The Center Cannot Hold

The Center Cannot Hold

These are, to say the least, interesting times we live in. The cultural zeitgeist is filled with stark contrasts and irony. Anger is spilling over into the streets. And yet, underneath it all, is that uniquely American hunger for progress, as well as optimism that we can always improve our lot.

Economists say that the cycles of prosperity, collapse and recovery are quickening, meaning that any stability or growth periods will be short-lived before we get sucked into another painful constriction. Numerous studies have shown that much of the wealth generated in the last growth cycles has been concentrated among the top one percent of Americans, and that middle-class and lower-class households are struggling even more than ever.

Consider this: From 1990 to 2005, executive pay rose almost 300%, while the average workers’ paycheck increased a paltry 4.3%. Actual purchasing power sunk almost 10%, according to a study by UC Santa Cruz. The income inequality in this country is almost the same now as it was in 1929.

A recent Time | Money poll found that 64% of Americans rate their current economic conditions as poor, while 44% say they’re worse off this year than last. A full quarter believe that this prolonged economic strife isn’t a blip, but the start of a long-term decline. Another quarter say they’ve had to go without health insurance, and 13% haven’t been able to afford to put food on the table.

Each month, the average American spends $3,710 on goods and services – down 2% from four years ago – according to the Bureau of Economic Analysis. Luxury spending is down, but new things are taking their place because they’re now considered needs – mobile phones, cable TV, internet access. We’re spending a lot less on food and much more on health care. The costs associated with financial services and insurance have tripled since 1950, accounting for $280 a month, or 8% of a typical budget. Today’s current household budget allots $601, or 16% to health care, and $665, or 18% to housing. Groceries come in at $281 a month, gasoline requires $151, personal care is down to $35, and the amount designated for electricity – $60 – is up 5%.

This constriction in spending by the middle-class has resulted in “an hourglass economy” where, as Time magazine says, “stores that cater to the wealthiest customers and bargain shoppers are doing the best.” Sales at Ralph Lauren and Tiffany are up more than 30%, while sales at Costco are up 16%. But middle of the road retailers like Target, Kohl’s and Gap report single digit growth well below 10%. In other words, the middle-class now shops at lower-end stores like Costco, Dollar Tree and TJ Maxx. The downward pressure is sending average shoppers in search of better bargains just to get their usual shopping done. There’s growing evidence that there now is no thriving middle – it’s the have-a-lots and the have-a-littles.

For marketers, this divide is worrisome. As average Americans struggle to maintain a decent standard of living, household budgets are under more scrutiny than ever. Costs continue to rise – for example, my energy company recently requested a 17% rate hike, which translates into an additional $228 a year per household. And more and more, consumers feel that there’s no way out, no way to get ahead, and fewer and fewer ways to keep their heads above water.

Part of their anger is focused at corporations who are profiting through the downturn. Banks. Oil companies. The usual suspects. But part of their anger is aimed at their inability to simply make it from day to day with dignity, food on the table, and a sense of security about the future.

There’s a great need in our society right now for empathy and compassion. Think about how your company can respond to these deep-seated fears and anxieties. Think about delivering products that make it into their stretched-thin household budgets and deliver more value. Think about how you can help those in the middle – your target – who are struggling, angry and feeling like their backs are about to break. Many of them feel like they’re doing everything they can, and that corporations and politicians aren’t doing enough.

Or, as the poet W.B. Yeats once wrote, “Things fall apart; the centre cannot hold.”

It’s time for companies to rise up to the challenges, leave the politicians to their stand-offs, and help middle America get back on their feet.

About the Author

Karen Barnes

Karen is a former contributor to Shelton Insights.

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