthusiastic about the June 2013 Employment situation Report, if you listened to Ben Bernanke, the growth in employment is not yet sufficient to cause a tapering of the current level of Quantitative Easing.
We simply don't have a sufficient number of jobs for our current population.
Unless you've been hiding away someplace for the past 20 years, certain jobs are disappearing from the United States. The jobs and industries that were created to replace those missing sectors of our economy are now disappearing, as well. I'm also now old enough to remember when unions were decried and criticized for acting like Chicken Little when suggesting that technology and automation would replace humans in the equation.
Nonsense, was the polite response to that uncanny ability to see into the future of the American workplace.
Have you seen the unemployment rate lately? Everyone seems to agree that number is under-stated due to the people that have simply given up even looking for employment.
It's hard to believe that anyone would actually give up on the search unless they were already within sight of retirement. Push that age higher and the unemployment rate goes with it.
As our population grows, albeit, it is now growing slowly, newly minted adults will need jobs. But where are those jobs coming from? Increasing the retirement age, coupled with decreasing standards of living simply dry up the existing pool of available jobs, as the now elderly won't even be able to afford to retire.
Of course, from an employer's short-term perspective, given the expense of a codger like employee pool and their attendant medical needs, a cheaper and healthier alternative may be irresistibly beckoning toward them to fire those highly experienced leeches.
Disequilibrium in immigration, birth rates, death rates and retirement rates can have drastic effects on our society.
Instead of listening to annual summertime stories of how inner city youth are unable to find summer employment and how that bodes poorly for street crime statistics, lets transport that model to every population around the entire country.
Take your choice. Marauding gangs of unemployed and disaffected youth or hobbling throngs of terminated geezers eating away at the fabric of American society, all clawing for the few jobs left in the United States.
So where will the job-seeking migration send Americans? It's not like the south or southwest are going to be booming anytime soon. It's also not very likely that China will find itself with a shortage in its labor pool. Libya's burgeoning domain shortening industry is mostly run by an savant in a basement somewhere in Detroit, so that's not going to be the solution, either.
Right now we look at Greece. Not long ago we looked at Tunisia. Well educated, yet high unemployment.
That turned out to be a good combination for civil unrest.
I'm just trying to do my part as a citizen who cares about our youth's future livelihood and don't want to see generational warfare in the streets.
I'm more than happy to stay at home, especially on those days that I can make more money by just tapping a few keyboard entries.
So I'm trying to do my part. I'm staying away from the employment market, despite Sugar Momma's recent exhortations.
What can I say. I'm just a patriot who doesn't want to see fellow citizens rioting in the streets.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.