Chicken Little and Pollyanna analyze the latest Pew income data
There’s an old story about the CEO who insisted all analysts present their findings with one arm tied firmly behind their backs. The boss was tired of wishy-washy reports that concluded “on the one hand … but on the other hand.”
When a new Pew Research Center report proclaimed The American Middle Class Is Losing Ground, that wise CEO came to mind.
Evidently, the 2015 middle class share of U.S. households is way down from 1971 – only 50% now versus 61% then.
Pew’s findings provided fodder both for hand-wringers and for cheerleaders, so most commentators were in two-handed analyst mode, simultaneously channeling Chicken Little, the sky is falling, and Pollyanna – play The Glad Game – to achieve balance. Whatever that is.
The Chicken Littles’ socially conscious angst focused on how the middle class is being hollowed out and that the low income ranks are growing. The Pollyanna takeaway was how much more income all households enjoyed in 2015 versus 1971.
The Chicken Littles found enough gloom in the Pew commentary (italics below) to see a falling sky:
- Progress masks financial setbacks since 2000
- Lower tier households grew 1971-2015, from a 25% share to 29%
- Income grew fastest among “upper” households
- Upper-income families have seven times as much wealth as middle-income families – back in 1983, the ratio was only three times.
- Americans over 65 are the most likely age group to be lower income
To Pollyannas, the data proves everyone is better off in 2015; sure, the rich more than others, but – Pew’s snappy title notwithstanding – no income tier actually “lost ground.”
- In 2014 dollars, median lower tier household income rose 28% vs. 1971; the median middle-income household grew by 34%
- OK, for upper-income households the increase was 47%, but that also generated more taxes to support lower income folk.
- Yes, the middle class share of households shrank – but almost twice as many moved up (7%) as down (4%.)
- The 65+ age group improved their income status far more than any other demo: 26% net upward movement since 1971.
For Boomers and the American economy in general, that last statistic is the most important.
The Wile E Coyote method: cut to the chase
Question: who out in the real world, far from the gray domain of statisticians and social trend-trackers, personally experienced the changes between 1971 and 2015?
Answer: older members of the Boomer generation of course. Most Xers and Millennials didn’t enter the income-earning stream until the 1990s and 2010s respectively.
Starting out in the 1960s/70s, older Boomers have the long view of American household income growth. According to Pew, the 65+ age group is the only one whose upper income brackets increased in size 1971-2015– a net increase of 27%.
Add plummeting costs for former luxuries – travel, giant TVs. mobile phones – as well as far cheaper food and clothing, and older consumers today are much better off than their grandparents were back in 1971.
After the Chicken Littles and Pollyannas have had their say, it’s time to turn to Wile E. Coyote for his hungry, cut to the chase focus on the endgame. Wile’s take: let’s go get those juicy, plump Boomers. They’re so tasty.
The Financial Times summed up the Pew data in more erudite terms, but the bottom line is the same.
“The US middle class is already being reshaped by its aging population, and older citizens are set to play a swelling role in the economy as their weight in the middle and upper income brackets mounts.”
(FT quoting projections by the McKinsey Global Institute) “Americans aged 60 and over are forecast to drive half of all U.S. spending growth between 2015 and 2030.”
Hungry brand alert: you have to work for your share
Baby Boomers, their big sisters and brothers born 1940-1945 and 4 million Gen Xers who turn 50 this year – the Boomer-Plus Generation™ – owns over 70% of U.S. household net worth. Its 93 million members represent the world’s # 3 economy, with way more spending power than Germany, or the UK, or Italy or France.
But Madison Avenue has not gotten hungry enough to chase us down; the FT quotes Jaana Remes, a McKinsey Global Institute partner as “surprised she had not heard corporate leaders express more interest in this group.”
When adland is finally prodded into action by innovative client managers, they’ll find it takes hard work – and smart work – to win a bigger share of business in the 50+ arena. We don’t offer Acme surefire Snag-a-Boomer kits, but we do know the territory. Meep, meep!