Consumer business react to the decline of U.S. middle class

A recent Wall Street Journal article begins

For generations, Procter & Gamble Co.'s growth strategy was focused on developing household staples for the vast American middle class.

Now, P&G executives say many of its former middle-market shoppers are trading down to lower-priced goods—widening the pools of have and have-not consumers at the expense of the middle.

That's forced P&G, which estimates it has at least one product in 98% of American households, to fundamentally change the way it develops and sells its goods. For the first time in 38 years, for example, the company launched a new dish soap in the U.S. at a bargain price.

A related Daily Ticker item published on the Yahoo Finance website notes:

The top 1% of Americans control nearly a quarter of all the country's income, the highest share controlled by the top 1% since 1928, according to The Stanford Center for the Study of Poverty and Inequality.

The U.S. ranks #3 among all the advanced economies in the amount of income inequality.

In 2007, the top 10% of American earners pulled in 49.7% of total wages, the highest since 1917.

The top 5% of Americans by income account for 37% of all consumer outlays, according to Citigroup.

On Tuesday, the Census Bureau reported the U.S. poverty rate rose to 15.1% in 2010, up from 14.3% in 2009 and its highest level since 1993. In addition, real median household income fell 2.3% last year to $49,445.

The next time someone tries to convince you that the percentage of taxes paid by the rich proves that they're being unfairly overtaxed, remind them of the first and third items above, that in 2007 almost exactly half of U.S. wages and salaries went to just the top 10% and today the top 1% rakes in almost 1/4 of personal income.

Another Daily Ticker item on Yahoo Finance cites some additional data:

[...] The share of middle-income jobs in the United States has fallen from 52% in 1980 to 42% in 2010.

Middle-income jobs have been replaced by low-income jobs, which now make up 41% of total employment.

Over the past year, nominal wages grew only 1.7% while all consumer prices, including food and energy, increased by 2.7%.

Wages and salaries have fallen from 60% of personal income in 1980 to 51% in 2010. [...]

And at the risk of repeating myself, in both 1929 and 2008, spikes in wealth and income concentration combined with weakly regulated financial markets were followed by deep economic downturns, and there's sound reason to think this was not a coincidence.

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