How Upper and Lower Income Consumers Spend
The United States is a class ridden society.
Its population can be segmented into four classes delineated by effective household income [as mitigated by number of household members].
Operational Definitions of Classes
About one in twelve (8%) U.S. households are UPPER CLASS, defined as those households with income over $150,000 or $100,000 for two-person households or $70,000 for one-person households.
One in three (33%) U.S. households are MIDDLE CLASS, with income at or above the median of all households with the same number of persons, but below that of the upper class.
Something over one in four households (28%) are WORKING CLASS, with household incomes below the median of all households with the same number of persons, but above “Poverty” status.
Los pobres de la tierra—THE POOR—inhabit one in eight (12%) of U.S. families. They have household incomes below the officially designated Federal poverty line, which is based on different income thresholds for households with different numbers of persons.
A national recession is like a cold winter in that its impact on individual families is largely a function of class.
Typically, the poor live in a perpetual recession while the upper classes live in perpetual boom times. And right now, the middle class is just on the brink of suffering from the recession and the working class families are in the grip of the recession.
The Consumer Affordability Index (CAI) which tracks the proportion of consumers who feel they can no longer afford to sustain their current level of spending finds the upper class are comfortable with a Consumer Affordability Index (CAI) of 117. The middle class are getting by with a CAI of 98, the working class consumer is hurting with a CAI of 83, and the poor have a wretched CAI of 75. (Source: statistics are based on interviews with 3,394 consumers sampled nationally at the rate of 450 interviews a month)
Class impacts spending:
FOOD, CLOTHING AND OTHER CONSUMABLE PRODUCTS:
The Index measuring consumer willingness to spend freely find Upper class consumers much more willing to spend for food, clothing, and other consumables (121 Index), than middle class (95), working class (88), and poor (51).
The spending gap—difference in consumable spending Indexes—between upper class and poor consumers is more extreme for clothing (92 points) and food (95) than it is for medical services (55) and gasoline for driving (50).
The working class and poor exert more effort to find affordable food than the middle and upper class consumers.
The percent reporting they use coupons is ten points higher among poor consumers (57%) than among upper class consumers (46%), middle class (48%) and working class consumers (48%).
Use of private label brands is reported by 39% of the poor, 37% of the working class, 31% of the middle class and 26% of the upper class.
The percent reporting buying lower price products even though they are not their favorites, ranges downward from 38% of the poor to 29% of the working class, 20% of the middle class and 12% of upper class consumers.
The reverse pattern obtains for the percent who report buying products they like which ranges upward from a low of 18% for the poor, 26% for the working class, 32% for the middle class, and 45% for the upper class who, at this point, have barely been touched by the recession.
MAJOR GOODS—CARS, HOUSES, APPLIANCES, AND 9 OTHER MAJOR PRODUCTS:
Consumers in the same income class are more like each other in how they shop than consumers that share the same ethnic heritage. As they say—Black and White stand shoulder to shoulder against the Poor.
The difference that class, as defined by income, makes in the percent actively shopping for major goods is more substantial than the difference that ethnicity makes.
The Index measuring active shopping for major goods—checking prices, reading ads, visiting dealers, is 193 for upper class consumers; 119 for middle class consumers; 74 for the working class and only 57 for the poor. The active shopping index gap of 136 points is almost double the consumable shopping index gaps of 70 points.
The gap in the active shopping income between upper class and poor consumers varies widely by type of product. The gap is greatest for overnight stays in hotels/ motels (213 points); personal computers (125 points) and major appliances (120).
Smaller gaps obtain for new cars (88 points), air travel (77 points), new carpeting (64 points) and furniture (61 points). The narrowest gaps are for houses (49) and used cars (44 points).
Active shopping does not necessarily equate to actually buying. The poor and working class have to shop more actively than the upper and middle class to find something affordable to buy.
For new cars, the active shopping index declines in step with class from 126 for the upper class to 66 for the middle class, 41 for the working class, and 38 for the poor.
By contrast, for used cars, the active shopping Index is highest for the working class (102) and the poor (81) who must scramble to find an affordable car than for the middle class (72) and upper class (58) who can more readily locate an affordable car.
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