Income inequality begins to hit business in the pocketbook

[unhappycamper]

http://www.latimes.com/business/hiltzik/la-fi-mh-income-inequality-20140204,0,2565238.story



Income inequality begins to hit business in the pocketbook
By Michael Hiltzik
February 4, 2014, 3:29 p.m.

There's a new element in the debate over U.S. income inequality, and it's one that may actually get our political leadership talking about ways to address the issue: businesses are beginning to notice that their middle-class customers have disappeared.

The consumer market is beginning to look like a sandwich without meat in the middle--there are enough wealthy customers to keep the luxury market humming along, and a growing demand for cheap no-name and other bargain products.

The phenomenon has been reported by Matthew Yglesias of Slate.com and more recently by Nelson Schwartz of the New York Times. As we reported here and here, it's been building for years. But it really picked up steam after the last recession, when the imbalance in income between the top 1% and everyone else has really taken off.

Most economists view the stranglehold of the wealthy on U.S. income and wealth as a problem--it leads to slower overall growth and more volatility. As economist Jared Bernstein has observed, it also promotes the creation of asset and credit bubbles, which have a tendency to burst, taking the rest of the economy with them.

[global1]

1. It's Not Rocket Science Here....

When people don't have money to spare and only can afford the basics - food, living space, utilities, etc - they're not going to be doing much shopping. Do you think that is why many retail stores are closing or corporations are paring down their locations?

I was wondering when this was going to catch up with the corporate world.

The solution is relatively easy for employers - raise the minimum wage, pay people more, put more money in their pockets to spend - and that money will come right back to them.

When people have a little money - they go out to eat again; they go to see movies; they go on vacations; they consider beautifying their surroundings; they shop; they spend the money. When people spend money - they deplete inventories that need to be replenished thereby cranking up the manufacturers to produce more. Manufacturers need to hire more people - that themselves will be making some money to spend and the cycle repeats itself. More taxes are raised in the process. Sales tax, property tax, income tax. More money in the coffers of government - local, state and federal. Economy starts churning.

Employers by cutting back on employees and by not paying an adequate wage have created their own problem - no one to buy the stuff they sell.

I was wondering when this would start to catch up with them. So when will the pressure be brought to bear on a do nothing Congress to create a jobs bill; to push for infrastructure development; to raise the minimum wage?

I think we might be coming full circle now and the reality has hit. There is only so much blood you can squeeze from a turnip.

Oddly enough it looks like the push will probably come from the employers and not the employees - to jump start the economy.

It's not rocket science. There is an easy solution. This has the potential to break the obstruction in Congress as the pressure will be brought to bear on the Repugs to do the right thing.

[diabeticman]

2. GOOD now maybe these Repub jerks will actually allow a raise in the min wage. They claim they

are protecting these businesses well these businesses are screaming we can't survive without customers so give them more money so we can get rich again.

[Crewleader]

3. k&r

[Warpy]

4. Begins? What planet is this guy on?

He needs to leave his ivory tower office and start driving around his city and looking at all the vacant storefronts in strip malls.

Income inequality has hammered small business for decades. We're now in the end game, fewer new small business being started because there is no customer base left to sustain them.