* Today we got the official numbers for Q2 Non-Farm Productivity and the consensus was that it would increase for the first time in 3 quarters; the prior 2 quarters we saw a decline in productivity

* So analysts were looking for a .5 increase in the second quarter

* Instead, we got a decline of .5

* More importantly, this is the first 3-quarter consecutive decline in productivity since 1979

* That was the Carter years - stagflation, the misery index, sky-high inflation, sky-high interest rates

* That was the last time we had a 3-quarter drop in productivity and President Obama is bragging about how great the recovery is and Hillary Clinton promises more of this

* If you look at the actual size of the decline over those 3 quarters, it's the biggest drop in productivity since 1993

* If you look at the year-over-year decline, this is the biggest decline in productivity in 3 years

* Productivity is extremely important

* Politicians are all talking about higher wages - "We need higher wages!"

* You can't get higher wages without higher productivity.

* That is where higher wages come from

* Now, a lot of politicians want to substitute government decrees - they want to mandate higher wages

* Like minimum wage - we're going to force employers to pay this minimum wage

* All that does, is raise the bar; it makes it harder for unskilled workers to get a job in the first place

* Now employers are forced to pay a wage that may be well above the productivity that they can deliver

* In that case, they can't get the job

* Mimimum Wage doesn't just raise wages, it raises the bar

* Another popular way that politicians try to mandate higher compensation is by mandating benefits such as health care, sick leave, paid vacation days, or overtime

* The idea is that you're getting something for nothing - I voted for this guy and he delivered

* That's not how it works

* When an employer hires somebody, they look at the overall cost of employing that person, relative to the productivity required for the job

* If I am mandated to provide certain benefits, the costs associated with them are also mandated

* If you force the employer to provide benefits at a certain cost, how is he going to pay for it?

* What happens is, the compensation becomes a mix of wages and benefits

* Maybe the worker doesn't perfer that, maybe the worker just wants the higher wage

* The worker can't have it because the government took that decision away by mandating that a portion of the pay include benefits, whether the worker wants them or not

* The politicians hope the voters fall for the idea that they got something for nothing

* That's government for you.  They always want you to think you're getting something for nothing

* But the something for nothing costs a lot more than you think because the nothing is not nothing

* In this case, wages go down so the benefits can go up

* Everybody would be better off if the government stayed out and let each worker negotiate independently with the employer for a compensation package that is most valuable to that worker

* But productivity is really the holy grail of higher wages

* If we really want higher wages we need to raise productivity and that's not happening

* If productivity is going down, wages are going down

* If you want wages to go up, you have to have higher productivity

* How do you get that?  Less government, lower taxes, higher interest rates so we get more savings and more investment and less of all this speculation and paper-shuffling that we have in this bubble economy

* I want to talk also on this podcast about Donald Trump's economic speech yesterday



Our Sponsors:
* Check out DeleteMe: https://deleteme.com/GOLD
* Check out Fast Growing Trees: https://fastgrowingtrees.com/gold
* Check out Kinsta at https://kinsta.com to get your first month free today!
* Check out NPR: https://npr.org
* Check out Vanta and use my code SCHIFF for a great deal: https://www.vanta.com


Privacy & Opt-Out: https://redcircle.com/privacy