Flight canceled”; “service temporarily suspended”; “not currently available”; “longer-than-normal wait times”: These are the messages that confront U.S. consumers daily due to the pandemic. Now, the phenomenon has a name: skimpflation.
It’s a simple concept. Companies that are having difficulties with shortages of workers and goods are skimping on what they offer consumers while, in many cases, charging the same price or more for the same service.
But skimpflation may have serious consequences, and it may even be one of the reasons why more and more consumers are feeling dissatisfied. There has been a rise in air-rage incidents, and the Biden administration’s poll numbers have been going down. Skimpflation could be to blame.
Cancellations
In October last year, American Airlines cancellations left thousands stranded. A single weather event (high winds in Dallas) led to problems with the airline’s shift schedule for pilots and flight attendants, who were already in short supply. But passengers weren’t the only ones affected. Crews found themselves having to work double shifts or stuck far from home at the end of work.
According to Alan Cole, a writer of the website Full Stack Economics and formerly a senior economist for the Joint Economic Committee of the U.S. Congress, a sense of dissatisfaction is part of skimpflation. There is a feeling among consumers that they are getting less for their money. Workers are unhappy with both consumers and their employers. The employers are unhappy with their frustrated workers. It’s an economic force that leaves everyone feeling they are getting the bad end of the deal.
“Nothing prepared us for how much worse life has gotten,” Cole told The Guardian. “Most of these factors haven’t been picked up on by the Bureau of Labor Statistics. We thought these changes to products were going to be temporary, so it was reasonable not to account for the changes. But now everything has gotten worse all at the same time, so even if you tried to account for them, you probably couldn’t.”
Quality of service
Even if skimpflation cannot be measured conveniently, consumers have certainly noticed that the quality of service seems to be getting worse everywhere. Consumer satisfaction indices are showing a downward trend, as they have been since before the pandemic began, while consumer confidence continues to go up and down.
Exit polls after the Virginia governor’s race in November 2021 showed that one third of voters registered the economy as their chief concern. The labor market is still seven million jobs down from pre-pandemic levels, inflation is at a 30-year high and worker dissatisfaction has led many people to quit their jobs.
As National Public Radio noted in the fall of 2021, Domino’s is taking longer to deliver pizzas; airline hotlines are putting customers on hold for hours; and restaurants, bars and hotels do not have enough staff.
During the 2021 holiday season, yet more Americans experienced examples of skimpflation in travel, present buying and entertainment.
Cole confessed to becoming “an inflation crank” after he stayed at an expensive hotel. “The breakfast was comically unimpressive: little more than some individual cereal boxes, a limited assortment of poorly cooled beverages and paper dishware,” he wrote. Some of these downgrades come with a Covid-19 justification, but they are also connected to companies reducing labor costs.
In economic terms, the balance of power between supply and demand may have changed post-pandemic. Cole believes that consumers had become accustomed to efficient services and cheaper goods.
These things are harder to maintain with the rollback of globalization caused by the supply chain issues affecting Western consumer economies. Employers had become used to having much more control than they now have. Workers wanted to keep their jobs and consumers wanted to buy those cheap goods and services. “That has unwound,” he says.
Cash and Covid
Many rounds of stimulus cash from Washington introduced money into the economy at a time when Covid was having a strong impact on capacity. Now that the pandemic is (hopefully) subsiding, those consumers have cash to spend and workers have more job opportunities. “So now we’re seeing the opposite balance of power, especially if you have a house to sell or you’re a worker in the food service industry,” Cole says.
To consumers who are sensitive to loss of services and generally take improvements for granted, the effects of skimpflation can be traumatic.
“We expect civilizational progress, but this was an unusual case of a new development affecting the real economy that was obviously negative,” Cole says. The new world is still one of masks and vaccines. Workers remain concerned about Covid, and fear and anger are everywhere.
A small business owner offering more money or flexible working conditions is likely to feel that workers who don’t come into work are being unreasonable. But workers are likely to feel that they’re being put at risk or inconvenienced.
“There are lots of non-wage dimensions to jobs and normally they’re not that big of a deal,” says Cole. “Now they’re all being renegotiated, with new conveniences and inconveniences to be argued about. That raises the transaction costs on both sides. So it’s possible for both sides to feel they’ve made sacrifices and to feel unhappy. But it’s really not one or the other, it’s just that the world has gotten worse.”
© Guardian News & Media 2022