Businesses are noticing the shrinking middle class

Okay, we all understand that the American “middle class” is withering away, being replaced by an increasingly wealthy top-level economic class (1% or 5% or 20% or whatever cut-off line you care to discuss); while most of the formerly middle class descends into poverty. We’ve all read plenty about wage-stagnation, or the grotesquely increasing disparities in income.

That much is old news.

Here’s an article I just saw from yesterdays NYT, that looks at the other side of the equation, which has seen less discussion: Polarization in spending trends. Businesses (retailers and service providers) are noticing, and are polarizing their product/service lines, providing more upscale or high-end goods and services, or more downscale Dollar Store quality goods and services, with shrinking offerings at traditional mid-level “middle class” levels.

The Middle Class Is Steadily Eroding. Just Ask the Business World. Nelson D. Schwartz, NYT, Feb. 2, 2014.

Just thought I’d point this out, in case anyone is interested in reading this, or discussing it here. I’ll start with this in MPSIMS, although it’s not entirely out of the question that it might belong in Great Debates if much of a discussion ensues here.

ETA: Okay, I’ll add a quote of an excerpt:

The article gives some examples of mid-level providers that are hurting, like Olive Garden and Red Lobster restaurants, some mid-level hotel chains, etc.

I found it super weird that Maserati and Jaguar were advertising during the Super Bowl.

I have read about the theory (or economic fact?) that rich people spending money on tech is very important for that tech to eventually come down in price enough to become ubiquitous. Like how when VCRs cost $1000 or LCD televisions were $4000 for something that’s $800 now. So I guess that’s one way that this current trend could eventually help the middle class. I am hoping it will bring down the price of fuel-efficient/electric cars.

Problem is…do the business owners care that they are losing the middle class? Sears and Penny’s are feeling it but will they just go lower class? Is there anything a company can do to get the middle class spending again or is it all up to the government?

The problem is not that the middle class is not spending, it is that the middle class is shrinking. What middle class there is still spends most of their money, besides some retirement savings.

Thus you see more and more businesses targeting the rich, since there’s no money to be made in the middle anymore. Not good.


While the middle class is shrinking it’s not just the percentage of households below the middle class cutoff that’s growing, it’s also the percentage of those above. In fact the upper class is growing slightly faster than the lower class.

So if you’re a business it makes sense to target the rich since there’s a lot more of them than there used to be.

Interesting. I have a friend who works at Red Lobster and he said they are attempting to reposition themselves as better quality than say, Applebee’s. Which would make sense, I suppose, if they’re seeing their regular customer base dwindle. I question the wisdom of this decision because I’m a snob and I don’t think they could ever shake their reputation as a mediocre seafood restaurant as I find the prices they currently charge a tad brazen. If everything goes up 2 bucks, I may not be able to look at the menu without laughing.

I’ve noticed this in the pricing of recreational items. I only have anecdotes, but the startling rise in some prices is worrisome. Even if you’re not in the market for the stuff, it doesn’t bode well for the industries (and their employees). The move seems to be toward a smaller volume of much more expensive items. Not good for the people who build them, nor for the remaining middle class folks being priced out.

Hardly a statistical sampling, but the examples I’ve seen:

While at the boat dealer getting a part, I noticed the insane prices of new boats. The new version of a ski boat we had 10 years ago? $70,000. A new version of my boat (small 24ft cruiser)? $131,000. :eek: I don’t think there’s any way an average middle class family can buy one of these; We certainly couldn’t have done it. (And this thread discusses the noticeable decline in boating traffic).

Hunting is also moving from low-middle class to an expensive sport. I think the days of Bubba and Chester heading to the woods for the price of a license are numbered. Shopping around, I found good leases often fetching close to $15,000 annually per hunter. Add a 4-wheeler and a pickup, and you’re into rich-dude territory.

I read an article a while back that predicted much of the recreation market will collapse in the next few decades due to (a) the shrinking and aging pool of participants, and (b) women are more often the primary household earner. The article pointed out that women (probably wisely) are less likely to sink a bunch of money into expensive toys.
Johnny LA had a similar thread on this a few months ago.

Also, keep in mind that while the middle class is shrinking, it’s still more than 50% of the US population. It’s pretty obvious that there’s still money to be made catering to them as well.

I know “things aren’t great, but their not that bad, and actually getting better for slightly more people than they’re getting worse for, although it’s too bad it’s not getting better for everyone” doesn’t make a great forum topic though.

My wife noticed this trend years ago with, of all things, socks.

It used to be you could get decent socks by paying a little extra.

Now you can get either crappy socks that are dirt cheap, or really nice socks that cost three times as much. The middle of the sock market vanished.

Demographically, the Baby Boomers and those born before 1946 (when the Baby Boom began) are the largest growing segment, yet very little is designed, manufactured or marketed to them. Many are “comfortably well off” and their money is not sought out. Why is that?

Good question.

I notice that it’s hard to find work-appropriate business casual clothes for someone pushing 60 hard. Everything seems to be synthetic with elastic waists or has horrible machine embroidery. I like tailored clothing, or flowing long skirts. Some Boomers are still working!

The loss of comfortable cars is another trend, too. By choice, I don’t drive a large car, but finding something with enough leg room is challenging. I’d be willing to sacrifice a rear seat to get enough room in front.

Thinking of my parents vs my 20-something and 30-something friends…it seems maybe like it takes a lot more time and effort to get a Boomer to part with their money. Might just be a higher ROI sloppily and easily marketing to the gullible younger folks who throw money away like it’s nothing than it is to get the money of an older person who asks a lot of questions first.

Echoing what No umlaut sort of said, I’ve got the money, honey, and I am willing to spend it. But spend it on what, besides nice cookware and shoes?

Which is it? Lack of supply or lack of demand? From where I sit, the demand is there.

I’d love to buy simple electronics that don’t require a tech degree to operate. (My Ford Touch, anyone? Anyone?) Simple, uncomplicated electronics would be great. Plug them in and watch them go. Instead, we get these horrors of complexity that do all sorts of tasks we don’t care about and we have to wade through instruction books to set them up.

I’d like a nice small car with leg room, too.

I don’t want to dress like a teenager or 20-something, but good luck finding age-appropriate clothing that isn’t made out of cheap, shiny, spandex stretchy t-shirt fabric that shows every bulge and lots of skin. I don’t want to look like your grandma, either. I’d love to have a nice big wardrobe.

We aren’t the desired demographic, so we keep our money. Nobody asks us what we want. Our needs go unmet, and businesses lose out.

While the article certainly gives ample evidence that the top 20% of earners are spending more in comparison, it does not support a conclusion that the middle class is shrinking. First of all, the article compares the top 20% of earners to the remaining 80% (which it calls the “Bottom 80%” - slant much?). Since the 0 - 80th percentile includes both lower and middle class (cutoffs vary, but generally speaking the top 25% constitute the upper class, bottom 25% constitutes the lower class and the 50% in between is the middle class) it could just as easily lead to the conclusion that, while the population of the groups remained steady, the bottom 25% have slowed their spending while the middle 50% have held steady. I don’t propose that as the case, only that from the data given it is a possible conclusion.

In real terms, tighter lending policies account for a large part of the “consumption spending” decline of the middle class. Even the abstract of the research paper referenced in the linked article says “The consumption-income ratio of the bottom 95 percent fell sharply in the recession, consistent with tighter borrowing constraints.” To overly simplify, rich people don’t need credit cards or bank loans to keep their spending up, poor people can’t get credit so a tightening doesn’t affect their spending, only the middle class uses credit to finance lifestyle. In times of tight credit middle class spending declines while upper class spending stays constant, thereby accounting for a larger percentage of the consumption spending pie.

In short (too late!), I see the charts as a proof that the overall expected spending patterns tend to occur when credit is tightened. Interesting, but the sky is not in danger of falling.

A more compelling theory for why these restaurant chains aren’t doing so well, is that they suck.

There are restaurant chains like Chipotle, Moe’s Southwest Grill and Little Caesar Pizza that are expanding. And I have trouble seeing them as refuges of either the 1% or of poor people.

Jackmannii’s post has got me thinking. Could it be that middle class people’s consumption patterns are shifting not because of reduced disposable income, but because people shop differently and want different things?

Our paletes are growing more diverse. It used to be that sushi was for the hoity toity, but now you can get it at the grocery store. When I hang out with my sister, we never go out for Standard America cuisine. It’s usually either Japanese and Thai. Sometimes it’s Indian. If we want something cheap and unsophisticated, we’ll grab a pizza or pick something up at Panera or Chipotle. Olive Garden? Why, that’s just as bad as Golden Corral! Yes, we are snobs. But when you have choices, you can afford to be a snob.

Retailers like Amazon are attractive to people like me who abhor shopping. Why sit in traffic and deal with long lines when you can do your shopping in the comfort of your living room? This is good for Amazon. Bad for JC Penny’s.

Going back to the snob thing. Media is doing a good job of advertising the lives of the rich and famous. Thank the Kardiashians, maybe? Or maybe all the lifestyle magazines and shows, like everything on HGTV. People watch a few hours of the food network and decide they want to outfit their kitchen just like Anthony’s. And then there’s stuff like Pinterest that’s designed to make people envious. So maybe people are more willing to drop big money on a few high-ticket items than they used to be, and they adapt by not buying as much of the piddly stuff at piddly places. Quality over quantity.

I’m not sure about any of my suppositions, hence why there are so many “maybes”. But I guess I’m just saying, just because places are going out of business doesn’t necessarily mean that society is breaking down.

I’ve noticed this one too. If it looks cheap, it usually is. But I’ve noticed a lot of what I would call “middle-class clothing” that have really marked up their prices. But not their quality.

I haven’t had Little Caesar’s in a couple years but when I did it was like five bucks for a large pizza! That’s competitive with frozen grocery store pizza, pound for pound. I hardly think of grocery store frozen pizza as just a solid middle class thing :slight_smile:

Pay them well?

Don’t fire them and replace them with entry-level people who get paid one-third less?