Where has the sentiment gone?

Good morning economists. Yesterday I was talking to a student of mine during a break. He told me a story about a neighbor who lost his job after working for a company for 17 years. "They showed him no respect" he added.

Respect? Sentiment? Those are things of the past. As we are feeling the impact of the recession, business owners tend to make business decisions with their calculator instead with their heads.

We all heard that "money cannot buy happiness". But it seems that lack of money can take away all traces of sentiment or emotion.

Could it be that the old saying is quite simply....wrong?

Have an emotional day!

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Qualifications needed to work at McDonald's

Good morning economists. Today I would like to discuss the job market and how this is changing as a result of the current recession. With youth unemployment rising to almost 12%, entry level positions like a cashier at McDonald's are becoming more demanding with regards to who they consider qualified applicants. A franchise in the US recently posted this on its website:

They are asking for their new cashier to have a bachelors degree! Traditionally only upper level management positions at McDonald's required any type of college degree but as it seems this trend is now changing. This is because firms realize that within the pool of the unemployed, there are degree holders who are willing to work for a lower pay (even close to the minimum wage).

The problem however, lies with the untrained youth labor who do not possess any such qualifications. The labor market requires that either they get some kind of qualification (degree or diploma) or that they work for below minimum wage compensation.

In the end, can someone afford not to get a college degree?

Have a nice weekend!

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Easter bunny arrested for riding a motorcycle!

Good morning economists. We have all heard the term "price discrimination" being used in the world of business. Price discrimination is when a firm or organisation charges different groups of people different prices for the same product. Indeed in most cases, price discrimination is deemed to be unfair and illegal. I have decided to coin a similar phrase from the behavior of police authorities. Fine discrimination arises from the discretion of the officer to give a ticket or a warning depending on the circumstance. Allow me to share a personal story.

Last week I was riding my vintage motorcycle which is incapable of speeding or being used in any other way apart from the occasional easy ride around the town. I was pulled over by an officer who requested license and registration. After providing the necessary documents, he proceeded to point out that if he really wanted to, he could have given me a fine based on the size of my license plate and the fact that I was not wearing a full face helmet. "The fact of the matter is that I can come up with any reason to give you a fine if I want to", he argued.

A couple of days later, I came across a news story of a guy who was dressed up as an Easter bunny, riding his motorcycle on the highway.

While the whole idea may seem ridiculously funny, the officer stopped the bunny because the suit was impairing his ability to drive and was a distraction for other drivers. The officer proceeded to issue a warning against the two legged creature who WAS wearing a helmet at the time.

Perhaps I should make a copy of the photograph and carry it with me when I am riding my motorcycle. If I get pulled over I can always come up with the excuse of "hey I am not as bad as this guy, and this guy got away with it in the end"! In the end, is the officers' discretion of giving fines to the benefit of society or is it just another example of discrimination?

Perhaps I should consider switching my riding clothes to a chicken uniform if that will keep the police away!

Have a great day! 

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Beware of wagging the dog!

Good morning economists! After taking a long break from blog writing (mainly due to increased workload and due to current events in Cyprus) I would like to examine today the idea of wagging the dog.  In fact today's post is inspired by the current economic crisis in Cyprus.

In 1997, a great movie hit the cinemas starring Dustin Hoffman and Robert De Niro. The movie was called "wag the dog" coined from a well known phrase in politics. The movie was about a presidential candidate who was involved in a sex scandal. In order to throw off the public's attention to the scandal, a movie producer was hired by the candidate's staff in order to stage a fake war. The idea was that everyone (voters) would be too preoccupied with "war" events to pay any attention to the sex scandal.

In a sense we as individuals are "wagging the dog" on a daily basis and on a much smaller scale. Haw often do you find yourself caught in a conversation which makes you feel uncomfortable? Think about your first reaction. Most likely, you will attempt to gracefully change the subject of the conversation. "Isn't the weather nice today", is one of the more usual catch phrases when you "wag the dog".

The problem with this short term solution is that the problem continues to exist and will eventually surface in the future. In the movie, staging a fake war may have thrown off the public's attention but it was not a real answer to the sex scandal. Wagging the dog will most likely work to minimize short term disutility (sense of uneasiness and anxiety) but as long as no real solution is found, the problem will continue to exist in the long term and most probably it will become more severe as well.

Have a great day!

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So is it a buyers' or a sellers' market?

Good morning economists. It is no secret that the global recession has affected both firms and consumers to varying degrees. I would like to share a story which made me wonder whether the market is slowly but steadily becoming a buyers' market.

A buyers' market is a situation where supply exceeds demand thus giving the buyers or consumers bargaining advantage over the sellers. A sellers' market is the exact opposite. In that scenario, there is excess demand and suppliers can take advantage of consumers either by raising prices or by having some sort of advantage over negotiations.

A month ago, my vintage motorcycle was in need of service. I do have my regular mechanic that I always entrust to do a good job on the bike, however due to the recession his business has slowed down in the last six months. It came as a shock to me that it took my mechanic almost two weeks to service the bike. That is, change the oil and refill the fluid in the front springs. For anyone who is into motorcycles will understand that this is a three hour job!!!

The problem was that I could not cancel the deal since he started working on the bike on day one, by dismantling the front springs. So it was impossible for me to move to bike to another mechanic. I had to endure the delay despite my daily phone calls to expedite the work.

In a global market where there is arguably excess supply, I found myself falling victim of a sellers' market. In other words I was at a disadvantage over the negotiations for the completion of the work. I wondered at the time whether my mechanic really understood the concept of a buyers' market and the whole idea of excess supply. I guess the supplier still has some negotiating power in the case of services than in the simple sale of goods.

Have you fallen victims of a sellers' market recently?

Have a nice day!

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