The glaring irony in the minimum wage debate is that it’s not inflation or rising labor costs that threaten corporate profits, but rather, stagnant consumer demand:
McDonald’s Corp. said its profit slipped in the second quarter as sales in the U.S. continued to flag.
The world’s biggest hamburger chain has been struggling to boost sales in its flagship market amid intensifying competition, changing eating habits and the persistent financial struggles of its lower-income customers.
In the U.S., sales at established locations fell 1.5 percent for the period fewer customers came into its restaurants. The company, based in Oak Brook, Illinois, hasn’t managed to raise the figure since October.
Real median wages declined 11 percent between 2002 and 2012, leaving low and middle income consumers with little discretionary income. Not even enough to spend on luxuries like McDonald’s.
It is lagging consumer demand that is holding back the US economy, and lagging demand is a direct result of lagging wages. Perhaps that’s why the 13 states that raised their minimum wage on January 1, are the 13 states with the fastest job growth since?
How do they pronounce ‘Ronald McDonald’ in China. And don’t go calling me a racist —— because that Polack Tom Brokaw would have just as much trouble.
Speaking of Randian economic orthodoxy, it has always interested me that the very same people who extol ‘Atlas Shrugged’ for its message about economic freedom and unfettered capitalism do not draw a parallel between ‘Reardon Metal’ and its developer’s being stifled by the other big steel producers and the big oil companies of today and their stifling of alternate forms of energy production.
Instead, today’s Randians take the part of the big oil companies. It grows curiouser and curiouser — to quote the king of Siam — or was it Alice in Wonderland
http://online.wsj.com/articles.....1404762501
The comments are insightful in their polarization of thought. It sure brings out the screaming Randians. (That would be a good band name “The Screaming Randians”. )
“Dr. Summers summarizes our economic situation very well, which is basically that technology continues to improve productivity in every sector resulting in a continuing reduction in the need to employ people.”
“…resulting in a continuing reduction in the need to employ people.”
I appreciate that technology might have something to do with that, but I think that a policy of allowing multinational corporations headquartered in the U.S. to have things produced overseas by people who are little better than slaves and then re-import them without stiff tariffs is the actual culprit in the loss of jobs.
You’d think that might occur to a smart guy like “Dr.” Summers.
He must have gotten his doctorate from the same school as Hunter Thompson.
Well, another thing the Golden Starches might consider is the fact that they make the absolute shittiest example of a “food” in an already awful restaurant type.
Fast food isn’t a new idea, but they built their business model on convincing people to eat fucking cardboard and petroleum byproducts, with a goddamn plastic clown.
Well…I know you wish this opinion piece to be true, but that doesn’t make it so. I suggest you actually look at the financial statements, and possibly read a transcript of the investor call.
Plenty of evidence regarding cost inflation and margin pressure do to higher labor costs. Higher minimum wage was presented specifically as a margin pressure. That means less profit moving forward, which will mean less growth, fewer jobs etc etc etc..
Even RR “resident HA declared capitalist” cant deny the results.
” I suggest you actually look at the financial statements, and possibly read a transcript of the investor call.”
Right. Like that’s what you did. Why not demystify your little buzzword-laden tome and just give us the wingnut website you got this stuff from.
@ 6
Or it could also be the fact that they are trying to sell the worst possible product in an intensely over-saturated market.
One things Corporation boards are good at, is spinning away their own incompetence and waste to the shareholders.
So racist headless lucy,
You’ve never listened to an investor call? The company Puddy works for tells it’s employees to listen to the call every quarter. Then for the dullards like you who are “lost” in the buzzword-laden call they hold a town meeting.
Meanwhile from Marketwatch… http://www.marketwatch.com/sto.....2014-07-21
There you go racist lucy… very few buzzwords!
@6 Oh, horseshit. Goldy got it right. The economy is suffering from weak aggregate demand. And that, in turn, is the result of decades of wage erosion. The U.S. has a consumer-based economy, and it doesn’t take a rocket scientist to figure out that when people earn less money, they spend less.
Of course, conservative ideologues dispute this. Read any investing blog and you’ll find a plethora of comments blaming the sluggish recovery on weak investment and a shortage of capital. To remedy this, they want to cut taxes on business profits and investment returns.
Investment is weak, alright, but not because of a capital shortage. This is nonsense. The world is drowning in idle capital. Corporations are cash-rich, and they’re using their cash hoards to (a) buy back stock, (b) raise dividends, and (c) buy other companies because they can’t productively reinvest that money in their own businesses. Expanding a production line doesn’t make money if there’s no buyers for the goods coming off that line. A warehouse full of unsold inventory doesn’t add to the bottom line.
The last thing our economy needs is more perks for the owners of capital. Do you think our monetary authorities would have held the interest rate on savings at zero for five years if we had a shortage of savings? What our economy needs, and lacks, is consumer purchasing power. And the way you get that is by reshoring jobs, hiring more U.S. workers, making more stuff in the USA, and raising wages. If American businesses don’t do those things, consumer purchasing power will never recover, and our economy will remain stagnant our sluggish for as far ahead as the eye can see.
Conservatives love to rant about debt. I’m against debt, too, which is why I don’t have any debt. But that’s another story, for another time. Take a look at this eye-popping chart:
http://research.stlouisfed.org/fred2/graph/?g=9gr
It shows aggregate U.S. debt as a percentage of GDP since 1950. This statistic was a relatively flat line until 1980, then there occurred a debt explosion that exactly coincided with the advent of Reaganomics. If you believe, as conservatives say they do, that debt is “bad” then this chart is all you need to discredit conservative whack-o-nomics.
@6 “Even RR “resident HA declared capitalist” cant deny the results.”
You don’t comprehend much, do you? The NYSE closing price for McDonalds stock has plunged from $100.30 last Tuesday to $96.27 today. That’s a 4% drop in one week! MCD pays an annual dividend of $3.24. This decline boosts the current yield from 3.2% to 3.36% — and a dividend increase is due next quarter, which likely will kick the yield up to 3.5%. Know what I did about this? I mailed a check to my broker so I can buy more McDonald’s stock!
Investors are ditching MCD because the company has been hit with the double whammy of weak U.S. sales and a food scandal in China. Those investors can’t see past the end of their nose. These things will blow over, and when they do, the morons who sell their McDonalds stock to me for $94 or $95 will buy it back for $105 or $110. And — trust me on this — I’ll take their money from them.
Full Disclosure: I’m only a McDonalds stockholder, not a McDonalds customer. I don’t eat their crappy cardboard food. The only thing I want from McDonalds is dividends and capital gains. If you buy their overcooked hamburgers, overpriced fries, and overheated coffee, then thank you for dining at the Golden Arches. I appreciate your business!
Btw, I never listen to investor calls. Why would I waste my time listening to a sales pitch for a stock I already own? The only people listenimg to these presentations are professional analysts who get paid to listen to them. Then they write drivel and the next day the stock pops or tanks. It’s nothing more than entertainment for the masses.
I wish more fast food chains would get caught selling rotten meat to their Chinese customers, so I can buy their stock cheap.
Gold is the currency of kings. Silver is the currency of the merchant class, and debt is the currency of slaves.
Why would anybody with any productive work to do listen to an investor call?
Because FlubScout, it’s an hour the company feels is important to their employees to understand what management is saying as their view of the next quarter half year and full year outlook. So the employee can hear what they say outside the company vs. what is said inside the company.
Seems you never really worked in corporate America for a living!
@17 I will concede that a good reason for listening to an investor call is because your supervisor makes you — if you’re unfortunate enough to be an employee and have a supervisor telling you what to do with your time. As for me, I’m going to sleep in tomorrow, as I always do.
@17 “Seems you never really worked in corporate America for a living!”
And thank God for that!
Working is un-American. That’s why we give all our jobs to foreigners. Real capitalists don’t work. We don’t have to.
@17 I wasn’t even thinking about employees. Hell, when I want to speak with my employees I do so. No need to put on some off-broadway marketing show for “investors” to communicate with our team.
re 9 — GFY — I’ll never apologize to the likes of you ever again for anything — you race-baiting, name calling piece of white trash.
…you race-baiting, name calling piece of white trash.
Lucy, why was it necessary to use the adjective ‘white’?
re 23: Lily white would have been inaccurate. But mainly because the Puddwhacker a short time ago described the late Sen. Edward Kennedy as being white trash. So, turnabout is fair play.
McDonalds stock skidded under $96 today, closing at $95.35. I’m waiting to see how much lower it goes before I buy more. Coca Cola is another iconic brand-name company paying a dividend in the 3% – 3.5% range whose stock is languishing. Both of these companies have business issues, of course — namely, stagnant sales — which is why their stocks are falling while the stock market marches higher. But the folks who run these companies are pretty smart, and will turn things around, and meanwhile the best time to buy stocks is when they’re out of favor and cheap.