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Real Income Changes For Individuals and Households

 

“The decision to buy jewelry is thoroughly dependent on the level of discretionary income available to individuals and households”

Real income changes for individuals and households

At the basic level, incomes for individuals have to be constantly adjusted to keep up with inflation. If this is not done, consumers lose real buying power over time, which can eventually add up to be significant.

That being said, we are going to focus on long-run trends for analysis in this section. The United States does not have a problem of inflation so short-term annual changes in income are very gradual.

Furthermore, for the majority of people, significant income changes are usually because of rare income shocks, such as a job promotions or being laid off.

Why it matters

Most jewelry consumption is a by-product of lifecycle transitions. That being the case, jewelry is often still perceived to be discretionary - a luxury purchase.

The decision to buy jewelry is thoroughly dependent on the level of discretionary income available to individuals and households. Discretionary income is the amount of money left for spending, investing or saving after taxes and personal necessities (such as food, shelter, and clothing) have been paid.

Therefore, presence of strong liquidity constraints such as late mortgage payments, car loans and high levels of student and credit card debt are accurate predictors of limited discretionary income. People with limited discretionary income find it difficult to save up for jewelry.

In general, all products and services are in 'competition' with each other for a share of consumer spending.

Most shoppers are not rich folks so they have to prioritize how they spend their hard-earned money. To most people, spending money in one direction means skimping in another.

Money comes slowly and by sacrifice. Few people have enough. The average person is constantly choosing between one way to spend and another.

“Squeezed earnings of the less educated means they probably have little discretionary income to spend on goods like fine jewelry”

Exhibit 6-1: Long-term changes in the incomes of men and women by level of educational attainment (1979-2012)

Earnings By Educational Attainmenet.png

Note: Data relate to earnings of full-time wage and salary workers, 25 years and older.

Source: U.S. Bureau of Labor , Equity Communications

Comments

Women still earn less than men for each level of educational attainment. However, they have gradually
narrowed the earning gap overtime.

Men have lost earning power for each level of educational attainment except bachelor‘s degree and higher. For
both men and women, getting the right bachelor‘s degree has clear advantages in the labor market.

“The pipeline of increasingly educated cohorts of women has boosted incomes for women and devalued incomes for men who don’t get more education”

Exhibit 6-2: Long-term changes in the incomes of men and women by age and sex (1979-2012)

Earnings By age group.png

Source: U.S. Bureau of Labor, Equity Communications

Comments

The first half of the adult lifecycle has drastically lost out to the second half in terms of earning capacity. Men have lost earning power at virtually all stages of the lifecycle. Conversely, women have gained earning power at virtually all stages of the lifecycle starting at age 25.


Exhibit 6-3: Trend in the number of males with income by age group (1993-2013)

Males 15 years and older with income.png


Source: U.S. Census Bureau, Annual Social and Economic Supplements, Equity Communications


Exhibit 6-4: Trend in the number of females with income by age group (1993-2013)

Females 15 years and older with income.png

Source: U.S. Census Bureau, Annual Social and Economic Supplements, Equity Communications


Exhibit 6-5: Trend in the total annual income of men by age group (1993-2013)

Male Total  Income Received By Each Age Group.png

Source: U.S. Census Bureau, Annual Social and Economic Supplements, Equity Communications


Exhibit 6-6: Trend in the total annual income of women by age group (1993-2013)

Female Total  Income Received By Each Age Group.png

Source: U.S. Census Bureau, Annual Social and Economic Supplements, Equity Communications

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