The hollowing out of the middle ground seems to happen in most commoditized markets.
Take meat. Used to be you'd go to the butcher for your meat, and you'd get a reasonably good product, from a butcher who knew where the meat came from, probably even the farmer who reared the meat. That was the way almost everybody got their meat, so the fixed overheads of having a butcher shop was spread over a large customer base.
Move along a couple of decades. Supermarkets, with their more efficient logistics, eat into the meat trade. Butcher shops almost completely disappear. But supermarket meat goes through a longer supply chain with larger suppliers that have the efficiencies of scale to cope with the pricing power supermarkets have. The butcher shops that survive turn into boutiques, where their unique selling proposition is what used to be commonplace: that they know where the meat is coming from and probably know the farmer that reared it.
The market bifurcates into two basic strategies, low price and high quality (see also Porter's Cost Leadership and Differentiation).
The consumer who's willing to pay a little bit more for a little bit more quality ends up having to pay a lot more rather than a little bit more, because the pool of people who could spread the fixed costs of the higher quality is split - most go for the lowest priced product. There's a ratchet effect, where slightly higher quality products are, at the margin, increasingly expensive because there's no scale in that strategy: the more expensive they become the less uptake they get, which means they have less scale, which means they become more expensive.
In some ways it's a collective action problem: what would be a better outcome for a large group of people can't really occur because individual actions can't sustain a stable state change. In other ways - many, if not most economists believe this - it's a better outcome overall, because more people get to use the bargain basement product.
But I think people in the middle are usually worse off in commoditized markets.
That's a very interesting phenomenon with the butchers (and about 1/5th of the American retail economy in my experience), but it's not what's happening in airline services.
Airlines have jacked up the prices of comfortable berths people can sleep in on long haul journeys to almost 10x the price of shrinking torture chairs that most of us buy. For a long while business class and coach drew apart in price even as business got more luxurious with flat beds and fancy wines while coach seats in Boeing's newest, most advanced 787 jets are the narrowest trans-oceanic seats ever sold and Spirit/Frontier domestic seats don't even recline anymore.
But that difference was driven by corporate executive passengers whose employers were paying the 10x prices and getting tax breaks for doing so. Corporate sales is complicated and charging more can actually sell more units so the airlines carefully eliminated mid-priced options to force businesses to pay far more for the very profitable business class seats than their marginal cost.
And economic rationality has reasserted itself. Premium economy seating is now common on airlines outside the USA without such easily gamed large corporations to scam. The premium economy is similar in quality to old-fashioned business class seating at prices that middle class leisure travellers can afford. Mostly you can't buy it from the USA without paying a steep premium, but anyone flying to the USA from abroad has been able to for about a decade. Carriers refused to sell it at the same prices in the USA because running the game on corporate purchasing departments is so lucrative. For example, JAL and Cathay Pacific round trip fares between the Far East and USA in premium economy have been about $500-1000 more originating in the USA than in their home countries.
But Delta and American are now outfitting planes with premium economy because it's the most profitable use of space for carriers that have it and supporting the corporate business class sales inflation scam can't hold it back anymore. American is flying the new class on planes already. Even CX and JL prices are starting to rationalize.
So the key variable in airline discomfort has been American corporate purchasing culture irrationality and not the natural division of markets into tiers. Corporate purchasing irrationality and cartel pricing to exploit it are also the drivers of advance-purchase fares, last-minute price gouging, saturday night stay requirements, steep premiums for one-way fares, and lots of other paradoxical and nasty pricing strategies.
For a 6' tall person, the current seating is actually very inconvenient on 8h+ flights. No hyperbole at all!
So maybe the solution is to all genetically convert our offspring to shorter persons :)
How tall, though? I'm taller than 95% of the US population, have flown quite a bit, and have never had a problem. They can't build all the seats in the plane for people in the 98th percentile and up. (Or rather, they can build some, and call them 'first class'.)
I think it's very anti-humanistic to say that someone born tall should be required to pay for seats that are 10x the price of people that require slightly less space, or simply not travel long distances.
Perhaps it's worth comparing to people in wheelchairs. Airlines accommodate a few wheelchair-bound people on flights, but if more than that number want to fly, they need to pay extra. Shit luck for them, but the alternative would be for everyone else to subsidise wheelchair-bound people whenever they want to fly. If you consider, for the purpose of this conversation, being tall as similar to being wheelchair-bound that's the choice.
So what happens with people of below average intelligence and physical ability? They're likely to suffer from lower earnings. Should a person of average height and on minimum wage subsidise a well-paid tall person?
In an ideal world, chairs would adjust so that everyone is comfortable and still allow the same number of people on the plane at the same price. However, in the real world, we probably have to accept that allocating comfort based on ability to pay, with a bit of flexibility on both sides, is the best outcome.
I mainly meant to say that it's a ridiculous idea to suggest business/first class as a solution to basic needs given the absolutely insane pricing structure. Obviously reality makes it impossible for everyone to enjoy exactly the same advantages, regardless of their in-born traits.
So it depends how you define "basic needs". For me, this is a "nice-to-have" which might be skewed by my being average height and build. Those above average height, especially those who fly frequently, are more likely to consider it a basic need.
I think it's anti-humanistic to say that, because a small number of people are born a particular way, that others must be charged more money so that they can be accommodated by more services than they would want consume. See? It's so easy to call people anti-humanistic.
Most airlines that I've been on have started turning the exit row into a "non-first-class extra legroom" row. On a few occasions I've seen very tall people sitting there. And there's nothing wrong with building a range of legrooms into a plane. But I don't see why there should be some requirement that a costly good - legroom on a plane - be provided to more people than actually want to pay for it.
But first class largely costs more because of its larger legroom. Certainly there's no problem with having a long-legroom-but-no-frills class of seats. Indeed, unbundling services would probably facilitate this.
Have you flown international business or first class before?
It costs a much larger premium than the space differential, it largely costs more due to price discrimination, because many fliers in business aren't the ones paying for their tickets. If you're talking about real first class (which can carry up to a 30-50x price premium on the economy rate), there's also very attentive service, nice champagne, multi-course meals made by an onboard chef served on china plates with silverware, seclusion, sometimes even private rooms. I would not characterize it as "largely because of its larger legroom".
If you mean to say that many people choose business/first because of the additional space, that's more correct. But even in business, it's more about lying flat and other factors than simple legroom.
I have flown first class, not international business. Yes, there is of course a range of first class experiences. Many include expensive additional services.
But a sigificant component of the cost is simply that first class carries fewer people per linear foot than does economy.
Allowing the unbundling of services is much more likely to allow the emergence of an "extra leg room only" class, than is a situation where services must be bundled into a standard package. If the prices have to be the same regardless of seat location, and be packaged with an identical bundle of food, blankets, etc, then that's a strong disincentive to attempt to sell a separate class of legroom seats. And it's much more likely that a "standardized seat" will be too short for very tall people than it will be tall enough - and even if it were, that would mean fewer seats on the plane and thus higher prices.
I started paying business just for the legroom. It's the only reason.
And it's not always as somebody pointed out above that you may chose the door seats for the same price. I had to take a last minute trip for this summer vacation. Those places were part of some "Comfort" plan I didn't even hear of while booking. Fortunately those were the only ones free on the plane and they let me sit there for free. They were booked out for the flight back though...
It's a pain, it got worse through the decades and I fail to understand that development. Was the free market not supposed to make everything better and cheaper? ;)
I spend about 100 hours per year in the air, always in economy class, and I'm average height and build.
I'm not saying it's at all comfortable, just that it's rather hyperbolic to call it 'torture'. I have a book, an MP3 player and some headphones, and then look forward to landing. I prefer to have the money than pay for extra comfort. FWIW, I also have a pretty small car for exactly the same reason. I wouldn't call that torture, and wouldn't expect anyone to subsidise big cars just so I feel more comfortable for the same price.
I wouldn't call it torture, but I would call it "uncomfortable". I'm average build too; I don't mind the lack of legroom in economy, but when I have to spend an entire 12 hour flight managing where my elbows are (ahead of my seatmate, behind my seatmate, arms across my chest, hold the seat in front of me, etc) it's very uncomfortable. A shared 3" wide armrest is just NEVER going to work. If I could just sit in a relaxed pose I'd be thrilled.
Every time it comes up, I rant about the need for a human-sized seat that's only perhaps 50% more expensive, but it virtually doesn't exist. (Save Premium Economy on Lufthansa and Air NZ, neither of which I've ever tried due to arcane rules about what seats you're allowed to pre-buy on what codeshares.. thanks, United).
Wanting enough space for my elbows to be able to stay within the confines of my seat should not cost me 10x as much.
I fly US-South East Asia a couple times a year. Economy fares are around $1k(or $500-800 the last few months). Business class fares can be had for about $4-5k. Premium economy for around $1,500-2,000. My problem with premium economy is that for 50%-100% more than the economy fare, you're not getting much. Slightly(1-2") larger seat and pitch. Slightly better food. Earlier boarding. I wish they would have something in the $2,000-2,500 price point with those recliners that you find in domestic first class. I'd definitely pay that much for it.
I hear what you're saying, but I can't justify paying a full multiple of base fare.
Economy plus might not be the best thing in the world, but 50% more is at least within the realm of human affordability, and partial recline and my own armrest sounds downright luxurious. For 5x as much as a coach fare, the perks better be things I shouldn't discuss on a public forum.
And I don't really care about the quality of food or service, how many times they bring me a hot towel, etc. Just want a good seat.
While I agree with your points, I would also add that most of the people who are in the middle in the second, bifurcated market would likely be in the low end or outside the market entirely in the first market, e.g. they won't even be able to afford the meat. So they're not really worse off, the goalpost has moved.
I don't agree at all. Even today, meat from a good butcher is quite affordable. A much bigger part of the cost is physically visiting the butcher, since there's far fewer of them.
It does tie in with two-income families (households are more time-poor) and other changes in the economy, it's not just commoditization.
Totally agree. Some of the fares are really cheap these days. For example a return flight from Manchester to Dublin booked two weeks in advance is £20. That's a journey that can only be done by flying for one hour or driving for two followed by a three hour ferry.
Or perhaps even better, a return from Manchester to Nürnberg for ~£30 in 2 hours instead of a 14 hour drive plus ferry. The fuel for that alone (not including the ferry) would cost £170.
I just don't understand the complaints!
Booking a few months in advance I can get a return trip to the otherside of the world (Australia) for under £700 and get there in less than 24 hours. I find that incredibly cheap and would be mindblowing just 20 years ago.
It's not just about bargain basement product though. Supermarkets do offer premium products and prices more people can afford. Maybe not hand-reared meat, but better cuts of meat from e.g. Aberdeen Angus. The Bronze turkey we had for Christmas was dry hung, bought at Aldi (a German owned chain that operates here in the UK) at the price of a basic bird from a butcher.
My experience of supermarket premium products is that they are barely acceptable approximations of a quality version of the product.
Take cheese, for example - it's much easier to taste the difference with cheese. I've never had a UK supermarket Comte comparable to a Comte from a cheesemonger, no matter how premium it was advertised.
Or pastries. The only widely distributed supermarket in the UK with what I would consider edible pastries is Waitrose, and not all branches have a decent range. But bakeries in the UK have their own mass-market pathologies.
What really brought the insight home to me was my experience eating in Morocco. There, bread was baked by street vendors - it was always fresh and warm. You have to get lucky with timing to get the same experience in the UK, even if you go to bakeries. I realised we've lost certain qualities of life with our economic setup, and the more I found out about good food, the more I realised that supermarkets and commoditization had created a mechanism that forced me to work much harder to get good food.
Anyway, this isn't directly related to airline seats, but I do think the ratchet effect is real and it shows up in a lot of places.
> There, bread was baked by street vendors - it was always fresh and warm. You have to get lucky with timing to get the same experience in the UK, even if you go to bakeries.
Maybe that's just the UK? In Germany, many supermarket and discount store chains have recently been outfitting their stores with bakery stations, where you have a somewhat decent chance of actually getting warm rolls.
Also, I've had a pretty good experience with premium products in German supermarkets. I only rarely buy from a premium store (sometimes for cheese, almost never for meat), but when I do, their performance is pretty comparable to supermarket premium lines.
Yeah, that sounds like just the Anglosphere. I've been to Montreal and lived in Israel, and in both those places you darn well get fresh bread and pastries in either the supermarket or bakery shop of your choosing.
Mind, I was fortunate enough to live in the best baking city in Israel (something like 53 bakeries in a city of 300000 people, plus supermarkets and open street markets), but still.
Funny thing is this also describes the job market. Very low wages at the bottom, not even enough to sustain a living, nothing in the middle, high wages at the top. Hollowing out of the middle. All a result of supposed efficiency, but really it's just externalities pushed onto the employees. It's not as if they can afford it, they have no choice.
"nothing in the middle" is a blatant lie and hackernews discussions are much better when they are backed by facts and logical arguments rather than political clap trap.
A median says close to nothing about repartition. That's not a fact that you can use in a logical argument against your opponent's claim about repartition.
There's quite a few households and quite a lot of people between $35k and $100k. The claim that there is no middle class is blatantly, provably false. The very, very top has a lot. I don't think anybody is disputing that (I'm certainly not). But there are a lot of people who make a solid, middle class income.
The share of total national income for the middle class has been in decline for 50 years. The piece of the pie that the middle class represents is shrinking.
You're assuming the poverty line is a relevant metric. And regardless of the accuracy of that assumption, you still don't offer any information on the income spread over percentiles, nor a source for your one claim.
> In 2015, in the United States, the poverty threshold for a single person under 65 was at an annual income of US$11,770; the threshold for a family group of four, including two children, was US$24,250.
I think that's the general setup you get when an economy cartelizes. The untold story of American inequality has been the reversal of decades of antitrust work by the state, resulting in the oligopolization of most major labor, consumer, and capital markets. http://washingtonmonthly.com/magazine/junejulyaug-2016/popul...
So why are you telling the story with supermarkets and meat producers framed as actors? Looks like it's the consumers who have collectively made this decision, and companies have just been following their wishes.
Yes indeed, consumers have collectively made the decision from the choices given to them by the market (you need at least two sides for most market outcomes, since transactions generally have two parties). My point is that not all consumers are necessarily better off from the collective decision.
The fact that you only see two choices at the stabilized market right now doesn't mean that these were the only two choices present when the market transformed.
It's impossible for everyone to be happy when you're making the collective decision.
It's not just price. Most consumers don't want to waste time travelling to multiple different specialty food stores. It's not worth the hassle for a marginal improvement in quality.
Take meat. Used to be you'd go to the butcher for your meat, and you'd get a reasonably good product, from a butcher who knew where the meat came from, probably even the farmer who reared the meat. That was the way almost everybody got their meat, so the fixed overheads of having a butcher shop was spread over a large customer base.
Move along a couple of decades. Supermarkets, with their more efficient logistics, eat into the meat trade. Butcher shops almost completely disappear. But supermarket meat goes through a longer supply chain with larger suppliers that have the efficiencies of scale to cope with the pricing power supermarkets have. The butcher shops that survive turn into boutiques, where their unique selling proposition is what used to be commonplace: that they know where the meat is coming from and probably know the farmer that reared it.
The market bifurcates into two basic strategies, low price and high quality (see also Porter's Cost Leadership and Differentiation).
The consumer who's willing to pay a little bit more for a little bit more quality ends up having to pay a lot more rather than a little bit more, because the pool of people who could spread the fixed costs of the higher quality is split - most go for the lowest priced product. There's a ratchet effect, where slightly higher quality products are, at the margin, increasingly expensive because there's no scale in that strategy: the more expensive they become the less uptake they get, which means they have less scale, which means they become more expensive.
In some ways it's a collective action problem: what would be a better outcome for a large group of people can't really occur because individual actions can't sustain a stable state change. In other ways - many, if not most economists believe this - it's a better outcome overall, because more people get to use the bargain basement product.
But I think people in the middle are usually worse off in commoditized markets.