Minding Trends at Both Federal & State Levels

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One of the many things I intend to watch this year includes upcoming trends with the minimum wage laws. These are not only, in themselves, sometimes compelling road signs for economic direction, but going forward this season they may also foretell some interesting distinctions between state and federal mandates, and how that can play out for investors. Right now 29 states and Washington, D.C., already have minimum hourly wages surpassing the federal government’s $7.25.

Last week four states—Arizona, Colorado, Maine and Washington—approved ballot measures that will up their hourly rates significantly over the next couple of years.

And according to the National Conference of State Legislatures, 14 states will begin 2017 with higher minimum wages, the result of past legislation, along with other specific increases occurring relative to cost of living in a couple of those.

Whether or not you support a minimum wage increase is beside the point.

There are several logical arguments for an increase—the most compelling being simply that those in low-paying jobs will have a better chance to improve their lot. Some also feel it’s a viable route to economic stimulus overall.

On the other hand, many say that higher minimum wages ultimately eliminate jobs, as businesses will need to cut costs to compensate, and personnel can be streamlined. Some people also argue that mandating wage increases is an indirect means of extending welfare, and that in the long run this is counterproductive.

Opinions aside, I think what’s more interesting to look at here may be the future of federal mandates versus those implemented by the states.

Despite a federal prohibition law regarding marijuana, this past election saw more states approve recreational use. Likewise, in the past few years several states have implemented laws that, in essence, sidestep federal regulations regarding firearms.

Other rifts between state and federal authorities may be brewing as well, as evidenced by a contentious political race.

For an investor all of this adds up to information. It’s a message to give closer attention to state laws—and state trends—that may impact how a business is going to function in the future.

Certain investment areas can end up being, of course, very regionalized by nature, such as energy or real estate. Consequently, taking the time to familiarize yourself with relevant local jurisdiction can be a valuable tool to your investment strategy.

As times change going into 2017, take the time for due diligence to understand all you can about your investments and the frameworks that surround them.