American Consumers Newsletter

by Cheryl Russell, Editorial Director, New Strategist Press
December 2010

It’s the Internet, Stupid!
IN THIS ISSUE:

1. Hot Trends:  IT’S THE INTERNET, STUPID!
2. Q & A:  SHOULD POOR PEOPLE OWN CELL PHONES?
3. Cool Links:  RECESSION’S IMPACT ON HOUSEHOLDS, THE UNDEREMPLOYED, COLLEGE SUCCESS
4. NEW AND UPDATED REFERENCE TOOLS:  AMERICAN BUYERS, BEST CUSTOMERS, HOUSEHOLD SPENDING, and WHO’S BUYING REPORTS

To see Cheryl Russell’s Demo Memo blog, click here.

1. Hot Trends 

It’s the Internet, Stupid!
Twenty years ago, when I was the editor of American Demographics magazine, we published an article entitled “The Fifth Medium,” the purpose of which was to describe and name the Big Thing that was about to happen. Everyone who followed the trends could feel something coming, but no one knew quite what it would be.

 

“A new medium is emerging that may be more powerful than newspapers, magazines, and television put together,” theAmerican Demographics article announced. For want of a better word, we called it the “fifth medium” (the others were radio, television, newspapers, and magazines). We struggled to identify the fifth medium: “People call this new medium electronic publishing, on-line information, telecomputing, multimedia, or videotex. They are all evolutionary names for a beast that hasn’t yet shown its full form.”

 

Doesn’t it make you want to scream, “It’s the Internet, stupid!”

 

The identity of the beast is painfully obvious now, but it wasn’t so back then. For proof, try a search of the New York Timesarchives by year for the number of articles that contain the word “Internet.” Here’s what you get:

 

1988: 3

1989: 7

1990: 17

1991: 9

1992: 12

1993: 89

1994: 375

1995: 1,241

1996: 2,218

1997: 2,779

1998: 4,057

1999: 7,737

2000: 10,134

 

On November 5, 1988, the word “Internet” appeared for the first time in the New York Times. The article was about Robert T. Morris, Jr., a Cornell University graduate student who unleashed a computer worm on what the Times calls “an international group of communication networks, the Internet.” The other two articles of 1988 in which the word Internet appeared were also about the Morris worm, one of them noting that “many teenagers are treating Mr. Morris as a folk hero and are busy designing their own virus programs.” (Mr. Morris is now Dr. Morris and a professor at MIT.)

 

For years, even as late as 1996, the Times felt the need to add explanatory descriptors whenever using the term Internet. In a 1990 article: “An international computer network known as Internet…” In a 1992 article: “a worldwide network called the Internet.” In 1996: “the linkage of computers known as the Internet.” By 1996, the word ‘Internet’ had become common public currency, says Wordiq.com. After that year the New York Times no longer felt the need to explain the Internet to its readers.

 

Although the public was familiar with the term Internet by the mid-1990s, most were not Internet users until more recently. In the early months of 2000, according to the Pew Internet & American Life Project, only 46 percent of Americans were online. The figure topped 50 percent later that year. Today, 79 percent are online.

 

With that kind of penetration, you might think the Internet revolution is behind us, but you would be wrong. The Internet revolution has been slow to unfold and is only now–right now, this year–fully on top of us. What took so long? The demographics. The effect of technological change on human history unfolds at the pace of generational replacement (henceforth known as the Russell Rule). The Internet has been part of the fabric of our daily lives for only one generation, which is why the full force of the Internet is only now being unleashed. Among today’s young adults (18 to 29), 95 percent are online, according to Pew. The figure is 87 percent among 30-to-49-year-olds, 78 percent among 50-to-64-year-olds, and just 42 percent among people aged 65 or older. The older generations have resisted the Internet, but they are being replaced by younger generations who live in “the cloud.” A growing percentage of the world’s population has never known a world without the Internet.

 

Future generations will see clearly how the Internet revolution led to the dislocations that are causing our current economic woes. In contrast, most of the generations alive today–including all historians, pundits, politicians, and most business leaders–are not in a position to comprehend this cause and effect. Here is their position: They are standing barefoot on a shore, gazing out at the ocean, and seeing for the first time strange white clouds on the horizon. What could be coming their way? It’s the Internet, stupid!

By Cheryl Russell, editorial director, New Strategist Publications. If you have questions or comments about the above editorial, contact demographics@newstrategist.com.

BET YOU DIDN’T KNOW

Percentage of households headed by people
aged 65 or older spending on cell phone service
during an average quarter: 37%.

Source: American Buyers: Demographics of Shopping

2. Q & A

Should Poor People Own Cell Phones?

Forty-four million Americans live in poverty, according to the latest Census Bureau statistics, a substantial 14 percent of the population. Who are the poor? They are people whose incomes fall below the level needed to buy what was deemed to be a nutritionally adequate diet in 1955 multiplied by three and adjusted for inflation. Sounds crazy, no?

Crazy, but all too true. Mollie Orshansky, an employee of the Social Security Administration, was charged in the early 1960s with creating a poverty measure. She and her colleagues never meant for the methodology they devised to become permanently enshrined in American economic policy. But politics being what it is, that’s what happened. Orshansky believed her calculations would be updated every few years to account for rising living standards and changing spending patterns. No update has ever occurred. The poverty measure she created, based on a 1955 food consumption survey, is simply adjusted for inflation each year. Today,  a family of four, is deemed to be poor if their income falls below $21,954.

Officially, poverty in the United States is defined by this income measure alone. The poor may or may not receive benefits such as food stamps, subsidized housing, or Medicaid. In fact, most of the poor do not receive these government benefits. The poor may or may not own a house, a car, a television, a microwave, or even a cell phone. In fact, 97 percent of the poor have a television, 79 percent have air conditioning, and most own a cell phone. As Adam Smith once cautioned, poverty is relative. Begrudging the poor the necessities of the 21st century makes no more sense than begrudging them 20th century basics like running water and indoor plumbing.

By Cheryl Russell, editorial director, New Strategist Publications. If you have any questions or comments about the above Q & A, contact demographics@newstrategist.com.

BET YOU DIDN’T KNOW

Annual spending of the average household on…

Landline phone service, $467
Cellular phone service: $643

Source: Household Spending: Who Spends How Much on What, 15th edition

3. Cool Research Links

To keep up-to-date on ever-changing demographics and lifestyles, check out these useful links.

Effects of the Great Recession on American Households
For just $5 you can download the best study to date of the effects of the Great Recession on the average American. A National Bureau of Economic Research study (NBER Working Paper 16407), this analysis is based on the smart, new American Life Panel, an Internet survey run by RAND. With findings as recent as spring 2010, the analysis shows that 39 percent of households have been severely hurt by the recession–meaning they have experienced unemployment, have negative equity in their home, are arrears in their house payments, or have had a foreclosure. Monthly household spending is also analyzed, revealing deep cuts in restaurant meals and health care.

The Underemployed
The most recent issue of the Monthly Labor Review has an analysis of the nation’s underemployed. Not only has unemployment increased sharply over the past few years, so has underemployment–defined as people employed part-time for economic reasons, meaning they cannot find a full-time job or their work hours have been cut because of slack demand. In the fourth quarter of 2009, both the number of underemployed (8.9 million) and the incidence of underemployed (6.3 percent of all employed persons) was greater than in any previous quarter for the past 61 years. This article looks at the characteristics of this group.

Most Fail to Graduate from For-Profit Schools
Another damning report about for-profit universities. This one, from the National Center for Education Statistics, is a longitudinal study measuring how many students earned a degree within six years of starting a degree program at a post-secondary institution. The study examines the earned degrees in 2009 of students who entered school in 2004. Among students in 2004 who entered a degree program at a four-year institution, 51.5 percent of those who attended a public university had a bachelor’s degree from that institution six years later. Among those who attended a private, non-profit university, the completion rate was an even higher 57.0 percent. Among those who entered a for-profit school, the figure was only 13.3 percent. Much more is in the report.

BET YOU DIDN’T KNOW

Best customers of beer consumed at home: Householders aged 35 to 44.

Source: Best Customers, 7th edition

4. New for 2010: Find out how American Consumers Spend their Money

 Consumers are slashing their spending, making it vital to get the answers to Who buys? What do they buy? How much do they spend? And, most importantly, what will they cut as their incomes fall and expenses rise?

  • NEW TITLE American Buyers: Demographics of Shopping is a groundbreaking new guide to buying patterns, essential information in these difficult economic times. Its weekly and quarterly spending data show you how many households buy certain products and services and how much buyers pay for them, all broken down by age, household income, household type, race and Hispanic origin, region of residence, and education.
  • Starting a new business? Repositioning your products? In the new 15th edition of the annually updatedHousehold Spending: Who Spends How Much on What, you get dollar-for-dollar answers to who is buying hundreds of products and services ranging from laundry detergent and phone cards to motorcycles, wine, and restaurant meals.
  • Best Customers: Demographics of Consumer Demand, 7th ed., is a unique guide to how changing demographics are reshaping the consumer marketplace. Find out who spends the most and who controls market share–often surprisingly different–for over 300 products and services.
  • The 14 volumes in the Who’s Buying Series, which can be purchased individually or as a set, give you the big picture about consumer spending by age, income, household type, race, Hispanic origin, region of residence, and education. Each volume focuses on an individual product category, ranging from apparel and beverages to restaurants, consumer electronics, and travel.

For your convenience, New Strategist’s titles are available as searchable single- and multiple-user pdfs that are linked to spreadsheets of all the data tables in each book so you can do your own analyses and create PowerPoint presentations.

BET YOU DIDN’T KNOW

Percent change in average household spending on jewelry, 2000 to 2008 (in 2008 dollars): -22%

Source: Who’s Buying Apparel, 6th edition