It’s no secret that employees tend to be aware of their salary ranking within their places of employment. It is also true that people at a given level of employment — and performing similar work — generally expect that others doing the same work with the same length of service will be making similar money. And, likewise, everyone thinks they have an idea what those above and below their own rankings are making — and they tend to see that information through a lens that allows each to see the relative value that their company places on the various categories of employees and then also see where they personally fit within their cohort and also into the larger matrix.

This knowledge, and how it is used, sets up a dynamic that can be an absolute nightmare for those responsible for; a) developing employee compensation schedules that are competitive and fair to employees and b) conveying to the employee pool that the company places a high level of importance on successfully doing ‘a’.

So, pay raises all across the earnings spectrum — bottom, top or the middle — tend to have a knock-on effect across the entire pool of employees. This is especially true when raises are applied to a group of people as a single event. Conversely, pay increases given to individuals — generally doled out one at a time — tend to be seen more as additional compensation that is related to merit. Merit raises therefore are less likely to produce a knock-on effect than are raises which are or at least perceived to be ‘class’ raises. Merit raises tend to elicit comments from fellow workers like “Way to go, Susan!” much more than “Where’s mine?”

By now you are probably saying “OK. Fine. But why are you taking us down this road and where is it going?” Good question. The answer is Seattle.

Seattle seems to be the tip of the spear in the national fight for a $15 per hour minimum wage. It is now about three years since that the Most Progressive City in America (yes, it calls itself that) voted in a new labor rule as part of their march to the 15-dollar minimum. So, how’s it going? Unsurprisingly, there are problems. An honest headline might read “Seattle Workers Earn More, Get Less”.

Less?

It is true. They are, on average, getting less…to the tune of $125 per month. That is a noteworthy tune. If you are a minimum wage worker a hundred and a quarter is not just whistling Dixie.

For the explanation to the apparent contradiction we look to our two-handed economist who explains what may have been predictable by anyone who is not a socialist.

On the one hand employers were strong-armed by the Seattle City Council to grant a 62% raise to those earning the lowest hourly wage. On the other hand, the employers found ways to improve the efficiency of the employees they had. This added efficiency allowed them to reduce the hours worked by 9%. So, on average the pay raise was a pay cut. But still, the hourly rate did go up and there will be a knock-on effect as many up the food chain will wonder ‘Where’s mine?’.

 

Market Minute 6/30/2017 – Consumer Confidence Up? And the Logical Market Action?

The last polling on US Consumer Confidence* moved higher once again to 118.9 which is one of the best results in years. Personally, I find this to be an interesting contrast, as so many recent political polls show that much of the nation does not approve of the current administration or its policies. How can consumers disapprove of the handling of the economy, and yet be more confident than they have been in years? 

In short, we wonder how can confidence be so high?

Just my my opinion here but, is it possible that the public, over its lifetime, has learned to appreciate the general incompetence of the government? Have they learned that the public well-being is not controlled by Washington’s policies? 

Or perhaps is it that the polls may only reflect concern about the broad array of policies, and the unorthodox way the administration transmits their intentions to the masses (tweets!). And is this negativity true at the same time that consumers still hope for promised future tax cuts that will leave more money in their own pockets? 

Could it be all of the above?  

Bottom line:  As long as consumer confidence is positive and growing (both true), then it is hard to bet against the future state of the economy and the positive direction of the markets.

*Source: www.conference-board.org/data/consumerconfidence.cfm

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051

Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
www.denkinvest.com

This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email please contact us at 602-252-8700 or by e-mail at info@denkinvest.com.

Ronald Denk is an Advisory Representative offering services through Denk Strategic Wealth Partners, A Registered Investment Advisor. He is also a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation. Information in this commentary is the sole opinion of Denk Strategic Wealth Partners. Past performance is no guarantee of future returns. All market related investments involve various types of risk, which include but are not restricted to, credit risk, interest rate risk, volatility, going concern risk, and market risk.

The Update provides information of a general nature regarding legislative or other developments. None of the information contained herein is intended as legal advice or opinions relative to specific matters, facts, situations or issues. Additional facts, information or future developments may affect the subjects addressed in this document. You should consult with an attorney, accountant or DSWP planner about your particular circumstances before acting on any of this information because it may not be applicable to your situation.

Lincoln Financial Securities and Denk Strategic Wealth Partners and their representatives do not offer tax advice. Please see your tax professional regarding your individual needs.

*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.

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