As residents of Pullman and Moscow debate the future of retailing in the Palouse region, they need to read the short article, “The Middle Class on the Precipice,” by Elizabeth Warren in the January-February 2006 online issue of the Harvard Magazine (See www.harvard-magazine.com/on-line/010682.html). Warren is Gottlieb professor of law and faculty director of the Judicial Education Program at Harvard University.Dr. O'Rourke knows what he's talking about. He is a retired professor of Agricultural Economics and the former director of WSU's International Marketing Program for Agricultural Commodities and Trade (IMPACT).
Warren shows that a typical family with a single income earner (usually the husband) in the 1970s had a total income of $42,450 compared to $73,770 for the typical dual-income family in the early 2000s. All numbers were inflation-adjusted to 2004 dollars.
Because of dramatically higher fixed costs for home mortgage, child care, health insurance, car and taxes, the 2000s family had slightly less discretionary income than the 1970s family, $18,110 versus $19,560. Hence, many middle-class families live on the edge of an economic precipice.
Warren’s discussion is very relevant to the current retailing debate. Between the 1970s and the early 2000s, as their discretionary income has shrunk, consumers have been presented with thousands of new products that will make life more convenient, comfortable, entertaining, etc., all aggressively promoted by the great American advertising machine. Discount retailers such as Wal-Mart, Costco, Winco, Target, etc., have become successful by making an unprecedented range of products affordable to more consumers.
Families on the Palouse face the same income constraints and are susceptible to the same promotions as families in the rest of the nation. They have the same appetite for wider choice at discount prices. If they cannot meet those wants on the Palouse, they will simply take their business elsewhere. Any discussion of the future of retailing in the Palouse needs to consider broader societal changes as well as local
concerns.
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1 comment:
This actually flies in the face of people who advocate minimum wage. As you can obviosly see, one more person is working but only $1450.00 is gained in discretionery income. Inflation follows wage increases. The market always adjusts itself to the consumer, not the other way around.
This nicely leads to my next point. Wal-Mart helps lower and middle class families attain what used to be only available to upper income families. Nintendos, TV's, matching towels, winter coats, swim suits, large packages of toilet paper are now attainable for a class of people who were accustomed to doing without. As silly as it sounds, when I was growing up, those types of things were status symbols. Now those items are so readily available to so many consumers that we all consider them staples in our households. Wal-Mart and their competitors helped make them staples.
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