I have a hard time believing there's a direct correlation between broad sector performance and minimum wage increases. Too many other factors at play. And for that matter, this may be a chicken versus egg discussion. Minimum wage increases tend to come in the latter stages of expansions. So we might ask, did the minimum wage increase cause the subsequent contraction or was it coming anyway?

Minimum wage increases are clearly inflationary, especially when one considers the "bump-up" effect that happens for all wage earners slightly above minimum wage. Thus, one can anticipate the Fed's inclination to maintain or even raise interest rates, with the corresponding dampening effect on the economy.

In Canada, there are regional variances. A minimum wage increase in booming Alberta is probably meaningless. With all the oil money around you couldn't get anybody to work for minimum wage anyway. In the manufacturing areas of Ontario, those small businesses that are already struggling with a higher Cdn$ will struggle all the more, but many of these companies that have low-wage earners are not public companies, so little stock market effect.

I can see the WalMarts, the McDonalds and the other franchise establishments having to try to absorb the wage inflation, thus diminishing their profitability.

Those companies that pay above minimum wage anyway, will be more the victims of the overall economy - - the economy that has been expanding for so long that it's time for a pause. There's always a pause and we always try to figure out what was the trigger.

If the min wage doesnt give gdp a false boost, the proposed 2.9 Trillion war budget will.

http://tinyurl.com/2yfv4r
US President George W Bush has submitted a $2.9 trillion (£1.5 trillion) budget to Congress including almost $700bn in new military spending.

Can anyone comment on Lihir Gold....down 39% after hours......to $15.00.

"Wow" is right quail, checking the broader markets, I don't think it's a "fundamental" issue, but probably internal, corporate, or political.
Anything funky happening in South East Asia(besides the Shanghai market going down the tubes)?
Top executive been kidnapped?
Muslims blow the mine?
Lihry was up 2% on the day and is now down 40%.
It shows you how volative this jr. miner sector is. Need to build your own "mutual fund" with small, well deversified investments on the theory that tne big winner will boot strap the rest...until they can become leaders....maybe.
Of course, MFN is up over 5% for the day, so the juniors are still producing the juice.
Go figure.
Also recall Leisa's notion that stops are self defeating in this particular "place" evidence: KRY, etc.
Keep the faith.

Hello,

I just wanted to acknowledge this blog as a personal favourite of mine. While I'm reading the posts and comments I am calm and logical. I just ventured off to another well-known "blog" and I'm certain that my blood pressure rose in anticipation of the amazing success and profits I could gain if I loaded up on CSCO calls. (Whatever those are!)
I look forward to all future musings and to all the surprises Mr. Cara has in store.

Cheers from Toronto.

ALOHA !!

Okay ... lets analyze this minimum wage increase. In 1977 I was working in a hardware store(back before Home Depot and Lowes)for a mere $2.75 per hour and now they want to raise the minimum wage to say $7.25 per hour. That works out to be an average annual wage increase of fifteen cents per hour over thirty years.

Sadly that is "BEFORE TAXES" !!! A worker making $7.25 falls in the lower 10% tax bracket(unless Congress adjusts the brackets)and when you take out FICA and MED and STATE that $7.25 per hour turns into $5.65 per hour ... NET! Then there is the hidden tax called "inflation". In actuality raising the minimum wage is raising the tax receipts and therefore the income of the US government not the workers. P-O-N-Z-I !!

To raise the minimum wage of low income people, is the last ditch effort of the rich to give up a small amount of purchasing power to the workers. Walmart, just for an example, may secretly complain about giving a small amount of their part time employees a few more bread crumbs in compensation for their work efforts. But, these part time employees will no doubt spend this wage increase for their staples...Walmart benefits by boosting their sales of staples, and still gets to complain about having to spend more on employee compensation. It's a win/win for all the staple retailers. Who will not benefit, are the rich people that hire Bush's "guest workers" from Mexico to work in and around their fenced in mansions. I firmly believe these rich and greedy individuals.... secretly, would support slavery of any form of the word, if they wouldn't be branded as a slave owner. Slave, meaning any hard worker that hasn't had the same opportunities as the people that were born with that proverbial golden spoon. Raising the minimum wage is long over due for those poor souls that receive the additional income they deserve.

I cannot disagree with the social statements being made by bigwad and kaimu. While minimum wage may be an important first-step in the job market for young people, it's tragic to think people may have to eke out a living ad infinitum on such paltry sums.

But, I'm plagued by my memory of Economics 101, which taught me about supply and demand curves, and price/wage elasticity. The conventional theory being that as minimum wage increases, the number of jobs decreases, i.e. employers stop hiring or even layoff in an effort to control costs.

However, socio-economics aside, the question before us is how to respond at our individual level, (after all, we're not politicians or social activists here). Perhaps more specifically, the question is how will the stock market and individual stocks respond to an increase in minimum wage?

I had opined that WalMart might suffer, but bigwad makes a good point, similar to the old Henry Ford axiom that paying his workers more money meant they could afford to buy the cars they produced. That seems to be in line with the observation that dollar stores did well following previous minimum wage increases, (although I still think that was more a factor of the economy having swung into contraction and what you then see are increases in low-end retail as the middle-class cuts their budgets). I believe you'll find companies like Liquidation World (LQW) do well during recessions.