American Consumers Newsletter

by Cheryl Russell, Editorial Director, New Strategist Press
March 2005

Why We’re Going Broke

1. Hot Trends: WHY WE’RE GOING BROKE
2. Useful Q & A: HOW MUCH HAVE HOUSING PRICES INCREASED?
3. Cool research links: HEALTH DATA FOR METROS, IRS STATISTICS, VOLUNTEERING
4. Books for 2005: HOUSEHOLD SPENDING, BEST CUSTOMERS, AMERICAN INCOMES, AND AMERICAN ATTITUDES
5. More from New Strategist: WHO’S BUYING REPORTS

 

BET YOU DIDN’T KNOW

Fifty-three percent of workers say the income from their job alone is not enough to cover their family’s usual monthly expenses.

1. HOT TRENDS

Why We’re Going Broke

The number of Chapter 7 bankruptcies filed in the U.S. has doubled in the past decade, with more than 1.1 million people filing for bankruptcy in 2004. To stem the rise, the Senate recently passed tougher bankruptcy rules that are expected to become law soon. Pundits, politicians, and academics have been hard-pressed to explain the rise in bankruptcies. Some claim it is the result of spendthrifts taking advantage of the system. Others, such as Harvard law professor Elizabeth Warren, blame bad luck. Her studies show that most bankruptcies are a result of circumstances beyond individual control–large medical bills, job loss, a death in the family, or divorce. The underlying cause, however, may be even more fundamental. Bankruptcies are growing because men no longer make enough money to support a family.

If you examine the changing financial circumstances of the average man, his predicament becomes clear. He no longer makes enough to support a middle-class lifestyle of homeownership, health insurance, a college education for the kids, and a secure retirement. As the costs for these elements of the American Dream have soared over the past few decades, men’s incomes have not kept pace. In 2003, the median income of the average man was a modest $29,931–only $1,039 more than the median income of the average man in 1973, after adjusting for inflation.

The average man gained little ground during the past thirty years despite his investment in higher education. The proportion of men with a college degree nearly doubled between 1973 and 2003, rising from 16 to 29 percent. Nevertheless, men today are less able to provide for their family than their fathers were at the same age. Here are some of the ways the average man is being squeezed:

1. Job squeeze. Job tenure has fallen among men, especially for those facing the biggest financial obligations–men in midlife. Among men aged 40 to 44, the percentage who have worked for their current employer for ten or more years fell from the 51 percent majority in 1983 (the earliest year available) to just 36 percent in 2004, according to the Bureau of Labor Statistics (BLS). Among men aged 45 to 49, the proportion fell from 58 to 48 percent. The decline in tenure means less job seniority (and security), lower wages, and reduced pension benefits.

2. Housing squeeze. Because the average man is treading water economically, he is having a harder time housing his family. The median sales price of a new home sold in 1973 ($32,500, according to the Census Bureau) was four times the median income of the average man. In 2003, the median sales price ($195,000) was six-and-one-half times the average man’s median income.

3. Health insurance squeeze. Health care costs are growing much faster than the median income of the average man. In 1984 (the earliest year available), the average man devoted 2.4 percent of his median income to out-of-pocket health insurance costs ($370), according to the Consumer Expenditure Survey. In 2003, out-of-pocket costs for health insurance claimed 4.2 percent of the average man’s median income (or $1,252).

4. Tuition squeeze. In 1976 (the earliest year available), one year of college tuition at a four-year public university cost $617, according to the National Center for Education Statistics–7 percent of the median income of the average man. In 2003, one year of tuition at a public university cost $4,645, according to the College Board–a much larger 16 percent of the median income of the average man. The trend is even more pronounced at private colleges where tuition costs relative to the median income of the average man rose from 27 percent ($2,534) in 1976 to 63 percent ($18,950) in 2003.

5. Retirement squeeze. The percentage of men with defined benefit pension plan coverage has plummeted, putting his family’s retirement security at risk. In 1980 (the earliest year available), 84 percent of employees at private companies with at least 100 workers participated in a defined benefit retirement plan, according to the BLS. In 2004 the figure had fallen to 34 percent. Today’s workers now have the opportunity to participate in defined-contribution retirement plans. In other words, the average man rather than his employer now funds his own retirement, further eroding the meager gain in his median income.

Fortunately for many families and for the U.S. economy, the median income of the average woman has grown seven times faster than that of the average man during the past thirty years (an increase of $7,232 to $17,259, after adjusting for inflation). A growing proportion of women are committing themselves to full-time jobs, allowing their families to buy a home, pay for health insurance, put their children through college, and save for retirement. But with family resources strained by the rising cost of middle-class necessities and with the average man–typically the family’s principal breadwinner–falling behind, the reason for the rising number of bankruptcies is no longer a mystery.

By Cheryl Russell, editorial director, New Strategist Publications

If you have any questions or comments about the above editorial, e-mail New Strategist at mailto:demographics@newstrategist.com.

 

BET YOU DIDN’T KNOW

The average household owed 88 percent more in 2001 than in 1989, after adjusting for inflation–a median debt of $38,775.

2. USEFUL Q & A

Q: How much have housing prices increased?

A: The answer to this question is more complicated than it may seem, because housing quality has increased along with prices over the decades.

The Census Bureau tracks housing prices in a number of ways. The bureau has collected information for decades on the sale prices of new single-family homes with its Survey of Construction. The data show that the average price of a new single-family home rose from $71,800 in 1979 to $272,500 in 2004–a stunning 280 percent increase over the twenty-five years. But the typical new house of 1979 had far fewer amenities than the typical new house of 2004, complicating the comparison between then and now. The percentage of new homes with central air conditioning, for example, increased from 70 to 90 percent during those years. The percentage of houses with three or more bathrooms rose from 7 to 22 percent, and median house size grew from 1,650 to more than 2,200 square feet.

Fortunately, the Census Bureau also tracks the price of houses while holding housing quality constant. To determine changes in housing quality, the Survey of Construction interviews builders and owners of new houses about the characteristics of homes. The results show a steep increase in housing prices, but not as steep as the one calculated using the unadjusted figures (above). With measures of housing quality held constant at the 1996 level, for example, the Census Bureau calculates the price of a typical 1996 house at $89,900 in 1979 and $236,100 in 2004. By holding housing quality constant, the increase in housing prices is reduced to 163 percent over those years–significantly less than the increase based on the unadjusted figures, but a handsome return on investment nevertheless.

For more on trends in the price and characteristics of new housing, see the Census Bureau web site at http://www.census.gov/const/www/charindex.html.

If you have a question or comment, contact Cheryl Russell at mailto:demographics@newstrategist.com.

 

BET YOU DIDN’T KNOW

Householders aged 35 to 44 spend 58 percent more than the average household on mortgage interest.

3. COOL RESEARCH LINKS

To keep up-to-date on ever-changing American demographics and lifestyles, check out these useful web sites:

http://apps.nccd.cdc.gov/brfss-smart/SelMMSAPrevData.asp
Do you want to know whether the residents of Orlando, Florida, eat their vegetables? Or maybe you need to know how much the population of Las Vegas drinks? If so, you’re in luck. This web page is the portal into the health risk behavior of the residents of ninety-eight of the nation’s metropolitan and micropolitan areas, from Akron, Ohio, and Albuquerque, New Mexico, to Worcester, Massachusetts, and Youngstown, Ohio. The health behaviors examined range from activity limitations and asthma to weight control and women’s health. The data are from the Centers for Disease Control’s Behavioral Risk Factor Surveillance System, which fields annual health surveys in states and local areas. The metropolitan and micropolitan data now available are for 2002, but more-recent data will be added as they become available.

http://www.irs.gov/taxstats/index.html
It’s that taxing time of year again, and for those who want to look beyond their own 1040 form to see what everyone else owes, this is the place to go. The IRS Tax Stats web site shows you the numbers behind the headaches, with statistics on individual as well as business and nonprofit tax returns. Want to know the adjusted gross income cut-off for the top 1 percent of taxpayers? Answer: $285,424 in tax year 2002. The IRS allows you to search for information by topic (estate tax returns, sole proprietorships, etc.) or by tax form (1040, Schedule C, etc.). Some tax data are available for geographic areas as small as individual zip codes.

http://www.bls.gov/news.release/volun.toc.htm
This is the place to go for the latest data on volunteering, where you will discover that 64.5 million Americans aged 16 or older volunteered for an organization at least once during the past twelve months. The data come from a Bureau of Labor Statistics’ supplement to the September 2004 Current Population Survey, which asked respondents whether they had volunteered in the past year, how many hours they volunteered, the type of organization(s) for which they volunteered, the type of work performed, and why they volunteered. Those who did not volunteer were asked why (the largest share, 45 percent, said lack of time). The BLS breaks down the data by sex, age, race and Hispanic origin, education, marital status, presence of children, and employment status.

 

BET YOU DIDN’T KNOW

Married couples with children account for 66 percent of consumer spending on recreational lessons.

4. BOOKS FOR 2005:

The three-volume American Money Series, plus the long-awaited new edition of American Attitudes. Order online at http://www.newstrategist.com , call toll free at 800/848-0842, or fax your order to 607/277-5009.

Household Spending: Who Spends How Much on What, 9th ed. If Americans buy it, you can probably find out how much they’ re spending on it in the all-new ninth edition of Household Spending, which is based on unpublished data collected by the Bureau of Labor Statistics. New to this edition is the inclusion of a free CD containing a .pdf file of the entire book so you can keep its valuable spending data on your hard drive in addition to your bookshelf. (744 pgs., hardcover, ISBN 1-885070-67-5) $94.95

Best Customers: Demographics of Consumer Demand, 3rd ed. Best Customers analyzes household spending on more than three hundred products and services. It identifies the best and biggest customers for each item, examines spending patterns over the past few years, and predicts future trends based on changing demographics. (768 pgs., hardcover, ISBN 1-885070-75-6) $89.95

American Incomes: Demographics of Who Has Money, 5th ed. American Incomes explores and explains the economic status of Americans and includes an analysis of discretionary income produced by New Strategist’ s statisticians specifically for this book. Library Journal liked the first edition of this valuable book so much that it selected it as a Best Reference Source. (416 pgs., hardcover, ISBN 1-885070-68-3) $89.95

AMERICAN ATTITUDES: What Americans Think about the Issues That Shape Their Lives, 4th ed. American Attitudes presents a historical look at how our thinking has changed since the 1970s on a variety of subjects such as abortion, gun ownership, political party identification, the role of government, and sexual attitudes and behavior. The data in American Attitudes come from the General Social Survey of the University of Chicago’ s National Opinion Research Center. Until publication of this book, the valuable and fascinating results of the GSS have not been easily accessible beyond academic circles. (360 pgs., hardcover, ISBN 1-885070-43-8) $89.95

 

BET YOU DIDN’T KNOW

Average household spending on magazine subscriptions fell 35 percent between 1997 and 2002, after adjusting for inflation.

5. WHO’S BUYING SERIES NOW UPDATED AND EXPANDED

The Who’s Buying series of reports, which are based on the new ninth edition of Household Spending: Who Spends How Much on What, bring you even more detail about how much Americans spend by the demographics that count–age, income, household type, race and Hispanic origin, region of residence, and education. To round out the picture, each report also presents who-are-the-best-customers analyses of the data, showing at a glance the demographics of household spending product by product.

The new and expanded Who’s Buying series includes:

  • Who’s Buying Alcoholic and Nonalcoholic Beverages
  • Who’s Buying at Restaurants and Carry-Outs, 2nd ed.
  • Who’s Buying Entertainment
  • Who’s Buying for Pets, 2nd ed.
  • Who’s Buying for Travel
  • Who’s Buying Groceries, 2nd ed.
  • Who’s Buying Health Care
  • Who’s Buying Household Furnishings, Services, and Supplies, 2nd ed.
  • Who’s Buying Information Products and Services
  • Who’s Buying Transportation

If you need the big picture for items ranging from wine to cell phones, from pet food to sofas, go to http://www.newstrategist.com to see detailed tables of contents and to order downloads or hardcopy.

 

BET YOU DIDN’T KNOW

Married couples without children at home (most of them empty-nesters) have the most discretionary income per capita–an average of $11,362 per person in 2002.