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How a $15 Minimum Wage Will Cause Maximum Damage

5/22/2015

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There has been a lot in the news lately about the minimum wage being raised to $15 in many cities across the nation. In addition to Seattle, cities like Los Angeles and San Francisco have also taken the plunge.  There are viewpoints out there that say absolutely nothing bad will happen and there are those that state these increases will cause food costs at McDonalds and others to soar. I am here to tell you that both are wrong!  If nothing bad was going to happen, the minimum wage would have been raised years ago. Likewise, If McDonalds and others could charge more for their product.....they would!  
Ok.....I'll take the bait you say. What will happen? The answer in all of its glory is simple, the labor market will shrink. That is companies will refuse, or flat out be unable, to pay the new rate for labor.  But don't they need someone to make their hamburgers? Of course they do....but while Rosie takes potty breaks, Sparky does not.  They will decide instead to use automation to replace that labor. A recent study shows that employers will use automation when said machines are 15% cheaper than human labor. 

Therefore if we suddenly double the minimum wage to $15 from $7.50, this will give business no time to adjust and force the change to ore automation. I use the example of an aging paint company needing to automate as a way to keep prices competitive in my economics class. If the company does not modernize they will but forced to close down. Yes, buying the machines means less workers will be required, but that is how it gos.
In the end what we want is as many jobs available as possible. If entry level workers are not able to find jobs, they will become a drain on society later. Look at Greece, where the youth unemployment rate is over 50%! Or other cities/states that have high unemployment among the young adult population like Detroit/Michigan. We also lament over the fact that many recent college graduates are unable to afford to afford an apartment in the cities they live in or even have a hard time finding work.  This is due, in no small part, to the fact that they have little to no experience before and/or during their university years.

We unfortunately love immediate gratification in this country. As a negative, when the reverse happens....we do not notice.  That is, when we implement a plan if we do not see negatives right away, we consider it to be a positive plan. The effect of raising wages to $15 an hour will be that while some have a better paying job; in 2-3 years many will be out of work all together.  Think we pay a lot for Welfare benefits now? Just wait and see what happens.
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Having "THE TALK" With Your Children

5/16/2015

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As a Teacher, Coach and Financial Planner I have been around parents of all different backgrounds and walks of life. There is one universal topic that they all dread talking to their children about. In fact, many just flat out refuse to talk about it at all. Can you believe this? 

Here is a sample of the responses I usually get when I suggest that they NEED to have this discussion with their son or daughter.  Do I have to?   Another one I often hear is "That is a really uncomfortable subject to talk about".  However,  my all time favorite is "my parents never spoke to me about it and I turned out ok".  
You have obviously figured out the subject to which I am referring. It is that age old discussion about...that's right you guessed it.......MONEY.  What? I thought we were talking about........? Believe it or not more parents are comfortable talking about the birds and the bees with their children then are comfortable speaking to them about managing their money and what a big part of their lives it is and will become.

I am currently writing a book on this topic that I hope to have out in the fall of 2015. But until then, maybe I can give you some food for thought as to why giving your children at least a basic education on how to handle and deal with money is important.
THINGS TO CONSIDER
  • HR professionals indicated financial worries continue to contribute to employee stress on the job. Source: MetLife
  • 83% of companies surveyed said that personal financial challenges had a large impact or some impact on overall employee performance.  Source: Society for Human Resource Management
  • In 2012, 56% of people in the US had no ‘rainy day funds’. Source: FINRA Investor Education Foundation
Why is This Such a Big Deal Anyway?

  • There’s a $6.6 trillion gap between the pensions and retirement savings of U.S. households and what they should have to maintain their living standards in retirement – and the gap is growing.  Source: Retirement Income Deficit report by Retirement USA
  • 46% of Americans have less than $10,000 saved for retirement.  Source: Employment Benefit Research Institute





OK... but really its not like it will kill them


You have seen the push in this country to encourage everyone to go to college. If those students had even a rudimentary education in personal finance and economics, they might decide to stay home instead.  

And sometimes the best way to make money....is not to spend it in the first place.

Keep tuned to this website for my book coming out in early Fall 2015 :)


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