Income-wealth data can be used to identify individuals with the potential for major purchases. The previous article looked at income-poor but wealth-rich individuals. In this example, we look at the population with high incomes, but without substantial wealth, and suggest this could be an indication of adults who are on the verge of major purchases in the nearest future.
Figure 1: Number of Individuals with a High Income, but Low Net Wealth
Source: Euromonitor International (Income Wealth Tool)
Note: adults include population 18 years and older.
Joint income-wealth distribution
Wealth is a stock measure of accumulated assets, usually consisting of the value of real estate owned, net of anything owed to creditors, and other important property, such as automobiles. Income, at the same time, is a flow indicator. In this article we suggest that joint income-wealth information could give some preliminary indication of adults that are likely to make major purchases. These are adults without considerable net assets, which would suggest many of them are young professionals, but who have sufficient income to afford major purchases (possibly buying on credit), which may be a relevant segment for first-time buyers of cars or homes.
In the chart above, we have data for the US in 2013, which provide a typical example of the bivariate income-wealth distribution. On the Y axis adults are sorted by annual disposable income and the X axis indicates net-wealth brackets. In the US, there were 58 million adults with income of 60k+ (or 24% of the population) in 2013; at the same time, there were 71 million adults with net wealth between 0k and 50k. The combined income/wealth segment, at the same time, had a population of 10 million, which is the target segment we are looking at in this article.
Different income-wealth studies, eg Luxembourg wealth study or Norway wealth distribution survey, characterise this area at the top of income and the bottom of wealth distributions as a transit segment mostly inhabited by individuals of working age, ie 25-55 years old.
Compared to the general population, young couples without children are particularly overrepresented in this group. These individuals are at the beginning of their wealth accumulation, with the likely trend towards the upper wealth distribution level. This puts them in the segment that is likely to make major purchases in the nearest future, as such monitoring trends and sizes of this population segment across countries may improve the company’s or brand’s strategy in the market.
In the following example, we applied Euromonitor International’s estimated joint distribution of adults by income and wealth to evaluate the actual number and share of income-rich and net-wealth-poor individuals in 30 selected countries.
Cross-country comparison brings few additional issues because the bands for each bracket vary by country, and also by time. For cross-country comparison purposes, we define all adults to be “on the verge of major purchases” if their annual disposable income is larger than two times median income and net wealth is positive, but less than median country wealth level.
It is worth noting that considered cut-off points are rather arbitrary and could be easily adjusted, depending on the purposes of the study. Selected thresholds are justified by the fact that the adults are picked out from the upper socioeconomic class in terms of income and, due to highly skewed asset distribution, the bottom net-wealth segment (albeit not over-indebted). Figure 2 summarises the results.
Figure 2: Adults “on the verge of major purchases”, ('000)
Source: Euromonitor International
The countries on the right side of the chart could be considered as most interesting for a company targeting this specific segment, because the highest percentage of the population fits in this group. All the countries are ranked by the share of income-rich and net-wealth-poor adults. The largest percentage is observed in Mexico and Indonesia – almost 7% – which together make up more than 15 million of adults. The smallest portion refers to some Western European countries, such as Switzerland and the Netherlands, barely exceeding 2%. Naturally, the most populous countries, like China and India, account for the largest size of the considered segment, with a total amount of more than 100 million people. In the US the segment of interest accumulates more than 10 million adults and slightly surpasses the total figures of all considered Western European countries.
In general, for all the countries in the study, the average share of adults “on the verge of major purchases” is estimated at about 3.5%. With some exceptions we obtain slightly larger values for the emerging markets in comparison with the developed ones. This is primarily explained by the countries’ income and wealth inequality levels as well as their correlation in the considered joint distribution, which controls the individuals’ representation on the non-diagonal areas of the bivariate distribution chart.
Joint income-wealth distribution data significantly enrich the opportunities of purely income-based analysis of consumer behaviour, particularly for analysts with greater demand for accuracy. The flexibility of this distribution tool offers wide possibilities in the investigation of different segments of income-wealth distribution, depending on the purposes of the study.
 OECD social, employment and migration working papers no 65, Markus Jantti, Eva Sierminska and Tim Smeeding, “The joint distribution of household income and wealth: evidence from the Luxembourg wealth study”.
 Norway Statistics, Jon Epland and Mads Ivar Kirkeberg, “Wealth distribution in Norway, Evidence from a new register-based data source”.