Wednesday, November 08, 2006

Stories of the Day

Pill Poppin Pelosi?

Earlier this week I reported that certain sectors would be impacted by a democratic victory, including pharmaceuticals - and that the democrats appeared to be cruising to a victory.

Now we have the reality of Democrats taking over the house and possibly the senate (at this point the AP is saying the Dems won in Virginia while other sources are still waiting to see if it turns into a recount). Seemingly in response, the pharmaceutical sector dropped today.

Check out the plot below from Harris Bank. It shows the relative strength of Pharma stocks in the market compared to the chances of Democratic victory (according to the Iowa Electronic Markets event trading system, which is pretty neat really). Looks like a pretty strong relationship for a solid month before the election. A neat trick to remember next election.

Labor Costs Under the Democrats?'s Martin Hutchison weighs in on talk of increasing the U.S. minimum wage to $7.25 an hour. "Nancy Pelosi may get her way, that is, a higher U.S. minimum wage. Now that the Democratic congresswoman is set to become speaker of the House of Representatives, she will be in a good position to fulfill her campaign promise of a 40% increase, to $7.25 per hour.

Is that bad for the economy? Republicans, who have been fighting against an increase for years, answer with a resounding yes." They claim forcing employers to pay up discourages them from hiring low-skilled workers, Mr. Hutchinson writes. "It's an elegant theory, but it hasn't worked." For the full article, click here (subscription required).

[My opinion is that labor costs are very important, but that high labor costs rarely come from the lowest paid workers. The real impact is the huge bulk of mid-level workers in unions who are deceptively costly on the balance sheets of America due to deferred and non-cash compensation. I'm more worried about union renegotiations than the minimum wage.]
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