When you graduate college and earn your degree, where do you aspire to be in five to 10 years? For college students, the answer would usually be, “I would like to be in the middle or upper class.” But what if I were to tell you that the idea of our American middle class is eroding away at an alarming rate?
The reality is that in five to 10 years, there may no longer be what we think of as a “middle class” in America, and you as a student can prepare now to help increase your chances of weathering this class storm.
For evidence of this quiet shift in the middle class, take an afternoon drive down Howell Mill Road. On this road, there are roughly 20 restaurants in about a one mile stretch. On any given day, notice restaurants like Arby’s, Taco Bell and McDonald’s are not too busy. Then, take a look at Chipotle, Einstein Bros. Bagels and La Parrilla (a local chain of Mexican cuisine). You can hardly get in the door of the latter three during their peak hours.
Why is this the case while Arby’s struggles to have more than four or five customers at a time? Why is Chipotle one of the fastest-growing chain restaurants, while Taco Bell is seeing decreased earnings?
It’s simple: Restaurants and retail companies are ahead of the curve when it comes to socioeconomic shifts.
John G. Maxwell, head of consumer practice at PricewaterhouseCoopers, is very keen on this trend in the food service and retail industries. Since the recession, he has seen consumer demand spike for more upscale dining experiences, even at fast-food establishments like McDonald’s and Wendy’s.
Just take the recent Mcdonald’s McCafe renovations of the past few years, or the new Wendy’s renovation with a modern, sleek look and feel. Even using the term “fast food” is a faux pas, with the new buzz word being “Fast Casual.” Companies are clamoring to be the best and brightest in this new restaurant landscape.
Maxwell cites the quarterly decline in Olive Garden and Red Lobster chains as a solid indicator that the country is moving towards one of two economic groups.
“As a retailer or restaurant chain, if you’re not at the really high level or the low level, that’s a tough place to be,” Mr. Maxwell said. “You don’t want to be stuck in the middle.”
This idea of being “stuck” in the middle comes as a surprise to many. I, for one, always saw the middle class as being a reasonably respected group. One to aspire to be a part of and have the comfort of a steady job and income. Unfortunately, many middle-class jobs of years past are gone, but with a college education you are doing yourself a favor. You are actively increasing your knowledge and increasing your chances of landing a spot in the upper class.
The trend is being observed in other sectors as well. General Electric’s “Cafe” line of high-quality ovens and refrigerators marks huge sales increases. At the same time, Sears and JCPenney, two stores aimed directly at the middle class, are in dire straights. At JCPenney, shares of stock dropped 50 percent since 2009.
In contrast, high-end retailer Nordstrom and low-end chain Family Dollar have doubled in value since 2009. These real-life examples show that the often talked-about “income inequality gap” is making its first distinct impacts on not only consumer taste but also on the national economy as a whole.
As New York Times contributor John Graubard put it best, “In a few years it seems the consumer choice will be between Neiman Marcus and Walmart. Private chef or food pantry?”
