Pay The Same, Get Less
Businesses around the world, large and small, have been asking themselves the same question — how to pass the increasing costs of goods on to consumers without losing customers.
Some companies raise prices immediately as their costs increase. Others resort to sleight of hand. Magic? Yes. The magic of the incredible shrinking product.
A Little at a Time
Some companies try to ease us into charging more by making small, steady price increases.
A good example of easing price hikes is Mcdonald’s restaurants.
“[W]e have the approach that we want to do more frequent increases,” Ian Borden, head of international business for McDonald’s said earlier this month. “But at smaller levels so that we try and make sure that we don’t get into doing substantive increases.”
Shrinkflation
An increasing number of businesses resort to the less obvious method of raising prices. These companies maintain price levels but shrink the amount of the products they sell.
“Consumers check the price every time they buy, but they don’t check the net weight,” consumer attorney Edgar Dworsky told the Washington Post. “When the price of raw materials, like coffee beans or paper pulp goes up, manufacturers are faced with a choice: Do we raise the price knowing consumers will see it and grumble about it? Or do we give them a little bit less and accomplish the same thing? Often it’s easier to do the latter.”
Dworsky regularly lists package downsizing on his website Mouse Print.
Examples Mouse Print cites of companies maintaining prices, but reducing product size include:
- Cocoa Pebbles – a decrease of family size boxes in February from 20.5 ounces per box to 19.5. Note: Cocoa Pebbles is a Post brand. General Mills decreased its cereal sizes last year.
- Charmin Ultra Soft Mega Rolls of toilet paper shed 30 sheets in February, according to Dworsky
- A new bottle of Aveeno Skin Lotion has 10 percent less product, reports Mouse Print.
Quantity Matters
You can see the same sort of things in food pricing.
More expensive meats are priced by the quarter pound. Whereas less expensive meats are priced by the pound.
“You might be willing to pay $9 for a quarter-pound of lox, but if the sign says ‘$36 per pound,’ you would be aghast at how expensive it is,” John Gourville, a marketing professor at Harvard Business School told the Post. “Companies are constantly playing around with prices.”
If this keeps up, the Big Gulp may become the Small Sip.
History Provides Blue Print For Solving Labor Shortage
“When Mexico sends its people, they’re not sending their best … they’re sending people that have lots of problems, and they’re bringing those problems with us. They’re bringing drugs. They’re bringing crime. They’re rapists. And some, I assume, are good people,” says Donald J. Trump.
— — —
Throughout history, demagogues have played on people’s fears. Many fearmongers have identified groups of people to vilify as the source of crime and threats to safety. Hitler did it with Jews. In this country, immigrants have often served as the foil for such attacks.
U. S. Talent Shortage
One charge often leveled at new arrivals to this country is that they take jobs from people whose families have been here many generations. However, this fabricated problem may be the solution to a real national problem.
The United States is currently experiencing a gap between job openings and job applicants. There are 11.4 million job openings, but only 6 million unemployed workers, according to the United States Chamber of Commerce.
“We have a lot of jobs, but not enough workers to fill the jobs we have,” writes Stephanie Ferguson, senior manager of employment policy at the chamber. “If every unemployed person in the country found a job, we would still have 5.4 million open jobs.”
Hire an Immigrant
The problem only gets worse over time.
According to a report last year by TechNet, an association of technology executives, the shortage of job candidates with advanced degrees will result in 9 million unfilled jobs over the next decade. That, in turn, will result in lost production of $1.2 trillion.
“We are in a global race for talent. The United States must welcome the world’s best and the brightest, and their families, so they can put their talents to work for the American economy,” said Linda Moore, president and CEO of TechNet.
TechNet notes that education is the long-term solution to developing the employment talent of the future. However, the report points out that the need for skilled degree holders is immediate. As a result, the group is advocating immigration reform to attract more of those job candidates to American companies.
However, immigration reform may also be a long-term proposition. The last reforms occurred 14 years ago.
Breaking Away From Living Paycheck-to-Paycheck
About 64 percent of Americans live paycheck-to-paycheck. In addition, 49 percent of those earning over six figures are in the same boat.
“I was shocked when I saw those figures,” says Beverly Harzog, personal finance and credit card expert for U.S. News & World Report. “It is a terrible place to be. I know, because I’ve experienced it first hand.”
Harzog was a practicing CPA when she realized she was in financial crisis and living from one paycheck to the next. She was able to get out of debt and gain financial freedom through concerted effort.
Survival
“I always recommend having an emergency fund,” Harzog told Saving Advice. “But if you’re living paycheck-to-paycheck, that may not be possible right now. You may just be struggling to survive.”
In place of an emergency fund, Harzog says a zero percent APR credit card can serve the same function.
“A zero percent APR credit card can be a temporary solution to provide funds in an emergency,” says Harzog.”But it should be considered temporary.”
By searching online, you can find such cards that do not charge interest for 12 to 21 months, according to Harzog.
Saving Money
Getting out of debt is the best way to end living paycheck-to-paycheck, says Harzog. That means cutting expenses.
“You have to be ruthless,” Harzog says. “I know it is not pleasant, but you have to look at your budget to find places to cut expenses.”
That usually means cutting discretionary expenses. However, it does not mean eliminating them.
“You need to treat yourself,” says Harzog. “It’s important for your emotional wellbeing. But you can cut back. Instead of a Latte three times a week, go to once a week.”
Avalanche, Snowball, Or Blizzard
Harzog advocates keeping track of expenses and debt using apps or a paper notebook. They help with budgeting and monitoring your success in lowering debt.
In addition, she recommends choosing a debt reduction strategy based on your emotional needs as much as your financial needs. She advocates using one of three approaches.
- Debt Avalanche. The idea here is to pay off debt with the highest interest rate first. Once that is done, rinse and repeat until your debts are gone. This is best for those with patience and a long view of their financial goals. Consequently, it pays off interest faster than other approaches.
- Debt Snowball. This method attacks the smallest debt first and moving up to larger debts. Consequently, his concept pays more interest than the avalanche plan. However, Harzog says this approach keeps people, “motivated with quick wins.”
- Debt Blizzard. This strategy incorporates the previous two methods. Here, you start by paying off a small debt or two before moving on to the high APR debts. This concept gives immediate gratification and inspiration to continue with debt reduction, according to Harzog.
Get Help
“I’ve sent a lot of people to the NFCC (National Foundation for Credit Counseling) over the years,” says Harzog. “They will put you in touch with someone you can talk to over the phone or chat with online.”
The NFCC provides one-on-one counseling to help consumers reduce debt and develop a budget.
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Max K. Erkiletian began writing for newspapers while still in high school. He went on to become an award-winning journalist and co-founder of the print magazine Free Bird. He has written for a wide range of regional and national publications as well as many on-line publications. That has afforded him the opportunity to interview a variety of prominent figures from former Chairman of the Federal Reserve Bank Paul Volker to Blues musicians Muddy Waters and B. B. King. Max lives in Springfield, MO with his wife Karen and their two cats. He spends as much time as possible with his kids, grandchildren, and great-grandchildren.