Inflation Is Here, Get Used To It

I stopped to grab a burger in Marin County today and was kind of shocked to see the following posted on the front door.

 

Apr24_In and Out

 

That is a pretty steep starting wage for nonskilled labor, and $5.00 more than the California minimum wage.

In-N-Out does pay their employees well.  The private  burger chain pays store managers an average yearly salary of more than $160,000 with no college degree or previous management experience required.   Facebook engineers soon to be flipping burgers.

Nonbinding

It is clear the minimum wage in California is nonbinding — that is irrelevant — and all the bluster about raising it would cause unemployment is just that, bluster.

During softer economic times, when the minimum wage is binding, the story changes.  Not now, however.

Passing It On

Nevertheless,  it did feel prices have risen for a burger, fries, and soda since the last time I was in an In-N-Out.  I think it cost me around $8.50 today.

Does anyone remember the days of a $.35 Big Mac?

Real Minimum Wage Higher 

Here is what is interesting about that $16.00 per hour offer.

In 1980, the minimum wage was $3.10 per hour, which equates to $9.94 in today’s inflation-adjusted dollars.    The minimum wage is $11.00 in California, so a slight increase in the real wage.

If In-N-Out is forced to pay almost 50 percent above that to attract decent burger flippers and the company can pass it on in higher prices,  inflation cometh is here, folks.

Other firms will have to pay higher wages to keep and attract their workers if In-N-Out is going to start bidding up the labor market.

We are happy for the entry-level workers, high school, and college kids that now have a higher return on their labor.   However, that is only half the story.

Many of the lower paid workers are not entry-level.

Some,  reemployed from much higher paying jobs, some are seniors who cannot afford retirement.

We suspect, though wages are raging at the lower end,  companies are laying off older expensive workers and hiring younger cheaper workers to keep labor costs in check, and is one reason why the official wage numbers are not spiking.   We are not certain on this and have to further research it.

Wealth Gap

We haven’t even discussed the pornographic income and wealth gaps,  and will leave that for another day.

But just imagine, if you will,  the inflationary pressures the economy would be experiencing if a decent chunk of the income and wealth generated over the past ten years actually had found its way to those with higher propensities to consume?

Wealth Without Production = Inflation 

If wealth without work is one of Gandhi’s  seven deadly sins, paper wealth without production that is consumed is surely inflationary.  Go no further than than the real estate market to confirm this thesis.

How ironic it is the global central banks that have printed trillions over the last decade to generate the asset inflation to stimulate demand to keep the global economy afloat have not suffered the inflationary consequences of their actions.  At least, not yet.

The rich have become richer and spend proportionally less, and the poor have become poorer and cannot spend more.

Inflation

Rents and housing prices are skyrocketing, though maybe not in Manhattan.

Food prices are rising.

Gas prices are spiking.

My Verizon bill suddenly spiked $150 per month with new surcharges, so off to Sprint.

Moreover, there is no labor to rebuild the housing market in our fire-ravaged county.

So, of course, there is no inflation.

And how the heck do you correctly measure inflation with dynamic pricing anyway?

Do you have any question the methodology the BLS will or is using?

The Disneyland resort raised prices over the weekend, several months before the park plans to unveil a remake of its boardwalk-themed area at the California Adventure Park.

The prices rose the highest for annual pass holders, up as much as 18%. Daily tickets rose nearly 9%. By comparison, the consumer price index rose 2.5% in the 12 months ending January 2017.

Daily tickets for the Anaheim theme parks vary in price, depending on daily demand.A one-day, one-park adult ticket for Disneyland or California Adventure remains $97 for low-demand days, such as weekdays in May.

A ticket for regular-demand days is $117, up from $110. The price of a ticket on peak-demand days is $135, up from $124.  – LA Times,  Feb 11, 2018

Spiking Bond Yields

Why would bond traders ever bid the 10-year over 3 percent?

Sometimes the crowded trades are right.   Higher deficits,  the Fed now a yuuge net Treasury seller, and foreign buyers on strike, and then higher inflation.

Flatter yield curve?

Good luck on that one unless the stock market suffers a 1987-like crash.

This entry was posted in Equities, Food Prices, Inflation/Deflation, Uncategorized and tagged , . Bookmark the permalink.

55 Responses to Inflation Is Here, Get Used To It

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  16. John Fender says:

    With respect to the anecdotal story which begins the story, it is nonsense. Inflation is ever and always a monetary phenomena. It is a case of too many debased dollars chasing the supply of goods and services. It results from the government creating too much money. Sellers lose confidence in the future value of the paper they are receiving in exchange for their valuable goods and services and demand more of it. This often sets off an upward spiral.

    High wage offerings in response to a tight labor market are just the labor market at work. There are apparently too many employers seeking the services of not enough unskilled laborers so the in-balance between supply (laborers) and demand (employers) results in rising wages. This is not inflation. It is just a market adjusting to a new supply and demand equilibrium. Marin County is one of the most expensive places in America to live. $16 per hour is probably a starvation wage and it is no small surprise that there are not many takers.

    The rest of the story makes more sense. The Central Banks have badly debased the currency and inflation has long been baked into the cake. When the bankers were trying to “reinflate the bubble” that was basically the same thing as saying they were deliberately trying create inflation.

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  26. Meremortal says:

    What a silly article. Companies can pay what they please. If a company’s product is too expensive, don’t buy it.

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  36. brmr says:

    Small Correction-Mahatma Gandhi it’s spelled as ” GANDHI” not ‘Ghandi’ which means Dirty in Hindi

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