Black Friday 2011: Consumers aren't lacking in confidence. They lack cash.
Black Friday 2011 deals are here but economists say consumers are hesitant. The problem isn't psychological; it's financial. Seventy percent of the economy depends on consumer spending, but 80 percent of families are experiencing declining wages. Raising the minimum wage would help.
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That has a ripple effect, which fuels a vicious cycle. A Wall Street Journal survey of economists showed that 65 percent cited lack of demand as the primary impediment to increased hiring.Skip to next paragraph
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An October survey of small businesspeople found that 28 percent of owners reported that poor sales is still their top business problem, and nearly a fourth of respondents didn’t see the situation improving in the next six months. No demand means businesses don’t hire; fewer jobs and paychecks lead to less consumer demand.
The solution is clear (if broad). We need to slow foreclosures and restore the value of our houses, create jobs to re-employ the 24 million people who are currently un- and under-employed, and allow our young people to attain education without mortgaging their futures.
Those are tall orders. Fortunately, we can also implement some quicker reforms to put money into our pockets and trigger discretionary consumer spending.
ANOTHER VIEW: Do we really need a minimum wage?
Big corporations are sitting on mountains of cash, and during the economic recovery nearly 90 percent of growth has gone into profits rather than wages. Workers need some wage increases. The US could start by raising the minimum wage, the inflation-adjusted value of which is now more than three dollars lower than it was in 1968.
In numerous studies, researchers have countered the argument that a higher minimum wage leads to job loss. Cities and states with higher minimum wages adjacent to those that continue to squeeze workers show no evidence of lower job rates. In fact, studies of states with higher minimum wages have found that employment in small businesses actually grew faster than in states that leave workers struggling.
Another step: On December 31st the federal Emergency Unemployment Compensation Program is set to expire, threatening to push millions of unemployed people into further financial stress and trigger as much as a 1 percent fall in US economic growth.
Low consumer confidence can affect the entire economy. But it is insulting to those who have not seen the “recovery” economists declare to suggest it is somehow psychosomatic. Before working people in this country can dash out to the mall to do holiday shopping on “Black Friday” they need not just a boost in confidence but in real wages.
Anastasia Christman is a senior policy analyst at the National Employment Law Project.