Median Income Woes

In the last week, two different government agencies released income data. The Census Bureau provided a report on “income and poverty data for 2013.” Many, if not most of the reports that I saw in the press trumpeted the datum that the poverty level had dropped from 14% to 13.5%. Some in the political arena stressed that this was one more indicator that our economy was on the mend.

Maybe so. At the same time, Don Cole, the crusty curmudgeon, is not so sure. When I dug into the data, I saw that median household income (the 50% percentile) is still where it was 15 years ago. It is stuck at $52,000.  That is not progress. I had a few allies. Annie Lowery of NEW YORK MAGAZINE wrote, “We peaked in the late 1990’s.”

One issue that I have harped on over recent years is that those of us who work in advertising, marketing, or communications tend to live very comfortable lives. The people that we work and socialize with tend to be very affluent. As we age, we get free of basic money worries and some of us get rich.

I heard a stranger say the same thing to me recently. Showing up at a golf course, my playing partners got confused and did not post for our tee time. The starter paired me up with another group and I was put in a golf car with a pleasant gentlemen from Oregon. When you spend four and a half hours with someone the talk often strays from golf.

He told me after a while that he was a low level millionaire who runs a small insurance office. Here is a close paraphrase of some of his comments: “I was at a dinner party recently and looked around the table. All of my friends were easily worth a lot more than I. One has to have a net worth of $25 million. We discussed our children, trips we would take, and a few mentioned how great things were now that the Dow Jones Industrial Average had cracked 17,000. I explained that a buoyant Dow was great for all of us but many people, including most of my customers, were not affected. I told them they would be shocked if they knew how many of my car insurance customers were on food stamps and how many adults had aging blue collar parents paying their premiums for them. Finally, I talked about a young man who visited me that week up to his ears in debt. He wanted to buy a big Dodge Ram pickup truck. I advised him to buy a used truck but he went ahead and got the new one. If gas prices go up he will not be able to fill his tank. And, I bet $1,000 that he will miss an insurance premium this year.”

This gentlemen, although affluent, is in touch with what is going on. The middle class is shrinking. The Pew Survey, a study that I really respect, has illustrated that two decades ago, some 60% of Americans fell in to that sweet spot of middle income. Now, it is down to 45%. Forget what the pundits on CNBC say, the middle class is getting squeezed and there is no relief in sight.

There is one key thing about median income that is rarely mentioned. Demographically, median income has to decline in the years ahead. It is a virtual demographic certainty. Each day, 10,000 Americans turn 65. As these baby boomers retire, their incomes will drop. Median income has to go down. Their purchasing power may not be affected all that much as they will spend less on clothes, lunches, dry cleaning and automobiles and 40% have no mortgage. Yet, the median income will decline.

Separately, the Federal Reserve, a quasi-independent government agency, released their Survey of Consumer Finances--2013, about 10 days ago. Sifting through the turgid prose, I found a statistic that made me feel very sad. Household income for those under 35 years old is at $35,509. Adjusted for inflation, this is the lowest report since 1989. That was 25 years ago!

All of this has to have a profound affect on marketing and advertising in the years to come. Most of you who read this are in the top 10% of American income. A handful are in the infamous 1%. Congratulations! Try to get in touch like my Oregonian acquaintance on the golf course.

Forget your circle of friends. How do you market to people who are struggling? For them, the American dream has become a nightmare.

If you would like to contact Don Cole directly you may reach him at doncolemedia@gmail.com or post a comment on the blog site.