Black Friday Sales Down -- It Goes Back to Benefits and Compensation?

I heard it this morning. Black Friday sales were down. Not only were they off last year's huge numbers, they were well below forecast. Many economists and other prognosticators were shocked. Of course, people were going to spend more as they are paying far less for gasoline.

That connection doesn't hold; it never will. People, by and large, make larger purchases, the kind that fuel the Christmas economy, when they feel good about their futures. They do it when their long-term view of their personal economy is optimistic. Today, it's not.

Why not? Yes, fuel prices are down and down significantly. But, take-home pay is not increasing for most people. I think that most people view that fuel prices down are a temporary phenomenon -- a good one, but not one that will last for the long haul. But, take-home pay has been eroded for years now. Across the board pay goes up nearly every year, but not by much. In a good year, it might be a 3% to 4% increase. In a bad year, it's below 2%. At the same time, the employee's portion of the cost of their own benefits is increasing. Have you noticed your health plan? Your deductibles have gone up, your out-of-pocket maximums have gone up and your premiums have gone up by a bigger percentage -- likely significantly bigger -- than your pay. The same can be said about other employee benefits. Either you are paying more or getting less or both.

Does this mean that your employer is evil? They might be, but not because of the scenario described here. Companies have to be competitive in the marketplace. If their cost of goods sold or cost of providing services increases by too much, then their margins will be down. And, if that happens, then those pesky owners, be they the people who started the company or the broad group of shareholders will make less money. They don't like that. In fact, they are in business to make money.

I know; that's not a nice way of thinking about it. But, suppose you started a business. Wouldn't you want to turn a profit? After all, the person starting the business takes a risk. There is point in taking a risk if the reward is not at least commensurate with that risk. If you invest in a company, you expect that company to have increased, not decreased profits. So, the people who run the business cannot afford increases in labor costs that cut into those profits by too much.

Going full circle, employees notice what's in their paychecks. If your employee receives less money in the first paycheck of 2015 than she did in her last paycheck of 2014, it just doesn't matter how big you told her that her raise was. To her, it looks like a pay cut. When she sees a pay cut, she spends less, not more. And, because she is expecting that, Black Friday was not as busy as the stores wanted.