Your post is thoughtful. Thanks for taking the time to write it.
Personally, I see the benefits of scale allowing huge companies to crush smaller ones. This has been good for shareholders and top executives; bad for small companies, and I think bad for workers too.
I would like to see a couple of things:
- Higher tax rates on the highest income (like >$500K, which is top 1%)
- Higher tax rates on the biggest companies, and prevent them from getting much lower tax rates from tax inversions (switching corporate domicile to low tax jurisdictions offshore)
- use that money to fund lower tax rates on small businesses and the lower income households
I'm not super old. But in my lifetime I've seen a big change in this economy. The median household income ($52K roughly) is no longer sufficient for a comfortable life, retirement savings, and educating two kids. That is a damning situation.
What really upsets me is that I see folks in the bottom 50% fighting each other, tooth and claw, for scraps. While the top 1% - actually, the top 0.1% - fund media campaigns that successfully convince the bottom 50% that their well being depends on the rich getting richer.
See the charts above on income inequality. We are at levels not seen since the roaring '20s, right before the Great Depression. That's not right. In my view.
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Quote de jyl
So how are Nordstroms, Macys, Target, Kohls, Walmart, and all the other department and discount stores still in business and quite profitable? Maybe they just out-competed Gottschalks?
That's exactly what they did!
Gottschalks had annual sales volume of about $700 million. Wal-Mart is somewhere around $250+Billion, Target is around $82+Billion, Macy's/Federated is around $28 Billion.
In order to stay afloat, you need to be profitable. That can be done by increasing revenues or decreasing expenses or some of both. At Gottschalks, we were buying around $800 million of inventory per year where as Walmart is purchasing around $750 BILLION. They are able to get purchase discounts that simply don't exist for the little guys. Walmart is able to dictate prices buy purchasing entire supplies (in China). By the way, Walmart, Costco, and others are getting great discounts on inventory by paying very low prices from merchandise produced in low-wage countries.
So, where can we cut expenses - Payroll is the next most controllable expense and that's what we were forced to do at Gottschalks. It's quite possible that this affected customer service and then ultimately reduced sales. It's also quite possible that with inflation and rising cost of living, people went to the big stores and bought cheaper stuff. As minimum wage has increased over the years, many smaller companies did not survive and even medium size companies (like Gottschalks) didn't make it. We have far less choice than we had in the past and as we continue to squeeze businesses, we are left with big-box stores and that's it.
jyl - you have stated in some of your posts that "I'm firmly on the "wait and see data" fence here." I don't think you need to wait as there is plenty of history to review. We used to have 1 income families and that was sufficient. We used to have all kinds of services (i.e., full service gas stations, milk delivered at your door, etc...). Raising the lowest incomes to keep up is not the answer as it just keeps pushing prices up and service levels down. I believe that we need to reduce wages at the top and I would do that by limited the maximum tax deductions for payroll.
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