"Retail is suffering because the middle classes have lost $1,355 trillion in income since 1970"
http://www.smashcompany.com/business/retail-is-suffering-bec...
The end goal should be improving the median quality of life, through improving the efficiency of factors of production -- lower cost of goods... not through the expectation that the wages should arbitrarily grow linearly with GDP.
Around one hundred percent. https://data.oecd.org/lprdty/gdp-per-hour-worked.htm
But it's not just warehouses: efficiency changes have been top to bottom throughout the world. Things like Six Sigma, lean manufacturing, the Toyota Production System ... these have been massive drivers of efficiency nearly everywhere.
I worked manufacturing IT and was able to watch the assembly process. It's frankly amazing and us programmers have lots to learn. The worker that bolts widget A to widget B doesn't just have a box of bolts and a wrench. She pre-places the bolts in a pokayoke tray and places test templates against A and B. Are they misdrilled? Push a button on her console and they are diverted off the line for rework. Good? Templates off, place the assemblies in a work tray that can hold them in exactly one - the correct - configuration, pokayoke tray goes on and nuts screwed to bolts.
The count of nuts and bolts in her station are measured based on flow in/flow out and a runner brings and places more just in time to prevent her station from running out but not before they accumulate at her station. The environment and process is designed to absolutely minimize operator motion, with a supervisor monitoring and filling out time observation sheets to look for wasted effort and opportunities to change.
When I talked with some plant supervisors it was incredible: they were able to point to a manufacturing station and say "this worker takes twelve seconds to execute these five motions", and you could pull out a stopwatch and that was exactly what you would see.
Another way of saying that it grew more slowly than other groups is that it shrank.
edit: not being sarcastic, I just really admire effective communication (to whoever downvoted me </3)
Another way of phrasing it: child 1 used to be the tallest. The other children grew and now 1 is the shortest. The objective height of 1 may have increased, but relative stature declined.
The figure to think about is purchasing power. How much stuff can you buy with your money, whatever the numerical quantity of that money is. Purchasing power has been roughly flat for the past 40 years for the middle class [1]. The economy is growing, but almost all of that growth is captured by the upper class.
Things that the middle class mostly spend their money on, healthcare, education, housing - has all been getting disproportionately more expensive too. So it's not just that the effective earnings aren't increasing, it's also that the things middle class families spend on are getting more expensive.
It's complicated to think about, but that's partly why you shouldn't trust pithy analogies that try to make stagnant income for the middle class seem acceptable. As the saying goes - for every hard problem there's an answer that's simple, elegant, and wrong. "Everyone is getting richer, just at different rates, like your children grow at different rates" is one such answer. In reality, your upper class child is gigantic, fat, and eating more while the other children haven't developed in years.
1 - https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
This seems like a propaganda term to endow the more aptly named 'working class' with a more prestigious title. In any case, the point holds: your argument about inflation is so clear precisely because you can explain it against the backdrop of the height analogy. It is a really neat way to explain the situation, even if it mostly explains why OP is wrong.
This is the purchasing power of the currency over time. Here is a calculator for that: https://www.measuringworth.com/calculators/uscompare/ and here: https://www.officialdata.org/us/inflation
This gets called inflation. (People do argue about what inflation is and what they argue for depends on their economic ideology – there's the inflation of prices in a currency and the inflation of a currency itself through pumping more of it into the system, so-called quantitative easing)
https://en.wikipedia.org/wiki/Inflation
Put simple, height is measured using a fixed or absolute measure (inches or centimetres or whatever) – a $ in 1970 is not the same $ in 2020, it's relative – but we know this intuitively anyway because when we look at old prices (for most things) they are way less.
What matters is that U.S. middle-income share of aggregate income fell from 62% to 43% – is this not the usual measurement? This is what people mean by "the middle class is shrinking". It doesn't matter if the average middle-income has increased, what matters in this context is the overall purchasing power of the middle class.
Even adjusted for so-called inflation you have to wonder does your 2018 $ go as far as your 1970 $ ? How would we measure that? How about we look at household debt? According to this site “In 1983, the top 5 percent had 80 cents of debt for every dollar of income, while the remaining 95 percent had 60 cents for every dollar. By 2007, after decades in which an increasing share of income flowed to the top, the situation had reversed. The top 5 percent had 65 cents of debt for every dollar of income, while the remaining 95 percent had $1.40 in debt for every dollar. The situation remains skewed today.” https://tcf.org/content/commentary/graph-household-debt-and-... – this suggests that a $ dollar does not go as far today and that today maintain a middle-income lifestyle the average family has to go deeper into debt.
( You'll note that according to the New York Fed total household debt has ballooned from a fraction of a trillion to over fourteen trillion from the '60s to the 2010's https://www.newyorkfed.org/medialibrary/media/research/staff... )
2: It's interesting to look at debt, but net worth gives a more complete picture as larger assets can offset larger debts. On this front things we're looking pretty rosy for the median US household up until 2007, when the Great Recession roughly halved household net worth and hasn't seen a recovery since: https://www.financialsamurai.com/the-median-net-worth-of-us-... - the "good news" is that things aren't worse than where they were in the 60's in inflation-adjusted terms. The terrible news is the truly astonishing racial gaps in household median net worth: https://www.taxpolicycenter.org/fiscal-fact/median-value-wea...
I still think it's odd to argue that the middle class on aggregate are doing better when clearly they are not.
Besides, this article is about a luxury retailer, not the kind of place middle-class Americans go to.
Keep in mind how the concept of an "anchor tenant" works.
For instance, Sears had leases that were as long as 99 years long, with rates that were as low as one dollar per year. (No joke: https://www.denverpost.com/2019/09/26/kmart-monaco-evans-den...)
The way that the retail model was structured, back in the 70s and the 80s, was that the anchor would bring buyers into the area, and the landlord would make the lion's share of their income off of the stores around it, such as restaurants, jewelry stores, movie theaters, etc.
If all that makes sense, you can see that a lot of these landlords would actually be thrilled to see these department stores go away, because then they could re-purpose the space into something that generates more money.
Fry's Electronics, Sears, Macy's... they're all an example of this.
I used to work for Sears corporate. Sears got some incredibly good deals on leases. They were known to sign leases that are 99 years long:
https://www.thedenverchannel.com/news/front-range/denver/cou...
This creates a "tug-of-war" between the company that owns the building, and the company that is leasing it.
For instance, in the article posted above, Sears was paying $33,333 a month for their lease.
If the lease is 99 years long, and if the owner of the property can lease it to someone else for $50,000 a month, that creates a problem for the owner.
Basically the owner is in a pickle: they want to lease it to someone else, but as long as Sears is paying the lease, they can't.
So this creates a tremendous incentive for the property owner to buy out the lease holder. It also incentivizes Sears to let the property fall into disrepair. For instance, in the article I posted above, you can see that the community was eager to see something done about that derelict boarded up building.
Here's some math:
1) Sears is paying $33,333 a month on a 99 year lease
2) The property's market value is $50,000 a month
3) There's 50 years / 600 months left on the lease
If you do the math, that lease that Sears has might be worth ten million dollars or more.
Again, pure speculation on my part, but I personally believe that a lot of companies are getting wise to this scheme.
If you've ever gone to your local mall, and wondered why Sears and Roebuck is still open when there are four customers... well now you know.
Just because it squeezed Neiman Marcus, doesn't mean other stores could afford it.
Of course, everything has changed now. Will landlords have to lower their rents in response? Maybe.
The point of NM et al. was that they currated what you could not obtain yourself (outside of a private buyer's agent and/or flight to NYC).
With the internet... suddenly manufacturers could efficiently sell direct to consumer. Or at worse, via something like Huckberry that has far lower overhead.
The value proposition of brick and mortar curration evaporated, and the only thing that kept them going was generational intertia and loyalty. And the problem with an aging customer base is eventually they age... terminally.
Financial games and leverage may have exacerbated things, but you can only shrink for so long.
[0] https://www.vox.com/2015/4/1/8320937/this-26-year-old-grad-s...
They had a black t-shirt with some rhinestones (presumably) on it for $5000. It was probably from some famous designer, but still .. $5000 for a t-shirt that had been gone over with a BeDazzler?
I mean that's it in its entirety right? Otherwise by similar reduction, a Picasso is just some acrylic on canvas.
But what percentage of the general public can spot a Nieman Marcus buy from a thrift-store find?
If Miuccia Prada herself sewed together a tshirt and painstakingly put on the rhinestones with much thought, then no one would be questioning the price.
When I started interviewing out of grad school, I REALLY stretched to go buy a nice suit from Neiman-Marcus, a Valentino at $700 in 1995. The suit was gorgeous and the tailor at N-M did a beautiful job adjusting it to me.
I could be considered, barely, middle-class--certainly the lower end at best. The suit absolutely paid for itself many times over--that's a different set of stories.
That Valentino is now closer to $5,000. Inflation says that Valentino should be about $1,200. I suspect that even at $1,200 most students couldn't stretch for it today.
So, is Neiman-Marcus to blame for going further upscale given that they probably can't make any money in the middle anymore?
You made one purchase at N-M 25 years ago, and from that single experience, you're generalizing the entire merchandising strategy of the brand ever since then?
And your premise is false anyway. The 1 and only Valentino suit currently available at neimanmarcus.com costs $1173, which is less than $1200:
https://www.neimanmarcus.com/search.jsp?aq=valenti&dq=valent...
My point was that Neiman-Marcus had a product (properly fitted business suits) that was actually (probably upper) middle class. And that product, in fact, served its purpose really well.
People still underestimate the effect that an excellent suit has on people's perception of you in business. Being tech, I normally cruise around in really casual wear. However, investor meetings demand something a little more upscale so I'm pulling out my nice suit. I chuckle at the difference in behavior of the people around me (both employees and strangers) when I show up for work in a suit.
I'm not disagreeing with anything you said on making a good impression but that doesn't change anything on the fact that Neiman Marcus has never been for middle class shoppers. A one-off purchase does not make a customer base.