Wednesday, July 17, 2013

Minimum Wage in historical terms. Has it or has it not kept up with inflation? I show you the numbers. You decide...

It is always a dicey proposition to use the Bureau of Labor Statistics inflation calculator.  One can question its accuracy and value as a tool in comparing one time period to another. I get that. But it seems it is the best we have AND it is used to provide justification for an increase in the minimum wage.

The issue centers around the lost purchasing power of the minimum wage as inflation erodes its value over time.

Using the BLS inflation calculator, I entered the actual nominal dollar value of the minimum wage in the year it was changed, going back to 1981, and showed what the purchasing power of that wage is in today's dollars (I duplicated 1981 and 1989 because of the long time span in between changes and to illustrate the drastic reduction in headline inflation had on the purchasing power of the MW).

Example: in 1981 (slide "1") the MW was $3.35. In today's dollars that would be equivalent to $8.61.  So, in order to have the same purchasing power as a MW worker in 1981 a MW worker today would have to earn $8.61 (highlighted in yellow).  The actual MW today is $7.25.  This suggests that the MW today is too LOW by 19%!

But wait a minute.  If we choose to look at 1989 the minimum wage (slide "2") is still $3.35 but that is equivalent to $6.31 in today's dollars. This suggests the MW should be 13% LESS than $7.25!!

Inflation in 1980 was about 14%. In 1989 it was about 4%. Big difference!

See how deceptive this can be? Depending on which year you choose to be your base year can  distort the overall picture and present support or non-support for your position.

The long term average of ALL the adjusted numbers highlighted in yellow is $7.26. The MW is $7.25.

For the long(er) term that is about right.

Having said all that, the minimum wage probably needs to be raised. By how much I don't know.  But using more realistic data and analysis would be a start.

Monday, July 15, 2013

Do hospitals take the weekend off? If you have a newborn it might be true. See here why...

Saw this HERE (read the whole article for more detail than I am providing).

This study looks at what happens to newborns admitted to a hospital under the non-emergency "failure to thrive" category.  The baby experienced a rapid weight loss prior to admission and the parents brought them to the hospital.  Not an emergency, but certainly understandable from the parents perspective.

The graph below shows the cost (left axis) and the length of stay (right axis)

It appears the hospital essentially warehouses the infants until the weekend is over and regular staff takes over.  This is costly and does not lead to improved health comes, but longer stays and higher costs.

Try telling that to parents! Seems like more rigorous pre-screening could eliminate this but I am just guessing the hospital accommodates and charges (1) the insurance company or (2) the government for the space.

Part of the problem in controlling medical care costs right there...

Source: The Incidental Economist

Why "Price Gouging" is desirable and should be re-branded "Sustainable Pricing". A name is everything!

Here is a very nice summation of why "price gouging" should not be discouraged by the government imposed price ceilings (a price, by law, is not allowed to go above a certain level).  Businesses, for the most part, are not going to raise prices in normal times above the market price because competition will restrain them.

 However, if people expect those prices to go up considerably in the event of a disaster created shortage then the anticipation of "gouging" can actually have a positive affect.

  1. Without price increases, many people buy extra supplies “just in case”, regardless of what they have tucked away at home already. If too many people do this, supplies run out and people who need them much more urgently miss out. With price increases, people who don’t really need supplies will leave them on the shelf, not out of the goodness of their heart, but out of concern for their wallet.
  2. Price increases encourage conservation of resources people already have. Those who can most easily adjust their consumption will do so, leaving resources free for those who can’t. People might, for example, use their cars more sparingly to avoid having to fill up while prices are inflated.
  3. The ability to raise prices encourages businesses to stock excess reserves. Space in stores and warehouses is limited and products (even water) go off over time. If they’re not allowed to raise prices on those items, they’ll use that limited space for other products that have higher profit margins the rest of the time.
  4. Allowing price gouging actually encourages citizens to be more prepared for disasters. Do you have enough food and water and other essentials stored at home for you and your family if disaster strikes your town? Or do you just assume you’ll be able to go to the store and buy what you need when something goes wrong? Knowing that prices might double, triple, or more during a disaster is a pretty big incentive to go and stock up now instead of waiting — even for that person who lives right next door to the store!
  5. Finally, rising prices attract more resources from outside of the disaster area, where prices are lower. Nearby businesses, small or large, can easily profit by shipping essential supplies in and selling them at a premium. Without the ability to charge that premium, they would actually end up losing money through shipping costs, overtime wages, and inherent risks of operating is a disaster area. Without the profit motive, many don’t take the risk.

I also find the new name branding he gives "Price Gouging"---he calls it "Sustainable Pricing", a more accurate description:
“Price gouging” is a derogatory term meant to belittle. A more accurate description would be “sustainable pricing” — pricing that ensures supplies are sustainable to meet the demand of future customers.
Hope it catches on!

Sunday, July 14, 2013

Dorothy may not be in Kansas anymore, but our wheat supply is... and it is threatened. See here why..

Here are 2 maps showing where wheat is grown (on left) and where drought is occurring in the US (on right).  I got both of these from The Big Picture Agriculture blog and put the side by side with some minor editing.

Kansas grows 22% of the US wheat crop AND it is experiencing "extreme" to "exceptional" drought conditions.  Both of these are within the yellow circles.

Depending of how much of the harvest is salvaged plus harvests in wheat growing locales throughout the world, the price of wheat may increase.  As it moves through the supply chain as an input the price of finished goods made from wheat might increase in price as well.

Dorothy, please tap your heels together not so you can return to Kansas, but so it can rain.  That is needed much more...

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