Weekend reading

Good reads from around the Web.

Inequality is a rising – and a very real – problem. So it’s no surprise that those members of the chattering classes still able to earn a living coining bon mots for the broadsheets have come up with a new one: Wage rage.

Wage rage is what happens when your salary doesn’t go up in real terms, yet living costs and company profits do.

At the moment it’s mainly manifested in localised rants between couples in the grocery aisles of Tesco – one wants the asparagus while the other says make do with carrots – but it can only be a matter of time before the squeezed middle-classes angrily demand to see each others’ pay slips.

The lefty economist Chris Dillow, who writes curiously enough for the Investor’s Chronicle, has a Marxist explanation for why real wages have been falling:

…socio-technical change since the 80s such as CCTV, containerization and computerized stock control has made it easier for bosses to monitor workers. Direct oversight means they don’t need to worry about buying workers’ goodwill. They are instead using the Charles Colson strategy: “When you’ve got ‘em by the balls, their hearts and minds will follow.”

Years ago, firms wanted smaller but motivated workforces.

Now they can control workers directly, they don’t need to worry so much about motivation and so are content with larger but grumpy workers.

Dillow argues that high-flying executives can’t yet be motivated by the threat of being replaced by someone in China or Amazon’s mechanical Turk, and so they have been able to increase their wages.

Is he right? I have no idea.

As an investor and a capitalist, I do wince though when I see company profits rising relentlessly even as revenues and real wages fall. That the richest 1% have got inexorably richer is just the icing on the cake.

The problem for me is not just that it’s arguably morally wrong for a few to benefit at the expense of the many – morals are pretty fluid, after all – but that it’s unsustainable.

Companies need customers. And democracies need some notion of equality.

Still, it only takes a few lines in The Guardian for my inner Thatcherite to come out swinging his man bag:

There are also signs that workers are paying a price for the new competition from the likes of lone parents, whom aggressive workfare policies are chivvying to take up whatever work might be available, irrespective of the wage.

Yes, there are signs of that in the same way that there are signs in tea leaves.

Inequality has been growing for decades, through various political administrations. It’s more likely down to technology, globalisation, and the near-universal acceptance of market economies. It’s not down to saying that people who can earn money should do so before dipping into the pockets of others.

And then there’s the language. Someone with a job is a “worker” but a parent with a child who gets a job is apparently still a “lone parent”.

When does a lone parent become a worker? And what do we call a lone parent who already has a job? Or shouldn’t they exist in Guardian-land?

Capitalism rules, okay?

My hope is that the slide in real wages is a symptom of the long economic slump and the lack of animal spirits.

Once the economy starts ticking up on a global scale, company bosses may well fall over themselves to employ more people to meet the demand, increasing the competition for workers (and those wage-less lone parents…) and putting more money in our pockets to spend. Gradually workers will claw back some of what they’ve lost.

A rosy outlook? Certainly, but it’s worked before.

In the meantime I suggest saving as much of your dwindling salary as you can, and putting a big portion of it into shares.

If you can’t beat your capitalist masters, best you join them!

From the blogs

Making good use of the things that we find…

Passive investing

Active investing

Other articles

Product of the week: The Guardian is highlighting the new Race for Life bond from the Coventry. It pays 2.1%, fixed until 30 April 2015, and an extra 0.1% to Cancer Research UK. I note the best two-year fix is paying a higher 2.3%, so you might earn more and donate yourself. But remember your interest will probably be taxed!

Mainstream media money

Note: Some links are to Google search results – these enable you to click through to read the piece without you being a paid subscriber of the site.

Passive investing

Active investing

  • Is cash the most under-invested asset class right now? – Minyanville
  • The few things you should read (Wot no Monevator?) – Motley Fool US
  • Ruffer: Risks of a ’1994′ style bond crash are growing – CityWire
  • The end of QE is already roiling emerging markets – Economist

Other stuff worth reading

  • Five million Lloyds customers to be ‘dumped’ into TSB bank – Guardian
  • NS&I slashes interest rates [Search result]Telegraph
  • Home truths about property prices [Search result]FT
  • Especially in the US, interest rates are finally rising – Dealbook
  • Martin Wolf: The overstated inflation danger – FT
  • Warning over care home ‘trust’ schemes [Search result]Telegraph

Book of the week: What I Learned Losing a Million Dollars is getting some good reviews among the active trading fraternity. (And I know that fraternity includes a few of you, on the sly!)

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