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Today In Economic News



A couple of good posts from Hamilton Nolan:

  • We’ve discussed this in the context of Seattle, but there is in fact no evidence that raising the minimum wage, at the level it’s currently at federally or in most states, has negative effects on the restaurant industry.  It’s also worth noting that businesses lobbying against the minimum wage increases are essentially asking for taxpayer subsidies, assuming a political economy in which people are not simply left to starve. As Chief Justice Hughes put it, “The exploitation of a class of workers who are in an unequal position with respect to bargaining power, and are thus relatively defenceless against the denial of a living wage, is not only detrimental to their health and wellbeing, but casts a direct burden for their support upon the community. What these workers lose in wages, the taxpayers are called upon to pay. The bare cost of living must be met.”
  • The market for financial services, conversely, could use a little more Economics 101, and this appears to be happening:   “‘Clients yanked $207.3 billion in 2015 from U.S.-based mutual funds that hand pick their positions while pouring $413.8 billion into funds that mimic broad indexes for a fraction of the cost, according to new data from research firm Morningstar Inc… The movement of money in 2015 was the first net outflow from traditional money managers since the 2008 financial crisis and the largest-ever from actively managed U.S. stock funds.’  If the average actively managed mutual fund charges something like 1.5% a year in fees, that means that last year this industry lost more than $3 billion of our money that would have gone into their pockets, and then into prime Manhattan real estate and Maseratis. Instead, you and your retirement funds keep that money. And in the long run your investment return will most likely be better for it.”  We’ve been through this before, but paying people to actively pick stocks is almost always irrational. Virtually nobody can reliably beat the market, and in the highly unlikely event that you find a fund manager with a marginal advantage you’ll probably lose more in the additional fees than you gain in investment returns.
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