Special to The Globe and Mail
Published Friday, May. 22 2015
Everyone remembers the Occupy Wall Street movement of a few years ago. While the disgruntled 99 per cent could have honed their message a bit, the lightning rod of anger was the growing inequality of income distribution. The tent villages and drumming circles may have vanished, but the widening gap between the rich and the poor has not – and it’s almost certain to return to public-policy debates in the near future.
There’s no agreement on how to solve the problem of income distribution – or if it’s even an issue. But most would agree that if we’re going to figure out how to address it, we shouldn’t do anything to fuel the flames of resentment and make the situation worse. Yet that’s precisely what certain customer loyalty programs do.
Airlines have special boarding lineups (or non-lineups, really) for their preferred customers. In front of the huddled masses in the boarding area, they call on the “Super Elite” to board first. Virgin Atlantic refers to its favourite fliers as “Upper Class.” Does no one else find this strange? It’s one small step away from inviting rich people to board first – or at their leisure.
Hotel loyalty programs do this as well, with special check-in counters for their “Platinum” or “President’s Club” members. Those with such status can stroll into the hotel, jump to the front of the line and check in ahead of everyone else.
The defence for this form of discrimination is that companies like to recognize their loyal and most valued customers. Those customers have paid more for Upper Class seats and should therefore receive better products. This isn’t about discriminating against the poor, it’s about rewarding repeat customers.
Low-income earners are entitled to the same queue jumping if they are frequent customers, but the fact is they are not. If you’re Super Elite, you’re either wealthy or you have an employer paying for your flights – and no one earning $35,000 a year gets sent on that many business trips. It’s the 1 per-centers who are the loyal customers.
Notice that loyalty programs don’t work in markets focused on the 99 per cent. There’s no queue jumping at Tim Hortons for the frequent double-double enthusiasts. There’s no Super Elite lounge with free Chardonnay and hummus at the bus station (although Greyhound offers one free ride after you’ve taken 16 trips).
But here’s the important distinction: The problem isn’t offering loyal customers a superior product, but offering them superior treatment. It’s not the wider seats or the rooms with better views that are an issue; they’re a completely different product and should cost more. No one would fuss over a bigger steak served to a person who can afford it. But you might raise an eyebrow if the waiter told you, “Your steak was almost ready, but a wealthier customer just sat down and ordered the same steak, so we gave it to her.”
I’m not suggesting loyalty programs are a bad thing (full disclosure: I participate in a few of them). It’s fine to reward the faithful hotel customer with a bottle of wine in her room on her 10th visit, or a frequent Greyhound rider with a free trip. But if the superior treatment of the Super Elite customer results in eroded treatment for the regular Joe on the same plane, it’s going to eventually cause resentment.
Besides, Canadians don’t like queue jumping – not even if they’re the ones doing it. It’s awkward, and in the case of boarding an airplane it’s unnecessary. Everyone on the plane will arrive at the very same time. Being the last one on the plane is actually the best spot to be in. In a recent lineup of us non-elites, I overheard two women talking. “Aren’t you Elite status? You don’t have to stand in this line – go to priority boarding,” said one. “I know. But it’s too embarrassing,” said the other.
While we figure out how to address the serious problem of growing income inequality, shouldn’t we at least try to avoid calling rich people Upper Class or Super Elite? Let’s not fan flames of anger in the name of customer loyalty.
Todd Hirsch is the Calgary-based chief economist of ATB Financial and author of The Boiling Frog Dilemma: Saving Canada from Economic Decline.
Total eclipse of the sun? Maybe a royal coronation? There aren’t too many events that happen only once or twice in a lifetime. But for many Albertans, one such event happened Tuesday night. After nearly 44 years, the government has changed.
Mixed together with a hockey victory that same night, Alberta is awash in emotion, much of it jubilant. Regardless of one’s feelings on the outcome of the election, everyone would have to admit it’s nice to see democracy alive and kicking in Alberta.
But another question is out there: What do Rachel Notley and the NDP government mean for Alberta’s economy?
The confetti at NDP headquarters has barely fluttered to the floor, so it’s still too early to tell precisely what will happen. On balance, new governments can bring many benefits. New ideas, new faces in cabinet, and willingness to try new policy ideas. All of that can be energizing and positive.
Still, there are some elements of the NDP platform that raise some concern from some in the business community. The increase of the minimum wage to $15 per hour is characterized as a hardship for many business owners, particularly small and medium-sized businesses who are already trying their best to avoid laying off workers.
The proposal to increase the corporate income tax from 10 per cent to 12 per cent is a fairly modest increase from one point of view. And judging by how Albertans voted late night, that point of view is where many are at. But it’s easy to demonize “corporations.” We think of rich multi-national companies in the shiny towers, corporate jets and expensive suits. But, indeed, the threshold for paying corporate tax is fairly low: profit of more than $500k. That includes a lot of medium-sized companies in the province, most of which do not own corporate jets and are trying to weather the current economic downturn. That extra two per cent could be very challenging, even disastrous, they say.
Finally, there is the issue of reviewing the natural resource royalty program. While there are no specifics, some say a review would lead to higher royalties paid by producers. A few years ago, a similar review was completed but the changes were quickly undone. At best, a royalty review ensures that Albertans are receiving fair value for the resources they own. But another review could also send signals to investors and producers that—once again—their business projections will be turned on their heads. And, at worst, it could actually drive down investor confidence and drive out investment.
But before anyone gets too worked up, it’s important to remember that all of this is in the future and will be the real stuff of politics and province-building. It will take weeks if not months for the new government to figure out how it is going to proceed. The bureaucracy within government—the deputy ministers, assistant deputy ministers and directors—have a wealth of knowledge and can provide the new government with guidance. This is part of the value and the great gift of a civil service.
A change of government in this province is a chance for fresh ideas to bloom. The numbers suggest that our economy is fragile in parts. The gardener in me suggests that moving ahead with a combination of optimism and thoughtfulness is the key. Abertans have a role to play in that process by continuing to make their voices heard, and elected Albertans in listening to those voices.