Hurray for Upscale

If you have been paying any attention at all to economic news the past few years you might be familiar with the term "K shaped" economy. The top part of the K represents roughly the top 20% of families (really 10%) with the income that account for about 60% of all spending. As you might guess, the bottom of the K represents the other 80% - lucky us who get to divvy up the other 40%. 

I'm sure I wasn't the first to notice this but I bet I was earlier than most - and I can  prove it. Here is a post from 2022 - and it had been bugging long me before that!

(Things apparently haven't changed much for us proletariat in the intervening years.)

America's Economy - of the 20%, by the 20%, for the 20% . . .

Dateline: April 2022

Upscale home you want for $500,000 . . .

Have you thought much about the adjective "upscale?" as it's used today? Probably not - why would you?! - but a couple recent articles in the Minneapolis Star Tribune got me thinking about it. Here, let me bore you with my thoughts.

The first article was about why homes were so expensive to build (Apr 21.) As the commenters note, builders can’t really build affordable homes profitably (for a lot of reasons, allegedly) so they build “upscale” homes.

Home you get for $500,000 - in Robbinsdale . . .

“Upscale.” Is it just me or does it seem like everything is going/gone upscale? I mean you can’t swing a dead developer without hitting an upscale store, restaurant, house or apartment complex. Really, you never hear, "Hey, we're building a plain, average apartment building, come on down!" Or "There's a new restaurant in town - no artisanal 12 grain bread, no kale, no raw dead fish - just meat and potatoes, oh boy!" So, this raises the question: why do we hear the term "upscale" so much? (Okay, it raises the question for ME.)

We’ve always had stuff that was expensive, classy, high quality – or all the above. (The corollary, of course, is that we’ve always had people with bucks.) In general, though, those things were also exclusive. By that I mean it was rare; relatively speaking, the shops were few and far between. Upscale homes were relegated to small, exclusive neighborhoods (you know, where the doctors, lawyers and air line pilots lived.) Nothing wrong with that - many people have always aspired to live in really nice neighborhoods and shop at expensive stores because it was a sign of working hard and succeeding. For that same reason you would drive an expensive car or vacation in Maui – it’s a symbol of “arriving.” (So, what statement does my 2016 Hyundai make? Retired on fixed income!) Anyway, generally this was a pretty small percentage of people – early One Percenters? – and was a very small part of the overall economy. The REAL money got spent by all the rest of us, the great unwashed - and the largest middle class the world had ever seen. (As with today, to hell with the actual poor people.)

Ha, I laugh at your puny price of 110 grand!

Factoid: about 20% of households (not individuals) in America make $100K/yr or more (In MN we make around 10% more – aren’t we special?) Let's face it, a hundred grand ain't that much anymore so if you make much less than that (like 80% of us) how likely are you to buy an expensive (and very profitable for makers) upscale SUV, plan extravagant upscale vacations or move to an upscale neighborhood? Not very. Nope, no money in those folks, it's in the upscale 20%. That is why most businesses are now focused on those folks who have the money and are willing to spend on “upscale” (profitable) things. Optimistically, you might say that upscale folks make it possible for companies to make low profit stuff for the hoi polloi. You know, sort of like business travelers subsidizing us cattle in the back of the plane.

Um, flight attendant, could I have some peanuts?

So there you have it, why everything is going upscale. The rest of us? "Hey, move to Commonville where all the houses, cars and people are average - Target, Olive Garden and public golf course, here I come!" (Not that there’s anything wrong with that.)

Upscale Soup Nazi, “No Tesla for you!”

So, can roughly 32 million families support the entire economy of a country of 330 people million forever? Guess we better hope so.

Oh yeah, the second article. It was regarding an outlandish (my choice of words) pay package for modest accomplishments (my words again) of health care executives. (Apr 22.) A local healthcare company that lost a billion dollars last year rewarded the CEO with a pay package worth nearly $182 million. (His pay check last year was “only” $2.3 million.) Note: this is a teeny, tiny company in the very huge - and very profitable - healthcare industry where 8 figure executive pay is the norm. Come to think of it, that’s norm for most executives in big companies anymore. (It is good to be king, er, CEO!) In fact, in 1979 American CEOs made 31 times more than the average worker did, now they make 351 times more – wow, talk about improved CEO productivity! 

Come on, slaves, row faster, the CEO wants to waterski!

Here's the most productive CEOs of all!

(Some names may have changed but not the net worth)

So, what has this got to do with upscale? Well, I’m just spit balling here but I wonder if pay skyrocketing at the top while pay for the bottom just stumbles along correlates with an economy dedicated to the upscale market (of course driving up prices for everything.) 

Nah, gotta be a coincidence.

Oh well, have an upscale day! 

PS

Can I assume you gather how I feel about the term "Upscale?"

 Good!

Some apropos music . . .

Money     Pink Floyd

As always, I would be interested in your thoughts.