13-1

Chapter 13
Income and
Social Class

Income Patterns

13-2

The average Americans standard of living

continues to improve and can be linked to:
Womens 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.

13-3

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 twobedroom house.

13-4

Income Gap in the U.S.

States with the widest gaps in average income, 19982000

Average Family Income

New York

$12,639 $161,858

Top-toBottom
Ratio
12.8

Louisiana

$10,130 $117,374

11.6

Texas

$12,568 $138,001

11.0

California

$14,053 $154,304

11.0

Massachusetts

$15,740 $165,729

10.5

Tennessee

$13,078 $137,524

10.5

Kentucky

$12,602 $130,825

10.4

Bottom Fifth Top Fifth

Source: Economic Policy Institute and Center on Budget and Policy Priorities' analysis of
data from the U.S. Census Bureau's Current Population Survey

13-5

Income Gap in the U.S.

States with the narrowest gaps in average income, 19982000

Average Family Income

Indiana

$17,868 $125,616

Top-toBottom
Ratio
7.0

Utah

$18,758 $131,951

7.0

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

7.9

19,522 $155,809

8.0

Bottom Fifth Top Fifth

Colorado

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

13-6

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.

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13-7

Consumer Sentiment and Expectations

Index of Consumer Sentiment
Index of Consumer Expectations

100

95

90

85

80

75

70

13-8

Subdued Simplicity: Post Dot Com

Then

Now

Car

BMW

Honda

Home

Potrero Hill Apt

With View

Cole Valley Apt

With Roommate

Breakfast
Beverage

Tullys Mocha

Home-brewed
Coffee

Shopping

Neighborhood Market

Costco

Business Financing
Strategy

Venture Capital

Bootstrapping

Source: San Francisco Chronicle (2001)

Social Class

13-9

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

13-10

Social Stratification Refers to the Creation of

Artificial Divisions In a Society by:

Achieved
Status

Ascribed
Status

Earned Through
Hard Work

Obtained Through
Luck or Inheritance

Status
Hierarchy

Some Members Are

Somehow Better Off
Than Others

Class Structure in the U.S.

Access to Resources Such As Money,
Education, and Luxury Goods

Upper-Upper
0.3%
Lower-Upper
1.2%
Upper-Middle
12.5%
Middle Class
32%

Working Class
38%
Lower But Not Lowest
9%
Real Lower-Lower
7%

13-11

Social Mobility

13-12

Social Mobility Refers to the

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

Downward
Mobility

Components of Social Class

Occupational
Prestige

Income

Educational
Attainment

13-13

Relationship Between Income

and Social Class

13-14

The relationship between income and social

class:
More income doesnt 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

Women
and
Social
Class

Problems
With
Measures of
Social Class

Status
Inconsistency

Increasing
Anonymity

13-15

How Social Class Affects

Purchase Decisions

13-16

Worldview

Appropriate?

Considerations
for Constructing
Marketing
Messages

Codes

Taste
Cultures

Targeting Different Income

Levels
Targeting the
Poor

Targeting the
Rich

14% of Americans Live

Below the Poverty Line

Many Firms Target

Affluent Markets

Many Feel Alienated by

Society

Luxury Products Are

Important

Some Firms Develop

Products for Them

Old Money
Consumers

Educate Consumers on
How to Stretch $

The Nouveau Riches

Some Firms Locate

Closer to this Market

The Get Set

13-17

Status Symbols

13-18

The
Billboard
Wife
Parody
Display

Status
Symbols

Common
Characteristics
of
Conspicuous
Consumption

Modern
Potlatch

Leisure
Class