Monday, June 23, 2008

More Random Thoughts: Is it Amoral to Pay Less?

My last posting on coffee, tips, and massages surprisingly garnered the most comments so far. A masseuse read my posting about the small business in downtown San Jose and said she was "appalled" at the post, and it was amoral to pay the masseuses so little because they could not afford a reasonable living making minimum wage + tips. To read the full exchange, go back one post and click on "comments." I put my response below. It is slightly unnerving to me to hear people say that offering cheaper products or services is somehow amoral.



Thanks for your post. I hope your school/business is going well.

Like you said, people always want bargains. They will complain about Walmart and "exploitation" in front of their friends, but still clip coupons and go after the best deal possible.

I am not sure that paying less for a product is "amoral." Most poor(er) people charge less for certain services, because they work out of their home, or just don't have the resources to offer a more professional-looking experience. At the end of the day, Walmart and other cost-conscious companies have lifted many people out of poverty abroad, and going for the cheaper option usually means some poor person, somewhere, gets to have a job.

You are correct that when a consumer chooses a cheaper product of service, someone down the chain makes less money. But this person needs to differentiate his or her business or go extinct, and that "creative destruction" is one major source of innovation and promotes superior customer service. In any scenario, someone gets hurt. Consumers who choose to pay more help support the upper-middle-class lifestyle but hurt the chance of lifting someone out of poverty, even if it's not in the U.S. Liberals oftentimes don't understand that by advocating more laws and more expensive products, they hurt the poor and help the rich.

Most important, a little shop in San Jose won't hurt your massage business. Your business appears to be more upscale, so you won't be after the same clients that the downtown San Jose shop attracts. Therefore, both stores can co-exist. In the Bay Area, there are several upscale spas in Saratoga and Los Gatos offering the same basic services as the cheaper shops in downtown San Jose. But some people won't be seen in the "lower-price" shop, because they equate low-cost with being "lower-class." For example, I have a good friend who spends $1000/wk on clothing. When I suggested she try a Vietnamese-immigrant-owned place for her pedicures so she could save 80 dollars on what looks to me to be the exact same service, she scoffed. She wouldn't be seen dead in that place and said it might not be clean. In any business, you have to decide who you want as your customers and then proceed based on that goal. There is nothing "amoral" about buying services from lower-income groups or immigrants who offer cheaper services with very little reduced quality.

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