Demographic Update

For years, I have been pounding the drum telling people that demographics should be the first line of analysis for media placement, marketing, investment and societal issues. I use them everyday and any forecasting that I do is usually tempered by a heavy dose of demographic scrutiny. Last June, the US Census Bureau released some updated figures across several financial measures that I would like to share with you. What I like about the Census Data is not simply the size of the sample. It is that they often provide the median for many things that they measure.

You have all heard the old line that “you can drown in a river with an average depth of six inches.” The average, of course, is the arithmetic mean. I do not find it particularly useful when looking at many demographic characteristics and especially so when it relates to income, net worth or wealth. The median makes far more sense to me. It is the 50th percentile so it takes out the extremes at both the top and the bottom.

So, here are a few Census factoids:

In the U.S. median household net worth is $80,039. Take out equity in their primary residence (if they have one) and it drops to $25,166. So, in other words, sans house many American families have $25k or less in assets.

We all check our retirement accounts regularly. The median value of retirement accounts was reported as $58,500 (it has to be higher now with the recent record breaking rally on Wall Street). Still, not a fortune especially if you are over 50. And, some one third of working Americans have a retirement account balance of zero.

Some good news came from the Federal Reserve recently. Median household income hit an all time high by the end of 2016 and was at $59,039. The problem is that it was at $58,665 in 1999. So, when pundits say that the middle class is stalled or disappearing they are not exaggerating. It has been a tough slog back for millions of American families to recover from the Great Recession of 2008-2009.

What about earnings? The Census tells us that just under 45% of U.S. households have an adjusted gross income or taxable income (after exemptions and standard deductions) of under $30,000. Some 80% have a taxable income under $100,000 and approximately 5% over $200,000.

In the U.S., the Federal Reserve tells us that the top 1% of households have 38.6% of the net worth. The bottom 80% have 23.8% of U.S. assets.  Credit Suisse measured it globally and the top 1% control  almost exactly 50% of the world’s wealth. Credit Suisse also projects that the top .7%  worldwide are millionaires in U.S. dollars.

As marketers who are in the higher echelon of both income and net worth, can we truly relate to these data? Our economy has clearly improved, albeit slowly, the last few years, but financial markets have done very well. Yet, only 51.9% of Americans have any holdings in equities. So, the bottom half has benefited not at all from a 23,000 Dow Jones Industrial Average.

I hate to end on a sour note but I cannot resist mentioning a new and, to me scary, milestone regarding the national debt. This year the national debt is crossing the $20 trillion dollar mark. It will be 7% more than our Gross National Product(GNP) this year. So what, you may say, that is just a number. Well, economic historians often place an 80% national debt to GNP ratio to be a danger zone. Yes, we are lower than Greece, Japan and many European nations. It still, however, gives me pause. Will our new tax reform or cuts, if they pass, be revenue neutral? It seems unlikely. And, my friends, what about the unfunded liabilities in Social Security, Medicare and Medicaid?  They are somewhere between $100-200 trillion without reform. How about  one more zinger? If we ever have real interest rates again, not 12%, but let us say, 5%, the annual budget deficit will soar out of control as most of our national debt is now short term at artificially low rates.

So, we face growing wealth inequality and huge debt and how do we market to the struggling 50th percentile and below?

Time for a drink. Cheers!

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com