How we consume shapes the market

This is the final post in a 3 part series.

Recently, a French friend of mine was describing his astonishment at the sheer number of restaurants where he lives in the US. He said that where he lived in France there are far fewer restaurants than in the US. Eating out was generally reserved to celebrate special occasions with friends and family, whereas it seems people in the US go out to eat much more frequently. He posited that this difference in how we consume has given rise to the number of restaurants that compete based on lower prices. Perhaps if we ate out less frequently and for the purpose of celebrating a special occasion we would likely be willing to spend more on a quality meal than if we are just eating out due to habit or convenience. If we valued the quality of the experience, the service, the goods that we purchase over the accumulation of stuff, perhaps we would be willing to pay more. If we valued the work and worth of our fellow humans perhaps we would stop looking for the lowest price. 

If we change how we consume so that price isn’t the determining factor in our purchasing decisions then perhaps the business model that drives down prices would become obsolete. Could Walmart, notorious for their low wages and poor working conditions, thrive in a society that values human dignity over accumulation? In our current economic system, one can hardly blame employers for not wanting to pay higher wages. However, if we as consumers adopt a different set of values, businesses would follow suit and the argument about minimum wage would likely disappear. 

 

The story behind "value" shopping.

In my last post I wrote about how the argument around the minimum wage is tied to our consumption habits. I argued that paying less for stuff isn’t as inherent as we might think. This post, let’s look at the story behind why we want to pay less.

One of the fundamental reasons we want to pay less for what we buy is that we want to be able to buy more with what we have. We are constantly barraged with media pushing us to buy more. From television commercials, to ads on Facebook (and now Twitter), to the billboards along the freeway and in our bus shelters, and to the Coke machines in our children’s schools, we are encouraged to spend money; to consume. We are constantly, and continuously, barraged with messages about consumption. And consume we do.

To better understand how we consume, look at the self-storage industry.  According to the Self-Storage Association, self-storage businesses like Public Storage generated over $24 billion in revenue in 2013. We consume and accumulate so much stuff that we have propelled a whole industry as the things we have accumulated overflows our homes and garages. To put this in perspective, the self-storage industry generates more revenue than the national economies of 88 of the poorest countries in the world. It is quite apparent that we are a nation of consumers. Coupled with the fact that most of us, as employees of someone else, have relatively finite financial resources, spending less on what we buy in order to buy more has a certain kind of logic. But what if we choose a different path? What if we choose relationships and nature and experiences over consumption? What if we choose to value something other than more consumption in our purchasing decision?

How we consume and the minimum wage

Raising the Minimum Wage and Consumption

Part 1

I was having a friendly argument the other day with someone in response to San Francisco raising its minimum wage to $15/hr. It was the classic liberal-conservative argument; me arguing that companies should share more of their profits with their employees as opposed to excessive pay for executives, she questioning why we should pay someone flipping burgers $15 an hour and arguing that many small businesses would cut back employees, or shut down completely, because they cannot afford to pay the higher wage. Neither of us budging from our stance. 

I don’t dare say this out loud but my response to her argument is that I have little sympathy for companies that are based on a business model that requires low wage workers.  You might think I am awfully crass to criticize small business owners who are just trying to make a living in their own right. After all, they are just trying to survive in a market system that often requires prices to be as low as possible, right? In trying to make sense of my own turmoil about my insensitivity, I started to think more about the issue of a business model based on low cost inputs (labor, materials, whatever). 

Americans, generally speaking, prefer paying less for something if we have the option. This is a no brainer, right? The largest employer in the US, Walmart, has thrived on selling products on the cheap.  The largest online retailer, Amazon, has beaten the competition doing the same. Box stores have thrived because they can offer hardware, or paper, or stuffed animals at lower prices than smaller businesses. Given this economic climate, it makes sense that companies would want to maintain low wages in order to be competitive with lower prices, because Americans value lower prices! But what if we valued something else, why do we need to pay the lowest possible price on the goods and services we buy?

You might be reading this thinking, “this is common sense, of course I want to pay less for what I buy, what kind of moron would spend more for something if he didn’t have to.” Yet, often times we choose to do the opposite. I might go to a gas station near my house that charges a little more, versus one further away, for the convenience. Many people spend more on organic food even though outwardly, and sometimes even in taste, there is little difference. People choose to pay significantly more for name brand jeans even though there isn’t any functional difference to their generic brand counterpart. In each of these cases we value something other than getting the lowest price. Finding the lowest price isn’t as inherent in our decision making process as we might think.  

Next: The story behind paying less..