uber driverÜber Wages Lag The Über Economy

“Today’s great paradox is that we feel the impact of technology everywhere — in our cars, our phones, the supermarket, the doctor’s office — but not in our paychecks…since the beginning of the personal computer revolution three decades ago, the median wage has remained stagnant…Too often, when people think about technology, they only think about the initial invention…Yet most major technologies develop over decades, as large numbers of people learn how to apply, adapt, and improve the initial invention…The problem isn’t that technology has eliminated the need for mid-skill workers overall.  New opportunities are there, but grasping them is difficult…If we meet that challenge, then large numbers of ordinary people will benefit substantially from new technology, just as they have for the past two hundred years.”  Meanwhile, “working for Uber might come with its perks, but it also comes without the benefits and protections many businesses provide for their employees.  That’s unfair and illegal, a Boston labor lawyer is now arguing in court, potentially threatening the business models of the dozens and dozens of popular apps that make up the so-called ‘on-demand economy’…her suit, and others like it, might fundamentally change the calculus used by the venture-capital firms pumping money into these businesses.”  Then again, “states could create new worker designations to fit this burgeoning industry,” both ensuring that “businesses would benefit from an easily scaled labor force,” and workers would benefit from “protections against earning less than the minimum wage.”  Meanwhile, “the U.S. stock market has been a compounding machine since the early-1900s.  As long as people continue to innovate and set out to improve their lives I see no reason why stocks can’t give investors a decent return above the rate of inflation in the future.”


Speaking Of Inflation

Eurostat is reporting “no inflation in the 19-member region (alt) in the year from April 2014, up from minus 0.1 per cent in March…The price of Brent Crude has risen over 20 per cent from April 1 to today…helping to lift consumer prices.  Core consumer inflation, which strips out more volatile prices such as those for food and energy goods, remained at a record low of 0.6 per cent.”  Furthermore, the ECB thinks that “longer-term inflation expectations had started to recover after hitting low levels in January.  ‘The decline observed over the previous two years has come to a halt.  These movements — with some differences — were also observed in the United States and the United Kingdom.’”  Meanwhile, Goldman connects the dots between inflation expectations and the equity risk premium: “we find it more challenging to rationalize high PE multiples.  A fundamentally-based argument would need to argue that relative to past rate-hike cycles, some combination of the following three factors would presumably need to hold true: that expected growth is higher, equity risk premia are lower, and/or risk-free discount rates are lower…the latter is the easiest [argument] to make…That said, if term premia are low due to low and falling inflation risk, and if equities hedge inflation risk better than fixed-coupon bonds, then the drop in term premia doesn’t necessarily imply higher equity PE multiples.  The links between bond premia and equity premia are subtle; one needn’t imply the other.”  Meanwhile, “given the amazing strength in the US dollar over the last six months, the lack of momentum in US (or Chinese) economic data and the effects of the oil crash still lingering, one thing virtually no one is predicting is any kind of comeback for the commodities market.”


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