In a story that just reinforces our commentary on Social Unrest and Global States of Combustibility, the State of Colorado is dropping their minimum wage by 3 cents:
Colorado’s minimum wage will drop slightly in the new year — the first decrease in any state’s minimum wage since the federal minimum was adopted in 1938.
Colorado’s wage is falling 3 cents an hour, from $7.28 to the federal level of $7.25. That’s because Colorado is one of 10 states that tie the state minimum wage to inflation. The goal is to protect low-wage workers from having unchanged paychecks as the cost of living goes up.
But Colorado’s provision also allows wage declines, and the state’s consumer price index fell 0.6 percent last year, so the minimum wage is going down.
The Consumer Price Index is the big scam, as pointed out by Karl Denninger over at Market Ticker:
So now we turn to an intentionally-cooked number that excludes the largest single component of every person’s spending – housing – from influencing its reading – and then claim that “CPI rose”?
That’s ridiculous.
While we are only talking about 3 cents per hour here, imagine yourself as a minimum wage worker. You’re already making just enough money to buy food and maybe pay your rent, and you may be collecting some social provisions like food stamps. Now, the government comes in with a wage adjustment based on a bogus inflation number. The 3 cents per hour is not going to kill you, but what it does do is really get your blood boiling. You start losing confidence in your government’s ability to provide salary equality in the workplace, justified or not, and you get upset at your employer if he actually does lower that wage, as if they aren’t making enough money as it is. It’s these types of actions that lead people to the breaking point.
It’s more psychological than anything else.
Multiply this by millions of people with lowered wages, lost jobs, lost houses, repo’d cars and you have the potential for serious civil unrest at some point in the future.
From Social Unrest and Global States of Combustibility:
“poverty alone does not spark unrest—exaggerated income inequalities, poor governance, lack of social provision and ethnic tensions are all elements of the brew that foments unrest.”
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While some people may be losing a measly 3 cents, others are gaining .25 cents.
http://www.norwichbulletin.com/news/business/x980515340/Connecticut-minimum-wage-workers-set-to-receive-raises-Friday
Jon, thanks for the link. I wasn’t aware of this one. It looks like the folks up in CT will not be protesting!
The minimum wage is a bogus wage anyways. Its just another way the US Gov. screws the common man while making him think he’s helping him. There are jobs that are not worth minimum wage. There are jobs worth a lot more than minimum wage. Minimum wage is wealth pre-distribution because what it does its pulls up the wages of jobs that don’t deserve minimum and pulls down many jobs that should exceed it. In this way it “mediocreates” the low end wages robbing both businesses and higher wage earners while unjustly rewarding low end wage earners. More disgusting communist/fascist/socialist human farm examples. For more information about human farm management techniques, see http://freedomainradio.com
NetRanger, I agree for the most part with what you’ve said. However, by saying there are some jobs that are not worth minimum wage, what exactly does that mean? If a minimum wage is intended to pay someone for his/her work in order to live the most basic, frugal life, then how can it be fair to pay someone less than that? Do they not deserve the most basic lifestyle? I guess it depends on what you qualify as minimum wage.
I have a hard time wrapping my head around this, obviously.
NetRanger is spot on.Â
There exist many jobs that do not require the least bit of knowledge, training, or skill. Ideally, one is paid what the job is worth, not a “living wage.” Deserve a certain lifestyle? Time to do some libertarian and/or capitalist reading, Chris.Â
All prices on commodities should be set by the market, not by the man. Labor is not excluded.
Interesting website, I like what you’ve done. Sorry my first comment is a negative one (but ain’t that human nature?).
Your story on CO min wage dropping down to Fed levels requires the State CPI to DECLINE (which it did).
You then quote KD (who is in the deflationist camp) on how the CPI isn’t accurate (I also think CPI is totally bogus… just for different reasons) because it has been INCREASING and he believes we are experiencing deflation that just isn’t reflected in the numbers because of how its computed (excludes falling home prices). So in his mind (as I understand it from the blog in which the quote was taken) the CO CPI should have fallen much further, thus it would have been MORE justified to lower the CO min wage down to the Fed level, not less.
KD is a bad example of CPI criticism to use in this particular case. In fact, after reading his blog and posting on his forum for about a year, have concluded that KD is a bit miopic for my liking. Enough said on that topic.
There are many people whose income is indexed by the CPI. These households will often have 2-3% adjustments based on this bogus figure. In that perspective, a $0.03 on $7.28 rise or fall seems mild indeed (less than half of a percent).
The best advice I can give people is to not look to “experts” or your government for whether your money is gaining or losing purchasing power. Each individual has unique buying habits and financial situations. Look at what you (not the rest of the people who regularly make BAD purchasing decisions) spend the majority of your income on and determine if YOUR costs are going down or up.
If you believe that your dollars are gaining in value, then you should save in dollars (unless you feel this is a short term dollar rally leading to an eventual collapse).
If you believe that your dollars are losing value (ie purchasing power) then you should trade your dollars for other things that you feel will retain their value over time.
And for those of you who are not saving anything… well you’ve got other problems to worry about 🙂
Thanks again for such an interesting site, I look forward to browsing more of its content.
JT, thanks for the comments. Your points regarding CPI and Karl Denninger make sense – as Denninger is a deflationist for the most part, at least for now, and he expects price to continue to fall in the future (in real terms).
The point I was trying to make in this article is that the CPI is a bogus number and is not a reliable tool to help us determine the true rate of inflation.
I think the following advice you provide is great:
In my case, for example, I rent, not own, and I see deflation in housing prices, and because I would like to buy a home some time in the next few years when I feel the market is closer to a ‘bottom’, I should be saving cash (USD) to make the down payment. However, while i see deflation in housing, I also see depreciation in the dollar, so while the price of a home may be dropping in real terms, it may very well go UP in nominal terms!
Knowing this (or, better said, speculating on this trend) I would prefer another asset class to save in that i expect to rise in buying power vs. the dollar, for example precious metals, which, when converted to dollars later, may give me more dollars, and thus, more purchasing power.
I also see the price of food rising, and with the possibility of a depriciating dollar, I am purchasing MORE food now, not less. Specifically, I am looking at goods like rice, beans, canned goods, dry goods, and buying a little bit more of these for the pantry than I have before. In this case, I am saving food instead of dollars.
There are very basic examples I took from your statement to demonstrate the sometimes complex relationships between assets. Some go down, others go up. By becoming informed, at least we can try to make better judgements on which assets (cash, precious metals, stocks, commodities, etc.) are worth more than others and what their longer trend line is.
Saving doesn’t necessarily have to be denominated in dollars or stocks, but can include a variety of different, non-traditional asset classes, IMHO.
Great post. Thanks for contributing your thoughts on this one.