“Flight cancelled”; “service temporarily suspended”; “not currently available”; “longer than normal wait times”: these are the messages that confront US consumers daily as the economy struggles to find a post pandemic footing. Now the phenomenon has a name: “skimpflation”.
It’s a simple in concept – struggling with shortages of workers and goods, companies are skimping on what they offer consumers while, in many cases, charging the same price or more for that service.
But skimpflation may have profound consequences, and may even go some way to account for the rising tide consumer of dissatisfaction seen in increasing air rage incidents and even the Biden administration’s plummeting poll numbers.
Skimpflation is everywhere. Last weekend, American Airlines cancelled upwards of 2,000 flights, leaving thousands stranded, as a single weather event (high winds in Dallas) threw the carrier’s rotas of pilots and flight attendants, already in short supply, into chaos. 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.
All of this, says Alan Cole, a writer at Full Stack Economics and formerly a senior economist at the joint economic committee of the US Congress, is part and parcel of the skimpflation, a sometimes subtle, sometimes overt, sense among consumers that they are getting less for their money, worker unhappiness with consumers and employers, employers’ unhappiness with restive workers. It’s an economic force that leaves everyone feeling they are getting the bad end of the transaction.
“Nothing prepared us for how much life has gotten worse,” 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 got worse all at the same time, so even if you tried to account for them, you probably couldn’t.”
Even if skimpflation cannot be measured conveniently, consumers have certainly noticed that the quality of service seems to be deteriorating everywhere. Consumer satisfaction indices are trending down, as they have been since before the onset of the pandemic, while consumer confidence was mildly better last month after dropping over the summer.
At the same time, exit polls from the upset in the Virginia governors race this week showed that one-third of voters registered the economy as their chief concern. With the job market still 7 million workers down from pre-pandemic employment levels, inflation running at a 30-year high, and worker dissatisfaction triggering a mass resignation, circumstances could get worse.
As National Public Radio noted last week, Domino’s is taking longer to deliver pizzas; airlines are putting call-in customers on hold for hours, and restaurants, bars and hotels are understaffed.
And that’s before the holiday season, when yet more Americans are likely to run into examples of skimpflation in travel, present buying and entertainment.
In a September column, Cole confessed to becoming “an inflation crank” after he stayed at an upscale 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 degradations come, he argues, with a plausible Covid-19 justification but they are also down to companies reducing labor costs.
In economic terms, the balance of power between supply and demand may have shifted post-pandemic. Cole reasons that consumers had become accustomed to a slick services culture and cheaper goods that are harder to support with the rollback of globalizationtriggered by the supply chain issues affecting western consumer economies. Employers had become used to having the upper hand with workers keen to keep their jobs and buy those cheap goods and services.
“That has unwound,” he says.
Successive rounds of stimulus cash from Washington flushed money into the economy at a time when capacity was constrained by Covid. Now that the pandemic is (hopefully) waning 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 the consumer, who are sensitive to losses 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 vaccine mandates, workers remain anxious about Covid, and fear – and its close cousin anger – is everywhere.
A small business owner offering more money or flexible working conditions is likely to feel that workers who don’t show up are being unreasonable. But workers are, conversely, likely to feel that they’re being endangered at worst or inconvenienced at best.
“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 transactions costs on both sides. So it’s possible for both sides to feel they’ve made sacrifices and to feel unhappy about the situation. But it’s really not one or the other, it’s just that the world has got worse.”