We hear a lot these days about the effects of inflation on average Americans (whoever they are).  And we see a lot of finger pointing when it comes to the causes.  Greedy corporations.  Supply chain disruptions resulting from the lingering effects of the pandemic.  Federal Reserve policies.  The growing federal debt.  You know what we do not hear.  Anything about the responsibility of consumers to fight inflation.

Despite the fact the current inflation rate remains almost twice the Federal Reserve target of two percent, consumer spending continues to rise.  Which suggests, every consumer could help by following what I call the Dr. ESP “Fight Inflation Now” shopping principles.  Making discretionary purchases only when they are on sale or looking for a less expensive brand substitute or generic alternative.  Let me give you an example based on my most recent purchases at Publix.

• Every Thursday, Publix publishes a list of BOGO (buy one, get one free) items for the next seven days.
• Make a list of products you normally buy that are on the list.  Last Friday this included a favorite brand of cereal, Thomas’ bagels, Philadelphia cream cheese, side dishes such as Betty Crocker mashed potatoes and macaroni and cheese, pulled pork BBQ, buns for the BBQ and frozen pizzas.  For perishables, one is consumed immediately while the other is frozen for later use.
• Next look for sale items, even if the sale price is at or slightly more than you used to pay “in the good old days.”
• Finally, get the staples (e.g., milk) you need that may not be on sale.

Did it make a difference?  The receipt showed that even though I purchased milk and toilet paper at the retail price, the total bill was $58.67 after a savings of $38.13.  There has been one other side benefit from this system.  By substituting brand names, we have discovered new favorites which have permanently replaced old standards.

Why does the system work?  Instead of supply chain disruptions, consumers create demand chain disruption.  Consider the following.  If consumers follow the Dr. ESP “Fight Inflation Now” principles, prices decline as consumer behavior works its way through the demand chain as follows.

• Sale items lower the retailers’ revenue, squeezing their already narrow profit margins (especially for grocery stores).
• Stores will then order less from brokers or produce account representatives whose commissions will suffer.
• These middle agents will then do one of two things.  Independent brokers will devote their time and energy to higher volume products.  Manufacturers’ product representatives will report decreased sales to the home office.
• In either case, manufacturers, facing potential loss of market share, will likely reduce prices or offer more promotions.

Can it make a real difference?  I will let Arlo Guthrie answer that question.

You know, if one person, just one person does it they may think he’s really sick and they’ll ignore him. And if two people, two people do it, in harmony, they may think they’re crazy.  And three people do it, three, can you imagine, three people walking into Publix, only buying products on sale and walking out. They may think it’s an organization. And can you, can you imagine fifty people a day, I said fifty people a day walking into Publix, only buying sale items and walking out. And friends they may think it’s a movement. And that’s what it is, the demand side inflation massacre movement.  And all you got to do is follow the Dr. ESP “Fight Inflation Now” process the next time you go into Publix or any other retail store.

These companies are making profits and revenue and I’m not (going to) begrudge anyone for that because that’s what we are about in America. But we also want to make sure that success trickles down to the worker.

Labor Secretary Marty Walsh, April 21, 2021

Walsh’s comments accompanied a recommendation gig workers, especially those who represent the front line for companies like Uber or GrubHub, should be treated more like employees. A recommendation about which I find myself conflicted.

Based on traditional standards for differenting between employees and independent contractors, I understand why corporations which rely on gig workers oppose Walsh’s position. After all, those business do not set working hours. If Uber drivers want to take a week off, they do not need anyone’s permission. Their workplace is their own choice. GrubHub does not set specifications for delivery vehicles. If I want to use my bike, moped, Harley or 1964 Mustang, that is my choice. And if I don’t like the compensation, I simply stop providing the company’s service. No notice required. No exit interview. No NDA.

The gig economy is sometimes glorified as a low-investment entrance into entrepreneurship. Theoretically, if you want to make more money you choose to work longer hours. And you can innovate. Uber drivers can increase demand for their services by offering a bottle of water or granola bar to a customer. Or decorate their car so potential riders choose the guy/gal with the VW Beetle that looks like a tortoise.

But many gig workers are not subject to the risk/reward equation which is central to entrepreneurship. They do not have to worry about collecting revenue. They are not concerned with merchant accounts or being stiffed by a customer. Uber drivers’ shares of rider fees are deposited weekly in their bank accounts. If they decide to shut down their business they are unlikely saddled with sunk costs or outstanding business loans. And they spend little, if anything, on customer acquistion.

Of course, there are down sides. No health benefits. No company contribution toward retirement. No paid holidays or sick leave. But those are the same issues every start-up entrepreneur faces. That is the cost of being independent and having personal control over your life and work.

My sympathy for corporate America is tempered by the history of companies blurring the lines between employees and independent contractors to save costs. Substituting independent contractors for salaried workers eliminates employers’ share of Social Security and Medicare contributions, health benefits, unemployment insurance, retirement contributions and paid time off. Furthermore, it can reduce liability exposure.

Corporate reliance on independent contractors has increased in inverse proportion to a decline in union membership. In 2021, only 10.3 percent of U.S. workers belonged to unions compared to 20.1 percent in 1983. Some scholars argue that decline began with President Ronald Reagan’s appointment of John Van de Water as chair of the National Labor Relations Board. At an October 1984 labor law conference in Columbus, Ohio, Van de Water offered the following as the legacy for his time in office.

I would like to think that my term as Chairman will be perceived as the beginning of the period in which the Board changed from being viewed as pro-labor to a time of being strictly nonpartisan, as indeed it was meant to be.

I do not know whether the relationship between Van de Water’s being at the helm of the NLRB and union decline is causal or merely correlative. Either way, lack of protection for union workers contributed to the utilization of independent contractors in several major industries.

This is not a one size fits all situation. I foresee a time when gig-worker dependent industries respond to an employees’ market and begin treating some like salaried labor in return for mandated hours and schedules. Others may want to retain their independent status. We know it already varies depending on the job description. An executive at InstaCart is compensated differently than the person who delivers your groceries.

In the future, it may also differ by industry. Let me give you an example of one industry which represented the worse abuse of “independent contracts.” I know this because I was subject to that abuse. While in middle school, I delivered the Richmond News-Leader, the afternooon newspaper, to houses in my neighborhood. Consider the following.

• My work hours were mandated by the company. Pick up the papers after school and deliver them by dinner time.
• I was assigned a specific route which I could not expand without corporate approval.
• If I wanted to take time off, I had to find someone to take my route.
• In bad weather, the papers had to be placed in plastic bags which often were not provided by the company.
• I was responsible for collecting the subscription fees, often having to return to a house multiple times to find someone home.
• I was also expected to do the marketing, personally reaching out to non-subscribers.

For all intents and purpose, I was an employee of the News Leader, told when, where and how to do my job. Still I was considered what we now call a gig worker. Compensation in the mid-1960s averaged around $10/week for 10 to 12 hours worked (approximaely $95 in 2022 dollars).

What bothers me the most about the approach by both Walsh and Van de Water is the either/or nature of their respective positions. Instead, policymakers need a more flexible roadmap based on a reexamination of what constitutes employment and what qualifies for legitimate contracting. It should also include policies which encourage independence for those who seek it.

One example is the requirement that independent contractors pay both the employee and employer share of Social Security and Medicare. That assumes the business’ contribution and employee’s come from two different revenue sources. Sales revenue for the company, income in the form of wages for the employee. For many independent contractors, sales revenue is their income. Gig workers may need to pay a premium but it should not be twice that of a salaried employer.

Nicholas Negroponte, founder of the MIT Media Lab, once said, “Technology should not be used simply to automate business, it should be an opportunity to rethink business.” Maybe, the same philosophy should apply to the gig economy.

For what it’s worth.
Dr. ESP