I believe you have touched on one aspect, Ed. Other contributors would be:Ed in Tampa wrote:I believe the problem is the result of annual pay increases, those increases that come just because someone was there last year. ...Many are being priced out of the hobby today.
1. The rising cost of construction commodities such as steel and concrete, which have been diverted in recent history to the rapidly developing Asian giants. Greater quantity demanded = higher price. These commodities would include other raw materials.
2. Shipping does play a role in price appreciation when goods are manufactured over seas and imported.
3. A falling dollar means that imported raw materials and component parts are relatively more expensive. Therefore, to remain competitive the quality of products must decline or employment must suffer. For products to remain high quality that are manufactured state side, price increases must be passed on to the consumer and/or employee productivity must increase to decrease marginal unit costs. This is why I do not understand economic protectionism from a policy perspective, given our global economy today. Policy makers want to keep local jobs while other governmental entities devalue the dollar at the same time. That's ludicrous. If the dollar were getting cyclically stronger it would make a lot more sense.
4. Concurrently, a falling dollar makes imported finished goods more expensive, especially electronics and appliances.
5. A culture increasingly dependent upon technology that was not necessary 10 years ago (and probably not necessary now) means that more comparable real income is diverted to gadgets like cell phones, MP3s, personal computers, flat screen TVs, etc. The same reliance on technology is true for business especially for data services that were not available in the past. Business now pays for these services with no real increase in net profits since the increased efficiency has the competitive effect of driving prices down. Expenditures are diverted to new technology with no increase in net income. The flip side of the coin is that some new technology jobs are created.
6. Increased governmental interference in markets, regulations and the flow of monies at a macro level reduces efficiencies of private companies and individuals at the micro level and increases risk. Increased risk means investors require greater returns so marginal deals don't get done and companies sit on cash stock piles. Larger companies are just now starting to feel like they have enough reserves to being a little additional spending, while smaller shops never had enough to begin with!
7. My dad and I had a discussion about education costs a while back. We discussed his nominal income when he got out of college as compared to my nominal income when I finished. We came to the conclusion I was no better off than he was at the same point. However, it cost me proportionately more to complete my education than it did for him. So to be on a level playing field, over time the cost of education has risen (at least anecdotally), resulting in a proportionately declining return on that investment. I believe this is partially due to the declining quality of primary education, which requires employers to seek those with secondary credentials for entry level jobs.
The most important factors are the declining dollar (partially intentional) and a diversion of wealth based on changing priorities (consumer behavior).
I would note that we are in a deep and wide recessionary trough that really started with respect to real income prior to 2005. Continued market intervention will result in a prolonged trough so I don't expect a change for another five years or more. Don't believe all you hear about "improving economic conditions" because most "positive" statistics that are reported are at the margin, not relative to the whole body of data, or they are quoted as percentage change, not a nominal or real change. I intermittently track this kind of information in my work. In my opinion, we are bouncing along the bottom. But as the global economy improves, our ship will be raised with the rising tide as well. The question is, has our ship gotten smaller?
I have to say, I'm once again impressed by the broad knowledge base and sage experience on this forum.
