The ‘real’ costs of that pair of sneakers

When I was growing up, sneakers were ubiquitous, unbranded, ugly and cheap.

Kids loved them because they were so easy to run around in, and parents loved them because they saved wear and tear on your “real” shoes.

But over the years, the lowly sneaker has morphed into the designer athletic shoe, and in the process, given birth to a whole new category of what economists call “luxury goods.”

No company has benefited more from this fashion trend than Nike, which reportedly controls one-fifth of the global athletic wear market. Nike’s most famous brand is Air Jordan, named for the equally famous Michael Jordan, who led the Chicago Bulls to six NBA championships in the 1990s and is generally credited with being the greatest player ever to play the game.

In February, Nike began releasing a series of “retro” Air Jordans, to celebrate the 20th anniversary of earlier models. The “Powder Blue” Air Jordan 10 hit retail stores in late February; first day sales reportedly topped $35 million worldwide.

Air Jordans are manufactured in China and reportedly cost Nike a bit more than $16 a pair. The Air Jordan 10s are listed on Amazon for $250 to $550 a pair, depending on the style and color. If that strikes you as a rather hellacious markup, welcome to the world of “luxury” goods, where the selling price is determined not by the cost of the goods, but by the status that buyers think they confer.

Psychologists tell us that there are two main reasons why we buy luxury goods, even when many of us really can’t afford them. The first is called “signaling” — using luxury goods to “show off” and send a clear signal that you measure up to your peers, or to others in your community. Similarly, we often purchase luxury goods to “mark” significant accomplishments in our lives.

The second reason is triggered by moments of low self-esteem. As a recent article on luxury goods in Time Magazine put it, “when you’re experiencing low self-esteem, you’re more likely to feel a stronger desire to acquire high-status goods ...”

So, it would seem that no matter whether you are feeling way up about yourself or way down, you are likely to treat yourself to a pair of Air Jordans that you probably don’t need and maybe can’t afford.

Beyond the gaudy prices, there are a couple other hidden costs attached to buying MJ’s latest shoes. For one thing, spending on luxury goods doesn’t flow back through the economy the way it used to. Nike’s stock, for example, has tripled in recent years. But since the wealthiest Americans now own 90+ percent of all common stocks, they take home nearly all of the gains when stock prices surge.

On the other hand, people in the middle class and working class have to rely on the growth of good jobs for their financial well-being. Unfortunately, buying overpriced shoes from Nike does not payoff in jobs either. Nike imports all of its shoes, and, consequently, employs a lot fewer American workers per dollar of sales than most large companies.

So, from our vantage point, buying luxury goods tends to make other people rich and over-rewards CEOs — Nike’s Mark Price has earned $61 million in just the last three years. Buying luxury goods usually undermines American jobs, since almost anything you buy instead probably entails a lot more home-grown labor.

In professional sports, athletes often re-up their contracts with the team that gave them their start for less money than they could get elsewhere. It’s known in the sports business as the “hometown discount.” If Michael Jordan and Nike want to continue selling us Air Jordans at outlandish prices, then perhaps they should take a little less in profits and hire American workers to make the shoes that they sell in America.

It could be their way of giving the home team a hometown break.

Terry O’Keefe is a longtime guest contributor to the Citizen-Times and is a “recovered” politician.