Hourly Wages Tumble In First Quarter. Blame ObamaCare and the Fed?

For those that are paying attention, which includes those that follow Asylum Watch, it’s not surprising that the economy and the jobs market are not doing nearly as well as the President and the MSM would like you to believe. What is worrisome, of course, is that so few people are paying attention and the MSM seems to want to keep it that way. The title to a recent post at Mish’s Global Economic Trend Analysis should be the headline in every major newspaper and the lead story on all TV news outlets. But it is not.

First Quarter Hourly Compensation Plunges 3.8%, Most on Record; Manufacturing Hourly Compensation Plunges 6.9%; What’s Going On?

Now Mish didn’t make these numbers up. they come from this Bureau of Labor Statistics news release. This hasn’t happened since 1947. But, apparently the MSM didn’t find it news worthy. Or is it possible that journalist today are just as uninformed as the general public? I don’t know if journalist today are just plain stupid or they are so in the tank for their liberal president that they take everything the administration says as gospel. Along with all the scandals that are occupying our Congress critters, this fall in wage should be at the top of their agenda, but it’s not. The President should be holding a press conference about this and explaining it to the public. That’s not going t happen because the President doesn’t know anything, as he has often admitted, until he hears it on the news. But I’m getting off topic.

So, what is behind this decline in hourly wages? Mish has a theory that it has to do with two things: ObamaCare and the Fed’s Zero Interest Rate Policy (ZIRP).

The Fed believes that holding interest rates low fosters business growth, hiring, and bank lending?

So why isn’t that happening?  …. by holding interest rates low, the Fed encourages not hiring, but rather corporate investment in software and hardware solutions that enable companies to get rid of workers.

Why hire someone at increasing minimum wages, and increasing costs of medical care, when you can borrow money for next to nothing and invest in solutions that require fewer workers?

From my own experience in the corporate world, that makes sense to me. When looking at options on how to solve a problem, we would weigh the cost of capital against the cost of labor. If capital cost were high relative to labor cost, we would add labor. When labor cost were high relative to capital cost, we would employ more capital and less labor.

What about ObamaCare? Mish has this to say:

Obamacare is a huge part of the jobless recovery problem as well. I have talked about this on numerous occasions. Here is a partial list:

The evidence is now so overwhelming that no one but Obama and the Democrats can deny that Obamacare is responsible for the massive surge in jobs (nearly all of them part-time).

That makes sense as well, doesn’t it? How many times have you heard about companies reducing the number of full-time workers in favor of part-time workers because of the projected cost of complying with the ObamaCare mandate? I wrote about his trend towards part-time workers in a post on the 8th of May, in which I quoted these statistics for the month of April:

Total employment rose by 293,000 during April, but part-time jobs increased by 441,000. As a result, full-time jobs declined by 148,000.

That important data didn’t make the headlines either.

So there you have it. ObamaCare drives up labor costs so employers respond by reducing the umber of full-time worker and replacing them with part-time workers, which results in a decline in average wages. Jobs  aren’t being created because labor costs are high and capital is practically free making it logical for companies to invest in software and equipment instead of people.

We conservative/libertarians often ask ourselves: when are people going to wake-up? The information I have shared here today is the kind of information that has the potential to wake-up the low information types. But, if the media refuse to make this information news, the people will remain poorer, but they won’t understand that their own government is at fault.

Well, that’s what I’m thinking. What are your thoughts?

14 thoughts on “Hourly Wages Tumble In First Quarter. Blame ObamaCare and the Fed?

  1. Bernanke can’t prop up the stock market much longer. The mirage that all is well cant continue forever. Perhaps those who are effected by this monstrosity may get the drift that there are options. We shall see.

  2. .

    “Hourly Wages Tumble In First Quarter. Blame ObamaCare and the Fed? ”

    How about blaming corporate management/employers/”job creators” for a change. They are the ones making the decisions, aren’t they? Or are the workers to blame for managements’ inabilities to be do their jobs?

    Ema Nymton
    ~ @ : o ?

  3. Depending on what day that news was released- I am surprised the market didn’t shoot up a couple hundred points. They just keep throwing QE at it- and it can’t possibly slow down- no matter how bad the economy gets.

  4. People are not going to wake up until this hits them personally, until that point they will continue to live their lives in the dark. By the time it hits them and they wake up it may be too late to do anything about it.

  5. If capital cost were high relative to labor cost, we would add labor. When labor cost were high relative to capital cost, we would employ more capital and less labor.”

    This is an unassailable fact, a relationship that is fundamental to our economy. However, I believe that the relationship between capital and labor is experiencing only a minor shift because of the Fed’s actions.

    I believe that what is going on in the labor markets has deeper roots. It is an underlying trend in the world economy that capital will flow to the most efficient usage, and when the long term cost of capital is cheaper than the long term cost of labor, we will see machines instead of people being employed. In many cases capital and labor are fungible, i.e., one can be substituted for the other.

    After World War II, we saw the ascendency of the US as the dominant world economic power. This was not an accident. Before and during that war, the natural resources of North America almost dictated that the nation would be a big player in the world’s affairs. During the war, domestic labor was scarce, and the production of war material forced more efficient uses of capital. When we rebuilt the civilized world after the war, we did so in our own image which benefited the world more than they will admit.

    After the war, we saw the migration of manufacturing to Japan and Taiwan because of cheap labor. As these countries became more efficient, cheap wages and manufacturing shifted to South Korea, Singapore, Thailand, etc. I guess Mexico is in there somewhere.

    There is a trend. Whenever countries become more developed, and more efficient in the deployment of capital (automation), the cheap labor (sweat shops, etc) will move to a country where they are WELCOME! Cheap wages beat no wages, which is what many of those countries faced before foreign investment, moral considerations notwithstanding.

    As the developing world’s economies become more capital intensive for the sake of efficiencies, this whittling down on labor will continue. I see it as an unavoidable circumstance of civilization.

    I sure am getting wordy after my fourth cup of caffeine.

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