Do businesses profit from inequality?

Lizzie O'Leary Feb 3, 2014
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Do businesses profit from inequality?

Lizzie O'Leary Feb 3, 2014
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How do businesses cope with the ever-expanding gap between rich and poor?

In today’s New York Times, Nelson Schwartz writes that companies are finding more success catering either to the upper or lower ends of the market — in what he calls a stark contrast to national debate on the subject.

“I feel like whenever the topic of inequality comes up, it’s so heated politically and ideologically between left and right,” he says. “But when you talk to business people, they’re not really interested in the politics. They’re interested in making money and growing their business… and they see close up what a lot of the politicians and pundits are still arguing about.”

As an example, he points to Darden, a Florida company that owns several well-known restaurant chains. Some are on the cheaper end, like Olive Garden and Red Lobster. On the swanky side, Darden owns Capitol Grille, where people spend on average five times as much as they do at Olive Garden. In other industries — hotels, gambling, you name it — he found the same thing: The Dollar Trees of the world are doing great; the JC Penneys, on the other hand, are not.

Why is this the case? Schwartz explains that since the recovery began, the growth in spending has been concentrated in the wealthiest 20 percent of the country — especially the top 5 percent overall.

“So let’s say you’re a business, and you want to gain new customers,” he says. “You’re gonna appeal to the people who are spending more. I mean, it’s as simple as that.”

Schwartz says that spells short-term gains for those companies — but long-term it’s a bad formula for the economy as a whole. Lower- and middle-class consumers tend to spend much more of their income.

“It’s not even a question of fairness or left or right. Put that aside. We want the economy to grow.”

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