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Disposable People have No Disposable Income

by Miki Saxon


A few years ago I asked why companies thought they could cut pay, benefits and hours and still expect their workforce to stay engaged and give a damn about the company’s success.

The answer, of course, is they can’t and the employees don’t.

Even as they cut pay and hours, retailers that sell “value pricing” still expect people to buy.

A good example is Wal-Mart, long known as the poster child of low compensation and king of the part-time workforce.

But in earnings calls the blame is on the costs that are going up with no mention of wages going down.

“Their income is going down while food costs are not,” William S. Simon, chief executive of Wal-Mart, said of the company’s customer base. “Gas and energy prices, while they’re abating, I think they’re still eating up a big piece of the customer’s budget.”

And down it has gone.

Adjusted for inflation, the national minimum wage reached a peak in 1968 and has lost about 6 percent of buying power since it was last raised in 2009.

I sometimes think Henry Ford was the last executive who understood that you can’t run a consumer economy if the consumers aren’t paid enough to buy stuff.

Ford astonished the world in 1914 by offering a $5 per day wage ($110 today), which more than doubled the rate of most of his workers. (…) The move proved extremely profitable…

Obviously, Wal-Mart has never had an executive who understood that simple principle.

Congress doesn’t either.

Simon says income is going down, but apparently he can’t make the connection between that and his company’s actions.

Simon and his ilk know that people need disposable income to buy stuff, but for that to happen they need to stop treating their people as disposable.

Flickr image credit: Bernard Pollack

One Response to “Disposable People have No Disposable Income”
  1. MAPping Company Success Says:

    […] month we looked at the economic dichotomy of having a consumer-based economy while simultaneously reducing […]

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