www.downloadslide.com Chapter Four The Changing American Society: Demographics and Social Stratification 113 skills, abstract reasoning, and the ability to read and learn new skills rapidly. Individuals without these skills are generally forced into minimum-wage and often part-time jobs, which will rarely keep a family above the poverty level. 6 As the following data show, education clearly drives income in today’s economy. Since individuals tend to have spouses with similar education levels, these differences are magnified when spousal income is considered. Income: Workers 18 and Older 7 Education Level Males Females No high school degree $24,831 $14,521 High school degree 36,753 24,329 Associate’s degree 48,237 32,253 Bachelor’s degree 72,868 44,078 Master’s degree 88,450 54,517 Professional degree 147,518 87,723 Education influences what one can purchase by partially determining one’s income and occupation. It also influences how one thinks, makes decisions, and relates to others. 8 Those with a limited education are generally at a disadvantage. Not surprisingly, education has a strong influence on one’s tastes and preferences, as shown in Table 4–2. However, education seldom provides a complete explanation for consumption patterns. For example, a lawyer earning $30,000 per year as a public defender Education Level Influences on Consumption TABLE 4-2 Graduated College Attended College Graduated High School Did Not Graduate High School Products Cocktails 103 92 96 113 Beer 70 90 106 168 Motorcycles 87 113 122 70 iPod (Apple) 164 115 65 38 Activities Waterskiing 103 114 105 80 Visiting museums 175 103 64 40 Foreign travel (last 3 years) 135 100 84 73 Registered to vote 116 106 96 69 Shopping Kmart 75 97 119 107 Neiman Marcus 139 86 88 86 Kentucky Fried Chicken 68 112 110 126 California Pizza Kitchen 198 113 46 42 Media Forbes 154 124 69 45 People 129 113 85 52 Nick at Nite 51 90 118 163 Fox News channel 97 101 109 85 Note: 100 5 Average level of use, purchase, or consumption. Source: Simmons National Consumer Study 2010, Experian Information Solutions (Costa Mesa, CA 2014).
www.downloadslide.com 114 Part Two External Influences will have a different lifestyle from a lawyer earning $250,000 per year in private practice, despite similar educational backgrounds. Income A household’s income level combined with its accumulated wealth determines its purchasing power. While many purchases are made on credit, one’s ability to buy on credit is ultimately determined by one’s current and past income (wealth). Most of American history has been characterized by consistently increasing real per capita income. For most middle- and lower-income Americans, this increasing trend stopped in the 1980s, and household incomes were stagnant or declining until they increased again in the mid-1990s. 9 Several notable economic expansions have taken place from the mid-1990s through 2006. The first was from 1993 through 2000 and the second from 2002 through 2006. Economic expansion results in higher incomes and spending power. A major concern, however, is the growing income divide. One study shows that during the 1993–2000 expansion, real incomes of the top 1 percent grew by 10.1 percent while the remaining 99 percent grew by only 2.4 percent. Even more striking, during the 2002–2006 expansion, the top 1 percent of incomes grew by 11 percent compared with just 0.9 percent for the remaining 99 percent. Such increases in wealth concentration mean that not all Americans are benefiting equally from economic expansion in the United States. 10 Just as Americans have not shared equally in prosperous times, neither have they shared equally in the most recent recession. For example, while the United States lost 1.2 million people previously earning over $100,000, roughly twice that (2.1 million) dropped below $35,000. And while the economy has shown positive signs, consumers are still being affected by the housing market, the high price of gas, and continued economic and global uncertainty. In response, many consumers are buying smaller cars and homes, building fewer new homes, and remodeling less. 11 Target has actually gained business in this environment by repositioning itself more toward value, in part by creating their 5% Rewards program. 12 How long these trends hold remains to be seen. Consumers with modest incomes often want to “trade up” to luxury brands. Companies, in a strategy termed class to mass, have responded by expanding opportunities for less affluent consumers to afford luxury. However, today more than ever, this may require trade-offs. As one retail expert notes: Consumers are still willing to trade up. But if someone wants the designer jeans, they’ll cut back on something else. 13 Income enables purchases but does not generally cause or explain them. For example, a college professor or lawyer may have the same income as a truck driver or plumber. Nonetheless, it is likely that their consumption processes for a variety of products will differ. Occupation and education directly influence preferences for products, media, and activities; income provides the means to acquire them. 14 Thus, income is generally more effective as a segmentation variable when used in conjunction with other demographic variables. How wealthy one feels may be as important as actual income for some purchases. 15 Subjective discretionary income (SDI) is an estimate by the consumer of how much money he or she has available to spend on nonessentials. Several studies show that SDI adds considerable predictive power to actual total family income (TFI) measures. 16