Surprise! People Who Have More Money Spend More Money
In an analysis released on MediaPost today (link unavailable), a media and demographic analyst is shocked – shocked! – to discover that rich consumers spend more money. And on luxuries, no less.
After analyzing two US government reports – the latest Federal Reserve Board Survey of Consumer Finances and the latest Bureau of Labor Statistics Consumer Expenditures Survey – Stephen Kraus, SVP, chief insights officer of Ipsos Media CT’s audience measurement group, comes up with this startling insight:
Affluents continue to account for the bulk of American net worth, and a disproportionate amount of consumer spending.
Who’d have ever guessed?
They have more money
Kraus crunched the numbers for two socioeconomic groups:
First, what he calls Affluents, whom he defines as “those with $100K+ in annual household income [HHI].” These are 18 percent of American families and hold 69 percent of total consumer net worth.
And second, what he calls Ultra Affluents, whom he defines as “those with $250K+ HHI.” These are 4 percent of US families with 43 percent of total consumer net worth.
Especially if you’ve been listening to political speeches for the past four years, this shouldn’t be big news. But it can be somewhat misleading. In New Canaan, CT, for example (median HHI $141,788), Kraus’s Affluents would be grossing below-average income. And in communities from Jupiter Island, FL, to Huntleigh, MO, to Hidden Hills, CA (median HHI $200,000+), his Ultra Affluents’ income would be only slightly above average.
But in other parts of the country, where Affluents and Ultra Affluents aren’t just scraping by, they’re not exactly stuffing dollar bills into the mattress.
They spend more money
Affluents, Kraus notes, “account for 35 percent of total US consumer spending.” That, incidentally, is about twice their percentage of the population and half their share of total wealth.
In expensive and luxury items, their share of national spending is even higher:
- 34 percent of national spending on newspaper and magazine subscriptions
- 42 percent of dining at full-service restaurants
- 45 percent of streamed or downloaded video
- 47 percent of college tuition payments
- 51 percent of airfares and men’s suits
- 52 percent of hotel rooms
- 62 percent of charitable contributions
- 63 percent of watches
- 74 percent of ship fares
Ultra Affluents, Kraus finds, have similar patterns, though the numbers reflect their smaller percentage of the total population. Their share of national consumer spending (7 percent), too, is almost twice as big.
They account for:
- 13 percent of spending on smartphones and tablets
- 18 percent of club membership dues
- 20 percent of charitable contributions
- 24 percent of watch purchases (No word in the surveys as to whether those are Rolexes or Timexes.)
Follow the money
The recent tax increases targeted Ultra Affluents as the engine for singlehandedly paying down the national debt by paying their “fair share.”
Kraus sees Affluents and Ultra affluents as the engines of economic recovery, explaining that
Their personal and professional decisions remain a crucial engine of economic growth. Their pace of spending will disproportionately shape the economic recovery. Their investment decisions will disproportionately shape financial and real estate markets. Professionally, Affluents (particularly Ultra Affluents) skew toward executives and entrepreneurs – in other words, their business decisions to expand or hire disproportionately shape economic and job growth. They are a truly important market, indeed.
Willie Sutton, who was not a chief insights officer, put it more succinctly when asked why he robbed banks for a living. “That’s where the money is,” he said.
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