economics

Social Media

When I was still teaching, I saw a distinct shift in the attitudes of my students from years past. When you would ask tenth grade students what they wanted to do for a career, you would get sensible answers mixed in with answers about being professional athletes. In 2018, something interesting began to happen: students began telling me that they wanted to be social media influencers and stars.

When I first heard about Tik Tok, it was because one of my students became famous on the platform. She had over a million followers and was becoming a quasi-celebrity. We would host other schools for sporting events, and she was the captain of the cheerleading squad. Students of other schools would approach her and ask for her autograph. This made every other student of the school want to try out Social Media as a career.

I once had an in depth conversation with her after watching one of her YouTube videos. The videos are of nothing but teenage mindlessness. She told me that she was making about $5,000 a month of of those videos. I told her that the only reason that she was making so much is that she was young, pretty, and female. My advice to her was that she invest the money for the inevitable day when she was no longer young and someone younger and prettier came along, “After all,” I said, “do you see 17 year olds still watching you when you are 30?” She ignored that advice, and was busy spending the money on designer purses and clothes. She and her mother (who was helping her spend the money) were trying to get her a movie or TV role in California.

That was three years ago, and I just looked at her page: At 19 years old, that young lady has over 600 million views and 5 million regular followers, JUST ON HER TIK TOK page. Her Instagram page has another 1 million, her YouTube has over 200,000. So a total of 6.2 million people tune in to watch her videos. To put that in perspective, ABC’s World News Tonight has only 7.3 million regular viewers. A 19 year old making videos about putting on make up, how to do your hair, and the latest Social Media dance moves is scoring as many eyeballs as a nationwide television news show.

The impact that social media is having cannot be overstated. Influencer marketing is a $14 billion industry. Businesses report that they receive $5.78 return on investment for every dollar spent on influencer marketing. Teens are largely turning away from conventional media and turning to Social Media.

We need to pay attention to what is happening on Social Media. Teens are our future, and their future is being sent out on Social Media.

By Divemedic, ago

Rent Inflation

As many of you will recall, a rental property that I own is coming up for renewal. Right now, I am renting that two bedroom, 1900 square foot house for $1700 a month. That price includes a washer/dryer, pest control, and lawn maintenance. Two years ago, when we began renting to this couple, that rent level put us near the upper end of the area rental market. We didn’t raise the rent last year when they renewed.

A month and a half ago, we looked and decided that rent was probably going to be increased by $100 to $1800 a month when the time came. That was a month and a half ago. The time has come, and things are a bit more complicated than they were in October.

Zillow has a useful tool that landlords can use to compare their rental property to other rental properties in the area. Looking at the recent rental listings, there are only a handful of rentals available in the area. Houses are renting as quickly as they are being listed, and that is driving up prices. The ones that have recently been listed indicate that our home should be renting for somewhere between $2,200 and $2,700 a month. This means that, in the last 5 months or so, rents have increased by about 25% in my area!

If this keeps up, by the time of lease renewal on Feb 1, my house will have a rental value of $2400 to $2900 a month. In a year, who knows?

My wife says that she doesn’t want “to screw them” by renting the place for market, and wants to stick with no more than $1850 a month. She also says that too large of a rent increase will cause them to move out, and then the home will require cleaning, painting, etc. on top of being empty for a month or two. I must admit that it would make be feel guilty to raise rent by $400 or more dollars month. On the other hand, if rents keep increasing like this, every dollar that we don’t increase the rent now is two dollars of an increase that we will have to make next year.

Not matter what, inflation is hitting the rental markets in a big way. Rents are increasing at an astonishing 40 percent per year, at least in this area. Real estate is skyrocketing. We bought this rental two years ago, with the idea that we wanted a passive income stream. We put $150,000 down on the purchase price of $250,000. Every dime that we have collected in rent over and above expenses has gone to paying down the mortgage. We now owe $45,000 on that house. We were just contacted by a real estate agent and were offered $350,000 on that house. A $155,000 profit in 24 months corresponds to more than a 50% annual ROI. That house is increasing in value by $4400 a month. We are increasing equity at double the amount we are collecting in rent. That is going to be reflected in our property tax bill next year, and needs to be factored into the rent.

The only reason we don’t boot the tenants out and sell is that we don’t want to covert income producing real estate into dollars that are decreasing in value every day, thanks to President Biden and his insane economic policies.

Setting rent is tricky. If you rent at too low of a price point, not only are you leaving money on the table, but you are running the risk of getting tenants who will trash the place. (Sorry, but people without money don’t value your rental as much. They are more likely to destroy the place.) Too high, and the place sits empty for an extra month or two, and that costs you more than simply renting for a bit less.

The kitchen countertops need to be replaced in that unit, and that will cost around $3000. The renewal letter goes out this week, so we need to make the call. I think that we are going to offer the renewal at $1850, unless they want the countertops replaced. If that happens, I will have to raise rent to $2000. If they don’t want to renew and instead move out, then I will relist the place for rent at $2300. I am sure that I will get it.

By Divemedic, ago

Retirees lose 1/4 buying power

For decades, the returns that one can expect from the stock and bond market have dictated how much a retired person can withdraw from their retirement savings without fear of running out later. That rule of thumb has been 4% per year. That is, a person with $400,000 in retirement savings could withdraw $16,000 per year and be comfortable knowing that their nest egg would last for the rest of your life (well, at least 30 years, which for most of us is the same thing).

Not anymore. The lower performance of the market has reduced that rule of thumb to 3.3%. This means that every retired person in the country just saw their retirement income drop by nearly 18%. That person with the $400,000 retirement fund can now only afford to withdraw $13,200.

Now couple that with inflation, officially at 6.22% for the 12 month period ending October 2021, and you see that the retired person with the $400,000 retirement savings now has seen the $16,000 they had to spend last October only able to buy $12,400 worth of stuff. That’s right, retired people have just lost a quarter of real purchasing power in just a year.

By Divemedic, ago

They lied

Just recently, the press was busy covering us in lies by claiming that increases to the minimum wage wouldn’t increase prices.

The minimum wage in Florida recently saw its first increase on the way to the new $15 an hour wage, as did many other states. Now we are seeing stories about restaurant chains who are increasing prices. The wages are hurting profits, and more price increases are on the way. By March, McDonald’s prices were up 6% year over year, with another 3 to 4% increase coming in the next quarter.

By Divemedic, ago

Rental Inflation

It isn’t just food. The hardship that was imposed upon landlords during the COVID eviction moratorium, combined with the massive migration of migrants from the large cities of the north, who are fleeing lockdowns and high taxes, is affecting rents in lower cost areas of the country. For example, South Florida is seeing skyrocketing rents.

Even here in North Central Florida, rents are rising. In the area where I own my rental, there isn’t much to rent. What there is, is becoming more expensive. I am renting out my three bedroom, 1,900 square foot home with a fenced in yard and two car garage for $1,700 a month ($0.89 per square foot). That rent includes lawn maintenance and a washer/dryer.

A new apartment complex that is nearby recently began renting a three bedroom 1,000 square foot apartment for $1,600 a month ($1.60 per square foot), and that doesn’t include a garage or washer/dryer). They are fully rented with a waitlist at that price.

My current tenants have been living in my rental for two years without an increase. In that time, my costs for insurance, property tax, and lawn maintenance have increased by about $120 a month.

What this means is that I should be increasing my rent by at least $200 a month. I could probably get $2,000 a month. The tenants would have little choice- it isn’t like they could go anywhere else and find a better deal. My wife and I have discussed it, and we don’t want to do that. At the same time, we have a business to run. We decided to compromise and will be raising the rent to $1,800.

Inflation continues.

By Divemedic, ago

Remote employees

The website Payscale.com asks: “Should pay be adjusted for remote employees?” The real question isn’t whether it should, the question should be “Is pay adjusted for remote workers?” To which the answer is: “Yes, yes it is.”

This is just reality. When a business is hiring from a local pool of workers, the cost of living and tax climate of the local area dictates what amount of pay workers will be willing to accept. A person in Manhattan or Oahu, where the cost of living is high, will demand a higher salary than a person in Biloxi.

It isn’t just that, however. Labor is a product to be sold, and is thus subject to supply and demand, just like any other product. Expanding the labor pool from the local area to the entire nation increases the supply and thus the value of the labor.

One of the things that COVID and the lockdowns did to the business climate was to show businesses that expensive office space on Park Avenue in Manhattan wasn’t strictly necessary for success. Most office workers are capable of doing their jobs remotely. It won’t be long before businesses begin recruiting employees from places like Des Moines because they will soon realize that the employee pool there doesn’t need to be paid as much as the employees from Manhattan who are having to pay $3500 a month for a studio apartment after paying a quarter of their salary in state and local taxes. Places like Tulsa will soon host remote workers in the same way that India and the Philippines now host call centers.

This is why cities like Nashville and Clearwater Beach are seeing population booms as cities like Chicago and New York City see massive relocations.

The employment reality is changing.

By Divemedic, ago

Minimum Wage

Last November, the voters of Florida passed an amendment to the Florida state constitution that raised the minimum wage. As a result of that, the state minimum wage will be raised from $8.65 an hour to $10.00 an hour, effective at midnight tonight, October 1, 2021.

However, there is also a provision in that amendment restricting the amount of “credit” on the wages of tipped employees paid by employers who assume that some of their wages are paid in tips. The amendment sets that amount as what the FLSA allowed in 2003. In 2003, the allowable employer tip credit was $3.02 an hour.

What this means is that the minimum wage for tipped workers will increase from $5.44 to $6.98 an hour. Every restaurant in the state just saw their tipped labor costs rise by 28%. That will be passed on to the consumer, plus those workers will still expect tips.

Anyone not making minimum wage is probably just out of luck and won’t be getting a raise at all. I know I am not getting a raise.

So I recently had this discussion with some people while I explained my new tipping policy.

  • For bad service: 5%
  • For decent service: 10%
  • For great service: 15%

Next year, when the law gives you another 14% raise, to $7.98 an hour (plus tips) I will be cutting tips again. Probably to zero for bad service, 5% for decent, and 10% for great service. (Ask me what happens in 2023, when you get another 12.5% raise, to $8.98 an hour.)

The hate that I got back was legendary. I was told that if I can’t afford to tip, I shouldn’t eat out. It isn’t that I can’t afford it. It’s that I am receiving a service. Let’s list what service that is:

  1. The server writes down what food I want
  2. The server brings me a beverage and (sometimes) refills it. In the case of a cocktail, someone else who isn’t the server mixes that cocktail
  3. Someone else (not the server) provides the food and prepares it
  4. The server (sometimes, but other times it’s a food runner) carries that food to the table
  5. Someone (maybe the server, maybe the busser) cleans the table
  6. Someone else (not the server) washes the dishes

Anything else that is done is done (such as folding linens, setting the table, rolling silver) are done on the restaurant owner’s behalf, not mine. It’s a limited, minimum skill position.

Frankly, I am totally against tipping. I think restaurants should pay their own employees and not rely on customers to do it, but this is the system we are stuck with. So I get to decide what that service is worth, and to me it isn’t worth a quarter of the cost of my meal.

Here is the deal, skippy: You may have voted for a raise, but that law doesn’t apply to me. If your raise is causing me to pay more to dine out, then that additional cost will be deducted from your tips.

By Divemedic, ago

Who knew?

If everyone has more money, money is worth less. Who knew?

Let’s say that I gave every single person in the world a million dollars. We would all be rich, right? Of course not. How would I buy a sandwich? No one would be willing to sell me one for $5, because they don’t need $5. They have a million. Money would be so commonplace, it would be worthless.

This concept seems to escape those who push for a higher minimum wage, who are all now surprised that the massive government money giveaways and higher wages have reduced their purchasing power. What they don’t understand is that higher wages aren’t reduced by inflation, higher wages CAUSE inflation.

There will always be some who have more than others, because some are smarter, some work harder, some are just more fortunate. You can’t change that by handing out money, because money isn’t wealth.

By Divemedic, ago