Income and Social Class Chapter 13 Income and Social Class

Income Patterns The average American’s standard of living continues to improve and can be linked to: Women’s roles in the workplace - women are obtaining more high-paying occupations, and Increases in the attainment of education - college graduates earn 50% more than high school grads. Consumer demand for goods and services depends on ability and willingness to buy . Discretionary Income is the money available to a household over and above that required for a comfortable standard of living. Consumers tend to equate money with security and comfort and they are anxious about holding on to what they have.

On the Other Hand…… About 33 million (11.7%) Americans Live in Poverty Poverty = A Family of 4 Making Less Than $18,000 In the Bay Area, a family of 4 needs to make an average of $37/hr to rent a two-bedroom house.

Income Gap in the U.S. Average Family Income Bottom Fifth Top Fifth States with the widest gaps in average income, 1998–2000 Average Family Income Bottom Fifth Top Fifth Top-to-Bottom Ratio New York $12,639 $161,858 12.8 Louisiana $10,130 $117,374 11.6 Texas $12,568 $138,001 11.0 California $14,053 $154,304 Massachusetts $15,740 $165,729 10.5 Tennessee $13,078 $137,524 Kentucky $12,602 $130,825 10.4 Source: Economic Policy Institute and Center on Budget and Policy Priorities' analysis of data from the U.S. Census Bureau's Current Population Survey

Income Gap in the U.S. Average Family Income Bottom Fifth Top Fifth States with the narrowest gaps in average income, 1998–2000 Average Family Income Bottom Fifth Top Fifth Top-to-Bottom Ratio Indiana $17,868 $125,616 7.0 Utah $18,758 $131,951 South Dakota $16,845 $120,705 7.2 Minnesota $20,245 $154,972 7.7 Wyoming $14,867 $116,984 7.9 Iowa $16,586 $131,668 Colorado 19,522 $155,809 8.0 Source: Economic Policy Institute and Center on Budget and Policy Priorities' analysis of data from the U.S. Census Bureau's Current Population Survey

Consumer Confidence Consumers’ beliefs about what the future holds is an indicator of Consumer Confidence. Reflects the extent to which people are optimistic or pessimistic about the future health of the economy. When people are pessimistic about their prospects, they tend to cut back their spending and take on less debt. When they are optimistic about the future, they tend to reduce the amount they save, take on more debt, and buy discretionary items.

Consumer Sentiment and Expectations

Subdued Simplicity: Post Dot Com Then Now Car BMW Honda Home Potrero Hill Apt Cole Valley Apt With View With Roommate Breakfast Tully’s Mocha Home-brewed Beverage Coffee Shopping Neighborhood Market Costco Business Financing Venture Capital Bootstrapping Strategy Source: San Francisco Chronicle (2001)

Social Class Influences: Social Class is Determined by a Complex Set of Variables, Including: Income, Family Background, and Occupation. Social Class Influences: How Much Money Will Be Spent How Money Will Be Spent Access to Resources Such as Education, Housing, and Consumer Goods Taste and Lifestyles

Social Stratification Social Stratification Refers to the Creation of Artificial Divisions In a Society by: Status Hierarchy Some Members Are Somehow Better Off Than Others Achieved Status Earned Through Hard Work Ascribed Status Obtained Through Luck or Inheritance

Class Structure in the U.S. Upper-Upper 0.3% Lower-Upper 1.2% Class Structure in the U.S. Upper-Middle 12.5% Middle Class 32% Working Class 38% Lower But Not Lowest 9% Access to Resources Such As Money, Education, and Luxury Goods Real Lower-Lower 7%

Social Mobility Social Mobility Refers to the Passage of Individuals From One Social Class to Another. Horizontal Mobility Upward Mobility Downward Mobility

Components of Social Class Occupational Prestige Income Educational Attainment

Relationship Between Income and Social Class The relationship between income and social class: More income doesn’t necessarily result in increased status or changed consumption patterns. Income predicts purchase of expensive products without status (i.e. major appliances). Social class can predict the purchase of low to moderate priced symbolic products (i.e. cosmetics). Both social class and income are needed to predict purchases of expensive, symbolic products (i.e. cars, homes).

Measurement of Social Class Changes in Family Structure Problems With Measures of Social Class Women and Social Class Increasing Anonymity Status Inconsistency

How Social Class Affects Purchase Decisions Appropriate? Codes Worldview Taste Cultures Considerations for Constructing Marketing Messages

Targeting Different Income Levels Targeting the Poor Targeting the Rich 14% of Americans Live Below the Poverty Line Many Feel Alienated by Society Some Firms Develop Products for Them Educate Consumers on How to Stretch $ Many Firms Target Affluent Markets The Nouveau Riches Some Firms Locate Closer to this Market The “Get Set” Luxury Products Are Important “Old Money” Consumers

Status Symbols The Billboard Wife Status Symbols Leisure Class Common Characteristics of Conspicuous Consumption Parody Display Modern Potlatch