The two main questions I wanted to answer before writing this article are: when are the strikes going to stop and why do these contracts have to expire before executives can make an agreement? As the strikes continue, I have learned that these strikes have national repercussions, so there is no easy solution. Plus, strikes are not just about increases in wages; they are about technology, workload, and on the job and HR benefits.
I chose to focus on three recent strikes taking place in Los Angeles. The Writers Guild of America strike may lead to higher prices in streaming. The LA Unified worker strike may lead to school consolidations. The LA Hotel strike may lead to higher room rate rates. With every action in the market, there is a reaction governed by supply and demand. How much is just too much?
On January 1st 2023, the minimum wage increased in California to $15.50 . Many politicians and labor union representatives pushed for the minimum wage to be increased to a “livable income” now that we are experiencing the effects of hyperinflation. As prices have skyrocketed, progressive politicians are voicing concerns about the rise in costs. In fact, recently Senator Bernie Sanders said he wants to push for a $17 hour minimum wage.
The fight for higher wages is not just against corporations or Wall Street; it is also against ourselves. Higher wages equal higher prices that we are forced to pay. There are other factors that have led to the rise in inflation: active cash in the economy and the war in Ukraine, along with high fuel prices – all against a backdrop of a shutdown economy just a few years ago because of the global pandemic.
The Federal Chairman, Jerome Powell, has increased interest rates to decrease the amount of cash in the market to avoid a recession while bringing down the effects of rising costs. The macro solution to hyperinflation is to take some of the cash out of circulation. If you watch videos of Elizabeth Warren, her claims were that Powell’s actions were dangerous to the economy. If you look at the results of what the Fed is doing it is working.
Then there is the other side of the coin. Journalists are taking the claim that there have been pressures from Wall Street on corporations to return higher dividends, since returns were weakened during the pandemic. One sure way to have higher margins is to raise prices. For everyone who has a 401k or invests in the market, there is a positive stake in these companies bringing in more cash, resulting in a higher investment evaluation. It’s not just the people sitting on Wall Street who like the ticker symbols moving higher.
This is the typical cycle: our politicians fuel the debate while our pocketbooks leverage their new buying power. For a long time, economists have said that the cost of living in America is below the norm for the rest of the world. But the US is still a much younger nation as compared to other industrialized countries. Meet the politician who says no to higher wages, the labor union organizer who doesn’t want better benefits, or the CEO who won’t fight for more profitability, and that won’t be in America.
By Dane Flanigan