Ep. 212 - Unpacking Inflation's Impact: From Shrinkflation to Employment Inflation

Hello, this is Gabriel Shahin, certified financial planner and your host of more knowledge, more wealth here on every weekend, talking about all important topics of personal finance. My job is to go over the knowledge you need to increase your wealth. Not to the listener. You can always reach out to myself or any one of my colleagues here at Falcon Moth planning.

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That's keeping you up at night. That is burning of just what you should do depending on your situation. Because right now, there's so much going on. We've got a Fed hike happening. Still coming in here, uh, before the year's over, potentially. And they're talking on a consistent basis. And we still have inflation happening.

And we have it for multiple reasons. I mean, from gas prices to what's happening at the store. And recently, I mean, you probably have heard this, but of shrinkflation. Have you heard of shrinkflation? Shrinkflation is the example that I like to use. Is going at the store where you used to get 2 liters, but they might only now sell you 1.

75 liters. Or the, uh, candy bar that used to be 12 ounces is now repackaged as 10 ounces. Kind of small enough where you can't even tell the difference. But they're charging the same price. The example that I have that has affected me personally is, my wife and I, we were going to get some Edison lights outside.

Just, you know, so we could sit at night. And they used to be 50 feet at Costco for 40 bucks. Okay, fantastic deal. Well now it's not 50 feet, it's 40 feet and it's still 39. 99. So the idea is, is you're thinking prices are the same, but you're not getting the same quantity. This is shrinkflation, which had me thinking of how much more inflation out there that people just are not aware of.

I mean, I can see it, right? We know if people are feeling it. I'm starting to actually see clients and prospects actually truly be affected in the form of not just complaining, but the idea of like literally they are starting to have and Spend less because of all the other costs that on discretionary items because of all the other items That are now costing them more money at the stores at the gas pump their insurance Every single thing has gone up a price for that.

And so now that leaves less money for fun So I thought I would just go over the different types of inflation that's out there, because a lot of people just truly don't know, and I don't blame them for that. I mean, that's not what they do, but this is kind of like the textbook inflation periods, and what does that mean?

So I thought I'd print this out and just kind of go over a few of them with you. For example, demand to pull inflation. Well, this is kind of, uh, uh, uh, an aggregated demand if you look at it, but I mean, what it is... is it's when demand exceeds the supply. It's very kind of simple, right? So more people want that's not available.

So this could be like the Super Bowl. Why are the tickets so high? Because so many people want to watch that championship game. So it's very simple, right? Very. Common sense, right? So there's really nothing more to discuss there. So I want to go to cost push inflation. Now, this is an interesting one. This is just where supply can cause inflationary pressure.

Just in general, if the demand remains the same. Okay, and supply just falls just for whatever the cry, uh, uh, causes are, then price levels will increase. So, yet again, just whatever it is, okay? So, this is just another idea of how it can be affected. Now, another interesting one that I just like to talk about is just open inflation.

This is like the simplest form of inflation, by the way. And this is when price level rises, just ongoing, and people realize it. By the way. So you can literally see the annual increases over time. Like I'll give you an example. Even though the cost to maybe run internet to your house doesn't change. Like let's just assume like it's already there.

Everything is the same. Like it's it's there. The price will continue to increase on an annual basis. Okay. So that's just like yet again, the simplest form of it. All right. Um, other things are just simple grocery products. Just, uh, over time goes up. I'll give you another example. Um, if you sign a lease, Sometimes it's just always a 3 percent increase on the lease.

Just, that's just what it is. Whether there's demand, supply, whatever the case is, there's just there. So it's just open. It's just always, it's just known that there's going to be an increase in cost year over year. Um, here's an interesting one. Repressed inflation. Now, this is interesting because this typically, like, this isn't just an over demand on something, which will naturally lead to an increase in price.

So this is where sometimes the government... Can repress measures of controlling or rationing certain things to really help and reduce the excess demand from price increases. So it's just interesting because there is something as repressed inflation as well. Hyperinflation, we all know what hyperinflation is, is just prices increase at a rapid rate.

It's as simple as that. I mean, you can look at prices. Literally, it almost felt like every hour something like that was happening. We saw that a lot in 2020 2021 and even 22. And then you have like creeping and moderate inflation as well. That's just price level increases slowly over an extended period of time.

Period of time now moderate inflation is just the word the rise of the price is not fast or slow It's just moderate right where the creeping is just over time slowly. So yet again, these are just different types now true inflation This is an interesting one This is a takes place after full employment and all other factors and put over the economy when there is a full employment and the nation's output becomes Perfectly, we'll call it inelastic.

Therefore, more money simply implies higher prices and not more output. Like it's just everybody has more money at that point. And so because of that, they know people can afford more. So they're just like, true inflation is just, everything is going great, and just because of that, they're gonna continue to increase those prices.

And then of course, the semi inflation is even more. Uh, able to actually before full employment and economic economy, my face, uh, inflationary pressure due to bottlenecks of certain sectors. Of the economy. So these are just other types that are out there. And I think just yet again, it's important to know that these are some of the causes of what we've seen in the past few years, by the way, folks, if you're just joining me, you're listening to Gabriel Shaheen certified financial planner, and your host of more knowledge, more wealth you're on every week and talking about all important topics of personal finance.

And today we're just talking about just kind of the effects of what's going on in the market. And I just thought, let's just have fun with inflation for a minute. And we've seen that 15 percent increase Halloween just passed in. Candy prices. Now there's a lot of studies that show a majority of all sales of candy happened during the month of October.

Naturally, people are buying a bunch so they could start to, uh, distribute them on Halloween, October 31st. So, but the idea just kind of thinking about it is that when you. Forecast what you're going to spend and you have a certain dollar amount and you are seeing a year over year from 2022 to 2023 increase of 15%.

That's massive. And so that's just one side of it. The other side is you've got something as simple as business owners out here. You've got the state of California, for example, where you have to give three days paid sick days a year. Well, now they've increased that to five days. Okay, let's just see what that means, right?

So now the employer has to pay for two extra days now I know there's some of you that never get sick, but there's also some people out there like, you know I got a dentist and doctor's appointment. I'm gonna use my sick day there or you know what? I'm towards the end of the year and haven't used any of the days I think I'm probably gonna get sick around Thanksgiving.

Oh and the holiday season Christmas And, uh, New Year's as well. So, I mean, I'm telling you, it happens, right? Because if you don't use it, right, you lose it. So, I'm just here saying that is an additional cost to employers, which is another form of inflation. I call it employment inflation. So, now, let's put it like this.

Let's say now you have to pay, okay, you have to pay for two extra days a year. Okay, that's 16 hours. Let's say you have a 20 hour Uh, your employees make 20 an hour out here at Falcon Wild. The majority of them make much, much more than that. Let's just use that an example and say a staff of over 50 people.

Let's just say 50 people to keep it simple. So now let's go back. You now have from three days paid sick. Okay, so that's two extra days. Now, employer has to pay, right? So, that's two extra days, eight hours a day, right? So, that's 16 hours out of the year. Now, you multiply that by 20 an hour, that's 320. You multiply that by 50 employees, that's an extra 16, 000 that an employer has to pay.

Now, in this example, it's Rockland Wealth Planning because we have... About 50 or over 50 associates here. Now that assumes that 20 an hour. If the average pay is 40 an hour, that's 32, 000 a year. Employers are now going to have to adjust prices. Now I'm not saying here at Falcon Malt we're increasing prices, but there are restaurants that have, oh by the way, hundreds of employees.

Right? One establishment could have hundreds. Multiple different shifts. Multiple different seatings. Heck, that's one of the hardest jobs to fill right now. How many times have you got into a restaurant and you are put on a waiting list? You can't even. Think about it. They can't even have time to seat you, right?

But then you go into the restaurant and there's all these empty tables. So you're waiting 30 to 40 minutes, not because there's no room for you to sit. But only because there's no enough service to serve you. This is the reality we live in, and this is also another form of inflation. Because the demand is so much for the restaurant, and maybe it's the exact same, but the fact they don't have enough people to serve, they can charge more.

Because if you won't do it, the other 15 people in line will. We call that type, I'm calling it employment inflation. You get what I'm saying, folks, we're going to go on a quick break. When we come back, we're going to talk more about some of these indirect impacts, not on a macro level, like I was talking about earlier with inflation, but on a micro level of how this impacts you.

We'll be right back after a few words.

Welcome back folks. This is Gabriel Sheen certified financial planner. And your host of more knowledge, more wealth here on every weekend, talking about all important topics of personal finance. And say, we were just talking about the simple concept of inflation and the impact this has in the different levels of it.

We talked about shrink inflation before I made up my own ones called employment inflation. And then I'll even make up another one that's called competitive inflation. What does that mean? Well, when unemployment is so low, now if somebody really needs a hire that they would have normally paid 15 an hour for, now they're going to have to pay 16 an hour for just to get those people.

I mean, everybody, I just gave you that example of people going to the restaurant, and they're waiting 30, 40 minutes. To get seated and they go into the restaurant and there's like a bunch of empty tables. You probably ask the hostess, why can't, couldn't you have just sat me there? Well, we don't have enough staff to serve you.

We don't want you sitting there and complaining about the bad service because we used to have one server per four tables, but now we have one server for eight tables. What are we going to do? One server per 12 tables? You get what I'm saying? So they're stretching them dead. This is why now restaurants have to charge more.

Because they can't make as much because they don't have enough staff members. And on top of that, now they're allowing the state of California to have extra days of sick time. Which I don't, listen, I'm not against the people here. I'm just wanting to know the repercussions this is going to have. Raising the minimum wage to 20 an hour, what does that do?

Well if somebody has a budget of maybe... It's a certain amount that they can spend on staff, right? So if you had, for example, 10 staff members at 15 an hour, right, that gets you 150 of total spend. Well, now if it's 20 an hour and you could still only spend 150, you only can afford seven and a half people.

That's two and a half people, 25 percent left staff members. So yet again, they have to increase their price. I'm not trying to say, I, I'm okay, I'm four. I get the logic of increasing minimum wage, but that affects you, the consumer. Who do you think is going to pay for that? You know, it's crazy. You've actually seen like even in McDonald's, you get a number one supersized.

If you and your spouse get a number one supersized, you're spending like 25 bucks. That's almost as much as just getting a two for 25 at Chili's. Or Applebee's or whatever. Like sit downs are becoming almost the same price as a fast food chain. For the reason I'm just stating. They're looking to actually at a fast food chain or at a sit down restaurant.

They're looking to cross sell you on alcohol, appetizers. Drinks, dessert, or fast food, they don't. That's the difference. They just want to get you in the door at a restaurant. Now listen, I'm not against any of that. Quite frankly, about three, four years ago, I started to step our game up a little bit in the Sheehan family.

I got the shrimp tail cocktail in the beginning to start off the meal. I got the appetizers, not just the free chips and salsa they may get. I started to order a drink, a margarita, and I started to get a dessert. So, I mean, I may be the perfect client for them, but the idea is, is that these companies, I'm using restaurants as an example, struggle.

And this just doesn't happen on a company side of 50 employees or of a restaurant of 100 employees. But Fortune 500 companies with tens and hundreds of thousands of employees, you start to magnify that out in the example that I gave, and let's say their average salary is a hundred thousand dollars a year.

Well, a hundred thousand dollars salary is almost $50 an hour. So now for $50 an hour, and they now have to pay for two more days, that's $800 more that the employer has to spend for those extra sick days. You multiply that by a hundred thousand employees. That's costing that company now 80 million yet again.

I understand why companies and people are leaving California. I get it right when it's costing 80 million more dollars. This of course assumes everybody's making 100, 000 a year. That's the average salary. Obviously some making more, some less, and that assumes everybody takes those extra two days off and take six day sick days.

All right. I'm just saying, assuming everybody absorbs that idea is these are impacts that happen from changes, law changes that happen. These are fiscal policy changes, law changes that impact businesses directly, that impact stock markets, financial markets. I'm not against them. I'm just talking. I'm just letting you know.

I mean, it's funny because we have a lot of clients that listen to this, prospective clients that listen to this. Also, a lot of advisors are listening to this. So I know I'm not insulting the advisors here, but for clients and prospective clients, I'm here to say that I'm taking a position of just FYI for your info.

And if you want help, Relating this to your situation, if you want to just continue the conversation, we want to see how this impacts our portfolio. How can you be hedged against something like this? I'm not trying to tell you to start voting that first Tuesday in November against these type of policies.

I'm just here to say there are impacts that happen that may not directly impact you in your employment. But it will directly impact on you going out on a Friday night for dinner and having to wait a little longer. You always say, man, the economy can't be that bad. Look how long I'm waiting for food.

Well, actually it could be because they don't just don't have enough service to serve you. They have room under the roof, but they don't have enough room in the kitchen. Not enough people to cook. And then once the food is ready, All right. It's fine dining. They want to deliver it to you. This is the cost increases that you will see and why we discuss this inflation.

If you want help with this, you want us to relate this to your situation. You want us to answer the questions that you may have and what you should be doing to put your portfolio in a situation that can overcome these obstacles. Give us a call. We'd love to add value to your situation. We'd love to give you one to two meetings, one to two hours of our time at no cost folks.

Our phone number is 855 855 8555. 9632526 that's 85596 falcon like the bird where we can answer these questions for you and point you in the right direction of what you should be doing. Because these changes that are going to consistently happen, not just in the state of California, but on the federal level as well, will impact you one way or another.

It can positively impact you or your kids that are just looking for summer jobs. This low unemployment is fantastic. It's very easy for people to get jobs. Beggars can't be choosers. Employers are having to settle. So how can that impact you? You might get worse service. Do you notice that when you call an 800 number recently?

You used to be going to India and getting a foreigner or Philippines on the line. And you would complain about that. Well, now they're domestic and you're still complaining. Why? Well, maybe the quality is not as good. Because that call center has to pay a little bit more per hour. Maybe that's less people picking up the phone calls.

Don't you notice wait times are a little bit more? This is why you've actually seen people even increase AI. How annoying is artificial intelligence in customer service? I heard there's companies like Tesla that's been testing it out to solve your issues. I don't, I've never tried it. I, I don't know how that's going.

I haven't heard much feedback on it, but is that really what you want? Well, that's, what's being forced based on these changes that are happening. Companies are forced to enhance their tech stack, their technology to help people like you. By the way, folks, if you're just joining me, you're listening to Gabriel Sheen certified financial planner, your host of more knowledge, more wealthier on every weekend, talk about all important topics of personal finance.

This could be part of the cyclical moment. Maybe you'll start seeing more. Unemployment. Maybe. And you see it. Every McDonald's you go to, they have this little kiosk. There are some people that use that kiosk. The fact that even 1 people use it, which by the way. I know driving from California to Nevada, sometimes they have one and I think it's prim.

And they're like, nope, we won't help you. You gotta use the kiosk. Like, it's pulling teeth. They'll purposely have you wait just so you use that kiosk. And that is always busy. Well now, McDonald's is saying, hey, I'll match you. If you want to put all these higher minimum wages, you want to have extra time off for the staff, no problem.

We'll just replace the staff with robots. With the kiosk to take the orders. Mobile app. They've incentivized people on mobile apps where they'll give you free food. Hey, you get extra points for a free happy meal. Hey, we'll give you, instead of paying 3. 50 for fries, we'll give it to you for a dollar with any purchase of a dollar.

Just the fact that you bought it on the app saved us money not having to waste the time of our employees. This is a long winded way, starting with inflation, to tell you, with the changes that are happening today, it will impact the way our life is done. It doesn't make sense to have a staff member send a reminder email to a client anymore.

Here at Falcon Wealth, we incorporated two years ago, automation to do that. They get an automated email saying, Hey, you have a reminder coming up next week. Hey, you have a reminder, or a meeting coming up tomorrow. These are impacts that happen. That has saved us money. Oh, by the way, more efficient, the machine, the AI, doesn't make mistakes on names accidentally.

Or a typo in the body and paragraph of the reminder email. Right, so there's benefits to this. Sure, there's upfront costs. But the ongoing is great because guess AI.

Robot, you know, who doesn't need a break or need a lunch or cover somebody's shift because they have to leave early. You get what I'm saying? So there's going to be continuous enhancement which goes on into our economy. Consistent enhancement in Fortune 500 companies and even dinky old 50 plus staff of Falcon Wealth Planning, which, oh, by the way, considers us a large investment firm, but the registered investment firm.

And so the idea here is to make sure that your portfolio and your situation, you understand the impacts of what's going on around you, how it affects you, whether it's you're into cars, whether you're into travel, whether you're into grandkids, how does this impact them and their future? This is where we add value.

We're not just money manager. We're not just here to say, give us your money so we can invest it. We're a true financial partnership, and that just not means helping you, but your legacy and your family, and pointing them in the right direction, what you should be doing. It's something as simple as saying to people, you know what, education may be free here in the next few years.

529. There's a lot of corporations that actually pay for it already. They pay fully for your school. ASU and Starbucks has this fantastic partnership. You can be a part time barista and get a free education. You have a lot of these auto companies do it. Hotel companies do it. Financial companies do it.

They'll pay for your education. So the idea is putting yourself in a position where you're just increasing your overall wealth. Not just for you, but your kids and your grandkids. Making those wise decisions of the future, not choosing a career path that's not going to exist in a few decades from now, folks.

That is all the time we have. This was a fun, fun show. If you have any questions, please reach out to myself or any one of my colleagues here at Falcon Moth Planning. Our phone number is 855 963 2526. That's 855 96 Falcon. Like the bird or visit our website at falconwealthplanning. com that's falconwp. com for short where you can get this episode and any one of our previous episodes as well and sign up for our podcast and spotify as well where we can go over these consistent topics as you can get previous episodes there and then our knowledge center.

We have a YouTube channel. You get a bunch of videos there, but we're able to address those problems you have. And if you want me to record a video on there, or if you want me to address the questions that you have online, please send your inquiry to radio@falconwp.com. That's radio@falconwp.com for short.

Folks, thank you for tuning in with us. Want you to enjoy your weekend. Have a great week and God bless.