The Empty Chair

When labor and management, from both the private and public sectors, meet to discuss contract terms, it’s just about them. The empty chair, symbolically, is where the customer/tax payer should be sitting, as that’s who is paying the bills.  Historically, labor and management have eventually come to terms, and, after all the wrangling is done, the new, higher costs are passed along to the customers and/or taxpayers.

Perhaps things are changing.  Anecdotally, it appears that, at least for the private sector, consumers have begun to balk at higher prices, and have, either reduced consumption, or shifted to lower priced alternatives.

Companies are clearly beginning to notice.  For example, McDonald’s and other fast-food establishments have introduced “value” pricing for some items in an effort to maintain traffic and/or market share.

Investors should be alert.  Management efforts to provide greater value may affect margins and, as a consequence, stock market valuations.

All comments and suggestions are welcome.

Walter J. Kirchberger CFA