There is no supply chain shortage, it’s central planning.
economics
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.
economics
McDonald’s price hike
There are huge price increases coming from the fast food chain in January, as the company is raising what it charges the franchises.
economics
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.
economics
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.
Tipping
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:
- The server writes down what food I want
- 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
- Someone else (not the server) provides the food and prepares it
- The server (sometimes, but other times it’s a food runner) carries that food to the table
- Someone (maybe the server, maybe the busser) cleans the table
- 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.
Communism
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.
Criminals
Rats
The rats are fleeing the sinking ship that is the US economy. The regional Presidents of the Fed, who affect the economy far more than POTUS does, are busy dumping US dollar denominated securities ahead of the Fed’s expected decision to taper off on buying bonds and securities. This policy saw the Fed propping up Wall Street by purchasing stocks, bonds, and securities using dollars that they were creating out of thin air. Worse, they were purchasing those items from their own personal accounts.
This policy of using money created out of thin air has artificially propped up stock prices for years. It has also apparently been lucrative for the officials at the Fed. Now that this policy is coming to an end, the market will take a hit.
Now the officials at the Fed have decided to come clean and get out, coincidentally at the same time the Fed is to stop buying. I have a friend who is an executive at a large New York bank. He is prohibited from doing this, and his stock purchases are watched closely by the SEC to prevent insider trading to the point where he doesn’t bother because the bureaucratic hoops are too onerous. The people in the government are apparently exempt. (Yes, I know the Fed is an NGO, but that is smoke and mirrors)
I only have a few assets still in the market. A 401K, and a couple of stocks that pay dividends at the end of the quarter. I am waiting until the dividends pay out, then those stocks are gone as well. I’ve held them for over a year, so I only pay the long term capital gains rate on the profits.
economics
401k in an inflationary period
My wife is a high earner with substantial amounts in a profit sharing acct and a 401 acct. If anyone has the words to convince her to at a minimum take some $ off the table I’d appreciate it. She deflects my words like reverting back to mean, things go down, etc.
If you have a 401k with employer matching, she might be correct. Let’s look at a 401kas an example. Her employer matches her contributions, up to 7% of her income. Let’s look at the math to see what happens if she deducts 7% from her pay:
Let’s say she has an income of $50k per year. That means a deduction of $3500 a year. Her employer matches that with another $3500, for a total of $7000 put into her 401k.
Assuming that the two of you have a taxable income between $81,050 and $172,750, your marginal tax rate is 22 percent. What this means is that In exchange for this $7000, her take home pay is only reduced by $2,730 because she doesn’t pay tax on that money, since it is deducted before income taxes are calculated.
So she ‘loses’ $2,730 in take home pay, but turns that into $7,000 in retirement savings, which translates into an instant 154% return on investment.
The larger her employer match, the better off she is. If her employer doesn’t have employer matching for the 401k, the advantage is much less, and inflationary periods really hurt you. In the example above, if there were no employer matching, that $2,730 becomes only $3,500, which lowers the return to 28%, which in this inflationary environment doesn’t help as much the inflation is hurting you.
In my case, once I have worked there for a year, my employer offers a 4% match. I plan on deducting that maximum 4% as soon as I am eligible.
EDIT: Comments have devolved into nonsensical gobbledygook. I normally leave them open, but I’ve had enough. Comments closed.
economics
Shortages
In a comment to a recent post on signs of the collapse, HomePlace asks:
When I see reports of shortages from what I believe are credible sources, I’ve been making sorties to see what I see locally. These trips in the last several weeks have been limited to grocery and home improvement stores. I haven’t seen evidence yet here in the midwest of shortages. Are shortages regional at this point? Thoughts, theories?
There are shortages, but they are being stealthy about it. My local grocery store isn’t doing anything so obvious as to leave shelves bare. A great example:
The canned soup section was most of one side of an entire aisle just before COVID began. Now the selection is much smaller, and the soup section has shrunk down to less than half the size that it was. The produce doesn’t look as good as it used to- more blemishes, more wilting on the leafy greens, that sort of thing. There are other signs, let’s take a look: