Ekonomisk analytiker: Löneökningar leder till nedskärningar | NTD NYHETER

Antonio Graceffo, thank you so much for joining us. Great to be back on the show. Good to see you, Tiffany. So with this potential autoworkers strike looming, there's a lot of focus on unions calling for wage hikes to begin. What are the short and long-term impacts of that? Well, the issue with any kind of a wage hike is that you have a market rate of pay. You have a market salary that's paid by all the other employers. And then we have an equilibrium of people that want to work at that wage and companies that are willing to pay them. When you have strikes and you have other legislation that forces the wage to go up, all that means is job cuts because the money has to come from somewhere. The average corporate profits are about 6 to 8 percent. So if you start trying to increase the wage by 20 percent or there's people calling for a doubling of the minimum wage, well, that money has to come from somewhere. They're going to wind up firing people. They're going to wind up cutting hours. And in the long run, it's going to do more damage than good. And on the note of minimum wage, what's the root issue here when unions call for that? Well, as far as minimum wage goes, the labor cost represents about 30 to 40 percent of the cost for most companies like retail companies, fast food, that sort of thing. If you double the labor cost, now they need about a 30 percent increase in rice in order to make the same profit they were making before. And if they increase the price by 30 percent, well, that hurts. Everyone hurts all the consumers. Also, it means that people will buy fewer of that item or use that service less frequently, shop at that place less frequently. Some businesses will be driven out of business because of tremendous wage hikes like that. And actually, Antonio, you recently wrote an op ed laying out how President Biden has made a point since taking office of raising the federal minimum wage to 15 dollars an hour. With the federal government, one of the problems that the federal government is not subject to the market because federal government doesn't have to earn a profit and federal government will get reelected based on a lot of factors other than economic performance of their investments. So he he might order a doubling of the federal minimum wage or the minimum wage for federal workers rather. And then a year from now, he would say we we successfully increased the wage of 100 percent of federal workers. Therefore, we are successful. Right. Well, it's a law, of course. Of course, it raised 100 percent of these people's wage. But did it help anybody? Well, where does the federal government get its money that it pays these wages out of? It gets it from taxes. So that means one of two things. Either the government has to raise taxes or the government has to take money away from other services, which might be things that you want or need and use that to pay these government workers a higher wage. And now President Biden on Labor Day actually said the U.S. is no longer exporting jobs under his watch. You know that that's a bit misleading. So why is that? It's a bit misleading for a number of reasons. One is that when we look at unemployment, first of all, unemployment is higher now than it was under Trump. But there's another figure, which is workforce participation. And this means the people that have just given up and are no longer looking for work or that chose instead of looking for work, they went on social services. That number has increased is much higher under Biden than it was under Trump. So technically, those people should be added to the unemployment rolls or they represent people who don't have jobs under Biden. So we do have higher unemployment under Biden, but we have a lower workforce participation rate under Biden. Another thing is that if a company is going to build a new call center or they're going to build a new factory and they go, well, let's do a feasibility, should we put it in New Jersey? And then they go, oh, you know what? With all the regulations and wage hikes in the United States, it's too expensive to open there. So we're going to move our we're going to put our new factory in India. We're going to generate a thousand new jobs in India. OK, that does not count towards unemployment because those jobs never existed in the United States. And Biden is not counting those jobs. The Biden administration has a lot of regulations. For example, we have green regulations. We have environmental regulations. Of course, we have safety and things like this. And while these things may seem good on the surface, the problem is that each one of those creates cost and they encourage companies to move overseas where the regulation is less and the cost will be less. When you buy products from China, when you buy products from India, why are they cheaper? They are cheaper not just because of the difference in wage, but also because of the difference in the regulation and, of course, the taxes. And it's just cheaper to operate a company over there because you don't have to pay these kind of restrictions. And so given that we are seeing a lot of notes on, say, DEI, ESG, all these different ones, as you mentioned, regulation, what would be the solution? And I think you mentioned leaving it to the market. How would that play out? Yeah, the solution to everything is just leave it to the market. If you leave it to the market, the best people will get hired. The companies want to maximize profit. They will make decisions that maximize their profit. When people get angry at corporations, all those corporations care about is profit. And I say, yes, and thank goodness, because that means they will always make the decision that maximizes profit. And that means if you're the best candidate, they will hire you regardless of gender, race, whatever it is. But instead, companies wind up in situations where if they can't, maybe they're short a worker and they have to find somebody that meets a particular criteria, and they're turning down qualified people. So that also increases cost. Every regulation increases cost. If we leave it to the market, companies will do the profit maximizing activity. This will create the most jobs. And we all work for these companies. That's the other thing. Everybody hates the big way. I hate the big corporate. You work for the big corporate. You're dependent on them for your income. You don't want them to fail. Indeed. Well, Antonio Graceffo, thank you so much for your time. Thank you, Tiffany.