The Haves and Have Nots: The Impact of the Widening Gap Between Rich and Poor

Strategy Briefing

About This Report

Nov 2011

The income gap between rich and poor has increased steadily in line with economic progress, but only recently, with unemployment and austerity measures hitting the poor and “squeezed middle” the most, has public resentment against inequality reached a peak. This new global report examines how the rise of an increasingly wealthy elite at the top and a growing pool of low-income consumers at the bottom is affecting household expenditure patterns, and how this will impact marketers.

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The Haves and Have Nots: The Impact of the Widening Gap Between Rich and Poor

 

What this report includes

  • Top-level strategic analysis of how major consumer trends will influence global markets
  • Consumer insight
  • Impact across all relevant consumer markets
  • Unique graphics and case studies
  • Key market snapshots
  • Accompanying presentation to synthesise main findings
     

Why buy this report

  • Identify factors driving change now and in the future
  • Understand motivation
  • Forward-looking outlook
  • Briefings and presentation should provoke lively discussion at senior level
  • Take a step back from micro trends
  • Get up to date estimates and comment

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EXECUTIVE SUMMARY

Demand Factors
Levels of inequality
Chart 1 Gini Coefficient by Country: Highest Versus Lowest Scores in 2010
Spending patterns
Consumer Market Trends
Outlook

INTRODUCTION AND DEFINITIONS

Introduction
The growing gap between rich and poor
Inequality: good or bad?
Summary 1 Reasons for Economic Inequality
Definitions
Decile groups
Gini coefficient
Social classes

INCOME PATTERNS

Income Disparity
South Africa scores highest on Gini Coefficient
Latin America is the most unequal region
Gap continues to grow in China and the US
Europe is more egalitarian
Table 1 Gini Coefficient by Country 2005/2010
Income by decile
Chart 2 Average Household Disposable Income in Decile 1 as a Percentage of Decile 10 in Major Markets 2005/2010
Table 2 Average Household Disposable Income in Deciles 1 and 10 in Major Markets 2010
The growth of HNWIs
Chart 3 HNWI Population by Country 2009-2010

FACTORS DRIVING THE INCOME GAP

Economic development
Chart 4 Gini Coefficient, GDP Growth and Per Capita GDP in Key Markets 2005/2010
Labour and technology
Wages affected by changes in supply and demand
The decline of heavy industry
Jobs become more service-orientated
Table 3 Employment by Type in Selected Countries 2005/2010
Government intervention
Right- versus left-wing ideals
Measures to reduce inequality
Attitudes are changing in the West
The effect of tax reforms
Raising the minimum wage
Table 4 Minimum Wage in Selected Countries 2005/2010
Inflation
Property prices
Chart 5 Index of House Prices in Selected Markets 2005-2010
Energy and fuel prices
Table 5 Index of Electricity, Gas and Other Fuel Prices 2005-2010
Sociological factors
Culture, religion and immigration
The move from East to West in Europe
Chart 6 Leading Recipients of Migrant Remittances Among Developing Countries 2005/2010
Gender inequality
Table 6 Women’s Annual Disposable Income as a % of Men’s 2005/2010
Education
Chart 7 Households by Education of Head of Household 2010
Urbanisation
The rural exodus
Urbanisation creates new middle class in emerging markets
The suppression of Chinese peasants
Belgium and Australia have highest urban ratios
Chart 8 Urban/Rural Household Split in Selected Countries 2010

SPENDING PATTERNS

Maslow’s Hierarchy of Needs
Poorest consumers spend most on food and housing...
...and dedicate higher share of income to drinking and smoking
Healthcare important to all
Clothing spans both essential and discretionary purchases
The rich travel in style
Communication gains importance among low-income consumers
Private education remains the preserve of the rich
Table 7 Decile Expenditure on Alcoholic Beverages and Tobacco 2010
Table 8 Decile Expenditure on Clothing and Footwear 2010
Table 9 Decile Expenditure on Communications 2010
Table 10 Decile Expenditure on Education 2010
Table 11 Decile Expenditure on Food and Non-alcoholic Beverages 2010
Table 12 Decile Expenditure on Health Goods and Medical Services 2010
Table 13 Decile Expenditure on Hotels and Catering 2010
Table 14 Decile Expenditure on Housing 2010
Table 15 Decile Expenditure on Leisure and Recreation 2010
Table 16 Decile Expenditure on Transport 2010

CONSUMER MARKET TRENDS

Key trends
Premium versus economy buying
An age of frugality
Strategies to attract low-income consumers
The impact of the internet
Staying in
Mobile phones for all
The market for luxury goods
Quality takes the place of “bling”
Growth fuelled by BRICs
Luxury fashion brands pick up in US
Luxury electronic gadgets see dynamic growth
Chart 9 The Global Market for Luxury Goods 2005/2010
Demand for luxury travel continues apace
Table 17 Attitudes towards luxury travel in North America 2011
Discount shopping
Grocery discounters
Table 18 The Global Market for Grocery Discounters 2005-2010
The growth of private label
Fast fashion
The dollar store boom
Consumer foodservice
Restaurant chains emphasise value positioning
Fast food companies introduce budget options in emerging markets

KEY MARKET TRENDS

Brazil
The tide is turning
Government measures aid the poor
North-south divide
Poor spend most of budget on essentials
Table 19 Brazil: Inequality Statistics 2010
China
Population gets richer, but income gap widens
Most people fall into the lower classes
Wealth resides among young urbanites
Poor spend more than half their budget on food
Table 20 China: Inequality Statistics 2010
France
Egalitarian ideals persist
Baby Boomers are the most prosperous
The rich spend more on leisure
Table 21 France: Inequality Statistics 2010
Germany
A wealthy, mature market
The elderly benefit from accumulated wealth
Education is a key priority for rich households
Table 22 Germany: Inequality Statistics 2010
Japan
Class divisions emerge
40-somethings among the highest earners
Housing a major expense for Japanese
The gap will widen
Table 23 Japan: Inequality Statistics 2010
Russia
Transition to market economy benefits the elite
But Russia still dominated by lower classes
Younger adults are most prosperous
The affluent are more mobile and better educated
Table 24 Russia: Inequality Statistics 2010
UK
Social mobility remains low
Income gap rising
Wealth concentrated among the over 65s
And in the South East
Table 25 UK: Inequality Statistics 2010
US
No longer a classless society?
Decile 10 households account for a third of income
The bulging wallets of the Baby Boomers
Regional disparities
Potential for higher spending by wealthy households
The perception of “haves” and “have-nots”
Table 26 US: Inequality Statistics 2010

FUTURE OUTLOOK

The pressure for reform
Gini coefficient set to grow
Table 27 Forecast Gini Coefficient by Country 2010/2015
Opportunities for marketers
Polarisation to continue
Wealthy urbanites to fuel demand for discretionary items
Growth expected for luxury goods and travel
India holds the most potential
Table 28 Forecast Sales of Luxury Goods by Country 2010/2015