Tuesday, January 3, 2017

Food Flight and Other Lessons of Life

Back on November 17th, I blogged (The Truth May be Hard to Swallow) about how rising food, labor and real estate costs are making operating restaurants – even pricey ones – increasingly difficult in America’s most expensive cities. I focused on the New York metropolitan area, but clearly San Francisco, Washington, D.C. and Los Angeles are facing the same plight. Famous eateries – like NYC‘s famous Carnegie Deli – have simply not been able to create an economic model to keep their doors open… even when they are packed. Indeed, with these changing economics, New York City may be a city where finding a deli anywhere will be a challenge.
For those restaurants at the top of the food chain, where there is no price issue because of the rich folks still able to afford the best, there may some marginal profit cuts, but life can still trundle on. Food trucks are filling in the void in many urban areas, where real estate becomes a much lower barrier to existence. The growing trend toward Web-driven, gig-based, home delivery by a number of restaurants also reduces the dependence on a larger real estate footprint as well. But for those who still like to go out… what is truly amazing is what is happening to restaurants “in the middle.” Especially food chains.
“During the 1980s and 1990s, many restaurant chains set their sights on the middle class, offering reasonably priced meals that entire families could enjoy and afford. But as the middle class shrinks and inequality becomes more of an issue, these chains are hemorrhaging customers, and it’s ultimately going to doom them. Another product of less-than-ideal economic conditions is rising food prices. There have been a variety of factors behind skyrocketing prices for food, including climactic conditions and tighter regulations. As a result, consumers and businesses are feeling the pinch.
“Many restaurants simply haven’t been able to absorb the costs without switching gears. You’ll notice that certain fast food restaurants have bumped up prices over the past few years, for example. If they crank the dial too much, though, consumers will just find another place to eat if they feel prices are too high. And the cutthroat world of food offers consumers alternatives almost everywhere they look…For example, chains like The Olive Garden and Red Lobster are or looked to be nearing the end of their lifespan.”CheatSheet.com, December 21st.
Indeed, as the new administration seems intent on deporting a whole host of undocumented workers – labor that is heavily associated with kitchen staffing as well as agricultural work (from stoop labor to working in slaughterhouses), keeping those related costs much lower than if U.S. citizens (assuming they would even take those jobs) were employed – it does seem that there will be an even greater upward spike in the cost of eating out. Higher costs with fewer people able to afford to spend more… not a good sign for a work force that is often either an entry-level job market for the young or a last-ditch place to make a buck for the lightly-skilled or unskilled.
We can look at the marginalized middle-aged and older rust belt workers featured in my December 20th Left Behind to Rust blog and look at that group as “them,” but – if you’ll pardon the allusion – they just might be the collective canary in the coal mine for the rest of “us.” They are simply part of the same narrative that will eventually swallow most of us up, sooner most probably than later. We know that those West Virginia coal miners are not going to get back those highly-paid coal mining jobs in any numbers to make a difference. But then, this little story is going to get played out across our entire economy – the world actually – over the next few years.
Technology and global competition are eliminating a lot of domestic manual labor, from manufacturing to harvesting/mining. Shifts in global energy demand and environmental requirements (whether or not we maintain our own environmental rules) will also reconfigure our workforce, whether we like or not. As automation gets increasingly complex, as artificial intelligence (with self-learning capacity) becomes increasingly entwined within our job market, those unemployed coal miners might soon be sales clerks, stock brokers, doctors, lawyers, accountants, financial planners/advisors, etc., etc.
About a third of existing jobs in the United States will be replaced by technology within the next decade plus. Will there be a set of new jobs, with equal or better pay, replacing them? I am very skeptical. Self-driving cars and trucks anyone? Clearly, without the earning power of this cadre of better-paid workers, demand for “little luxuries” like dining out anywhere are slowly going to get priced out of reach for increasing numbers of Americans. Those jobs will vaporize, creating a vicious spiral where those who own the machines make money and those who don’t no longer do. For a while anyway.
Yet everything in our modern economy is predicated on having enough people working to make enough money to support the business of business. 70% of the American economy is consumer driven. No or fewer consumers and even those who own the machines will be hurting. Under a pure capitalist system, that’s just the way it is. People will adjust under market forces… but can they? We certainly have neither the governmental structure, the leadership nor the will to deal with what appears to be inevitable. Job scarcity that virtually no level of training will overcome.
We are excellent at kicking the can down the road and passing laws based on slogans without practical value. We are even better at using tax dollars to spend on costs without an economic rate of return (like a fat military that has not won a major conflict since WWII) but terrible at supporting investments in our future: better education, infrastructure and scientific research. While the president-elect promised major infrastructure investments, he has yet to convince his own party to get behind that effort. And meanwhile, he has appointed cabinet heads committed to downsizing the federal role in public education and scientific research.
If anything, we are making the inevitable worse, probably a lot worse, by pretending we can kill off these measures of progress and turn back the hands of time to an era when those impending forces either just didn’t matter or did not exist. We can’t, populist demand to the contrary. But someone in this ugly chicken coop better get to planning how to run an entire society on a new economic model that will be shoved down our throats, like or not.
I’m Peter Dekom, and true leadership – which seems to be entirely lacking in our country – is one that deals with what is and what inevitably will be to the benefit of the entire society.

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