Thursday 26 May 2016

Minimum wage luddites?

When I was a child I heard about the Luddites. The were a group of angry workers who smashed machines because machines 'destroyed jobs'. How ridiculous, machines increase productivity. Yet today as machines replace min wage workers, these same complaints are raised, even on the likes of zerohedge.

Its certainly true that other jobs will need to be created for these people to find work, which comes back to my Trumponomics infrastructure call.

I once asked a Finnish friend how Finnish companies worked with the high labour costs. His simple answer was you need high value businesses and high productivity. Ie pushing up a minimum wage forces up productivity and forces businesses to invest in value adding investments.

Max Keiser used to talk about the 'gulag debt serfdom' of workers in the current economic model. Pushing up min wages to the point where you can live off them is a key driver of my view that from here we have inflation and that from an economic sectoral balance perspective the cycle tilts in favour of labour and away from capital and financial instruments.

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