Perspectives Blog

New taxes require strategies to maximize after-tax return

Abram Claude, Vice President, Columbia Management Learning Center | March 18, 2014

…y will need to compare the amount by which they cross the threshold to the amount of net investment income (NII). The surtax applies to the lesser of the amount over the threshold or the net investment income amount. Although wages and distributions from IRAs and qualified plans (among other things) are NOT counted as net investment income, they can expose a greater amount of net investment income to the 3.8% surtax by pushing more or all of NII…

Hanging in

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | September 20, 2013

Recent retail sales data are well below expectations and probably an indication that consumers have become more cautious about spending. Financial conditions matter greatly, and the recent tightening is likely having some impact on housing activity and consumer attitudes. Spending follows wages and it will be difficult for retail spending to gain much traction with the tie to shallow compensation trends. The best one can say about consumer spe…

Quality milestone in the European recovery story

March 17, 2014

…ntional monetary tools to prop up inflation and eventually drive growth in Europe. The eurozone would function more smoothly if the large gap in competitiveness between Germany and other major eurozone economies closes. Thus, wages need to rise in Germany and fall in the rest of Europe and thankfully this is happening, albeit slowly. Cultural and political factors in Germany provide a brake on wage growth, while German industry faces ever-present…

Income inequality, disinflation and profit growth – the role of globalization

March 10, 2014

…s-border arbitrage of unit labor costs have been taking place. Put simply, companies look across the globe to determine the locations from which they can manufacture their products at the lowest risk-adjusted cost. Of course, wages are only one component in the calculus as to where to locate. Integral to the calculation of the cost of doing business are concerns over governance (the cost of managing across multiple legal, regulatory, political, m…

Labor markets in the new digital age

Columbia Management, Investment Team | April 14, 2014

…churn in the labor market is a normal response to the disruptive change inherent in innovation—killing some jobs but also creating new ones in the process. But the effects of the new machine age have put downward pressure on wages at the bottom and now middle-income workforce. A recent study by Oxford University economists Frey and Osborne* suggests 47% of U.S. jobs could be automated in the next 20 years, with less impact on those with a higher…

Gimme credit

Marie M. Schofield, CFA, Chief Economist and Senior Portfolio Manager | August 22, 2013

…a consumer still suffering some stress. Overall, there is little to suggest any acceleration in consumer spending. We need to keep in mind that the consumer’s ability to advance spending is mainly tied to gains in income and wages this cycle—which have remained very sub-par. Consumer credit has had little impact on the current recovery. Over 90% of the current cycle consumption growth is explained by growth in incomes and wages, well north of th…

Labor market takes center stage

Zach Pandl, Portfolio Manager and Strategist | October 15, 2013

…en, March 2013). Labor market issues have long taken a central role in Yellen’s career. As an academic economist her most well-known research focused on an idea called the “efficiency wage theory”, which argues that firms set wages in an effort to promote worker morale and thereby improve productivity. For the economy as a whole this theory helps explain involuntary unemployment, because efficiency considerations move wages away from the market e…