Low Wages? Low Sales.

Businesses are starting to realize that the middle class squeeze is hurting their bottom lines, too.

The Middle Class Squeeze Is Worrying Big Retailers, Too

Earlier this month, CAP released a report highlighting how squeezed middle-class Americans have become. That report showed that while the cost of attaining middle class security has increased by over $10,000 since 2000, wages for most Americans have remained stagnant.

The cycle of economic stagnation—low wages, leading to weak demand, leading to slow growth, leading again to low wages—is not only hurting America’s hard-working citizens, but it is also hurting businesses where those workers might spend their money and in turn boost the entire US economy. Wall Street is finally starting to get it: Standard & Poor’s has issued a report saying that inequality is holding back economic growth and Morgan Stanley has warned investors that stronger wage growth is critical to our economic growth.

A new CAP report released today provides further evidence that this squeezed middle class weakens our entire economy, hurting both businesses and the consumers who support them. The report, ”Retailer Revelations,” looked at the financial reports of the top 100 retailers in America and statements of Wall Street’s top economists about the outlook for the country’s biggest retailers. The consensus: trickledown economics is not working.

It has taken more than five years for retail spending per person to reach its prerecession level in the United States and business have begun to realize the impact that is having on their bottom line. Using new information to show the impact middle-class stagnation has had on the economy, the report demonstrates that businesses’ support for economic policies that grow the middle class would directly benefit their own business.

Here are some key findings:

  • Eighty-eight percent of the top 100 US retailers consider weak consumer spending a risk to their stock price.
  • Sixty-eight percent cite falling or stagnant incomes as a risk to their stock price — roughly double the percent that cited them in 2006.
  • Fifty-seven percent cite rising costs of essentials like housing, healthcare and energy, as risks to their stock price, further showing the middle class squeeze.
  • Wall Street economists even argue that low wages drive low demand and high unemployment.
  • Retailers could see their bottom line increase by supporting a growth-oriented agenda with policies such as a minimum wage increase.

BOTTOM LINE: America’s biggest retailers have realized that when the middle class loses, everyone loses. It’s time conservative lawmakers and pundits realized it too. An economy that works for everyone is an economy that grows from the middle out.

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