How are you feeling about the economy these days?
Does it comfort you to know that luxury items are flying off the shelves of high-end retailers while Walmart has had to stock smaller packages because its clientele doesn’t have enough cash on hand to afford its usual larger packages? Do you think the big spenders are going to save the economy? They’ve been enriching themselves while crushing the middle class for some time now and have more money then ever, so what’s the hold up?
Forgive my sour mood. I’ve been reading the news, and it isn’t good.
The ever-insightful Displaced Plainsman points to this story from the New York Times:
By Stephanie Clifford
Nordstrom has a waiting list for a Chanel sequined tweed coat with a $9,010 price. Neiman Marcus has sold out in almost every size of Christian Louboutin “Bianca” platform pumps, at $775 a pair. Mercedes-Benz said it sold more cars last month in the United States than it had in any July in five years.
Even with the economy in a funk and many Americans pulling back on spending, the rich are again buying designer clothing, luxury cars and about anything that catches their fancy. Luxury goods stores, which fared much worse than other retailers in the recession, are more than recovering — they are zooming. Many high-end businesses are even able to mark up, rather than discount, items to attract customers who equate quality with price.
“If a designer shoe goes up from $800 to $860, who notices?” said Arnold Aronson, managing director of retail strategies at the consulting firm Kurt Salmon, and the former chairman and chief executive of Saks.
The rich do not spend quite as they did in the free-wheeling period before the recession, but they are closer to that level.
The luxury category has posted 10 consecutive months of sales increases compared with the year earlier, even as overall consumer spending on categories like furniture and electronics has been tepid, according to the research service MasterCard Advisors SpendingPulse. In July, the luxury segment had an 11.6 percent increase, the biggest monthly gain in more than a year …
… The success luxury retailers are having in selling $250 Ermenegildo Zegna ties and $2,800 David Yurman pavé rings — the kind encircled with small precious stones — stands in stark contrast to the retailers who cater to more average Americans.
Apparel stores are holding near fire sales to get people to spend. Wal-Mart is selling smaller packages because some shoppers do not have enough cash on hand to afford multipacks of toilet paper. Retailers from Victoria’s Secret to the Children’s Place are nudging prices up by just pennies, worried they will lose customers if they do anything more.
While the free spending of the affluent may not be of much comfort to people who are out of jobs or out of cash, the rich may contribute disproportionately to the overall economic recovery.
“This group is key because the top 5 percent of income earners accounts for about one-third of spending, and the top 20 percent accounts for close to 60 percent of spending,” said Mark Zandi, chief economist of Moody’s Analytics. “That was key to why we suffered such a bad recession — their spending fell very sharply.”
Considering that, in the past 30 years, the nation’s economic growth has gone to the top one-hundredth of one percent, who now make an average of $27 million per household, I guess I’m a bit skeptical that they are going to suddenly become generous and lend a helping hand. Oh yeah, what is the average income for the bottom 90 percent of us? $31,244.
The Displaced Plainsman summed it up pretty well in his comment section: “As soon as hope runs out, people get angry. I see hope leaving around the same time that last roll of toilet paper is gone.”
Who can argue with that logic?
As Sarah Jaffe points out at AlterNet, my skepticism is well-placed:
With all the focus on the drama surrounding the debt ceiling, and the much-too-late focus on the economic pain the final deal’s austerity agenda will inflict, items that really matter—jobs, jobs, and jobs–have been all but ignored.
But a new report by the National Employment Law Project looking at the jobs created since the recession officially ended brings the focus sharply back to jobs, and its findings are frightening: 73 percent of the jobs created since the supposed economic recovery began have been in low-wage fields, where workers make between $7.51 (the national minimum wage) and $13.52 an hour ($15,621 to $28,122 a year for full-time).
In contrast, 60 percent of the layoffs from the Great Recession were in what the report calls midwage occupations, those that make between $28,142 and $42,973 per year.
“But in the weak recovery to date, employment growth has been concentrated in lower-wage occupations, with minimal growth in midwage occupations and net losses in higher-wage occupations,” the report notes.
This report further cements the argument that progressives have been making for a while: that corporations and the wealthy have bounced back in large part on the backs of the working people of the U.S., squeezing more work for less money out of American workers while returning to record profits, salaries and bonuses.
An economy built on low-wage jobs is inherently unstable and bad for everyone, not just the people struggling to feed themselves and their families on $7.51 an hour.
Continuing the Recession
Replacing living-wage jobs with low-wage jobs is an excellent way to continue sluggish economic growth. It’s not rocket science: people who make less money have less money to spend, and less spending means less incentive to hire. It’s the vicious cycle of recession, and the reason why government spending has been necessary in the past to put people back to work.
And those effects are already visible—consumer spending was down in June and barely grew at all, only 0.1 percent, in the second quarter.
But misguided Washington obsession with deficits is going to lead to cuts that will directly hurt the most vulnerable—and that includes the working poor as well as the unemployed. As Joshua Holland wrote:
“Last year, with the private sector economy continuing to slump, an analysis by Moody’s Analytics found that almost one in five dollars in American consumers’ wallets came from one government program or another. The public sector has already seen deep cuts, and that trend will only worsen with Washington’s relentless focus on deficit reduction.”As the government shrinks its spending, it’s worth noting that workers in low-wage jobs are often dependent on government programs even while they work. Wal-Mart, for instance, has long been criticized for relying on the government to make up the slack between its rock-bottom wages and what it actually takes for a person to survive. In 2004, a study in California found that Wal-Mart employees relied on food stamps, Medi-Cal (the state version of Medicaid) and subsidized housing to the tune of $86 million annually. With an economy made up of low-wage workers and unspecified cuts still to come, those workers will have to cut back on their already bare-bones spending just to continue to survive.
Real economic recovery will require not just job creation, but living-wage jobs that allow working people to spend and stimulate growth. A crisis of demand won’t be solved by keeping people poor.
Do yourself a favor(?), and read the rest of the article.