What killed Red Lobster? Something did because, according to LZ Granderson at CNN,
Darden reported a 37.6% drop in earnings per share?in the first quarter of the current fiscal year compared with a year before. Red Lobster was the biggest culprit. The magazine reports that the restaurant’s revenue dropped 4.9% during the second quarter. Darden this month announced plans?to separate Red Lobster’s 705 locations from the rest of its portfolio?with the possibility that it could be sold off.
Conservatives keep yelling that increasing minimum wage will kill industry and that welfare is bankrupting our country.? That is why, according to William Dunkelberg?at?Forbes.com:
About 60% of the officially poor don’t work, so the only thing raising the minimum wage does for them is to make it harder for them to get a job if they ever decide they want one.
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Ignoring the utter condescension inherent in that statement, focus on the idea that raising the minimum wage will kill jobs. How can companies afford to hire if they have to pay people enough to eat? Raising wages is wrong, giving the poor access to welfare services is wrong and it will all destroy the economy. Okay…
Here’s a question then. How do businesses stay afloat without customers? You don’t need to be an economist to understand the basics of a consumer-based economy. Businesses sell goods or services and consumers buy them. But, wait! What do consumers need to buy goods and services with? Well, that would be money. Which is in short supply these days, unless you happen to be in the top 1%. ?That’s not class war mongering, that’s just stating the facts about income inequality in America. A recent article in the Economist states:
95% of the gains from the recovery have gone to the richest 1% of people, whose share of overall income is once again close to its highest level in a century. The most unequal country in the rich world is thus becoming even more so.
According to the same article, this is due, in part to the fact that:
America’s tax code is riddled with distortions that favor the rich, from the loopholes benefiting private equity to the mortgage-interest deduction (an enormous subsidy for those who buy big houses).
Yes, though the wealthy would have you believe that they are victims of unfair financial burdens such as paying living wages and providing health care to workers, they certainly believe in corporate welfare. ?Policies that favor the wealthy are increasing the income inequality gap. More people are falling into poverty as the middle class disappears. Having a middle class is what allowed our consumer economy to rise in the first place. So what happens as more families see their incomes fall or stagnate and not keep up with inflation?
According to Mr. Granderson at CNN, this happens:
But statistics suggest that we haven’t been going to restaurants like Red Lobster the way we used to, and it’s not because our collective palate has changed.
It’s because we can’t afford to eat out anymore.
In the four years since the economy began to rebound, the median annual household income fell by 4.4%. But for black households like the one I grew up in, income fell by nearly 11%, more than twice the rate of Latino homes and three times that of whites. Red Lobster remains a favorite spot for black families to dine after church. I imagine it’s harder to do with over a 10th of the family’s income gone.
That’s it, in a nutshell. People can’t afford to eat out, Red Lobster goes under. People can’t afford to pay for goods and services, businesses go under. The only way to maintain a consumer based economy is to pay people enough so that they can afford to consume. Ditto for welfare. Money into the pockets of the poor equals money to spend on goods and services.?It really is that simple.
Edited by DH.
