Wednesday, September 21, 2011

Hourglass nation

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Proctor and Gamble is an iconic American company that makes products like laundry detergent, paper towels and toothpaste. The company's products are ubiquitous in our homes, and it has dominated its markets for decades.

But recently, it looked at its numbers and found sales to middle class families slipping. Normally, that would have been cause for more marketing or repackaging. But nothing is normal these days.

When P&G looked at its numbers, it also found that sales of its lower-priced products had increased significantly. That would be expected during an economic contraction, and in other times, the slip would be a blip on the company's radar—nothing to be concerned about.

However, P&G is not alone in recognizing a change that is galvanizing national companies whose target market has been a stable and prosperous middle class with household incomes between $50,000 and $140,000 a year. Those households previously made up 40 percent of total households.

What's surprising and appalling about the situation is that P&G believes that the slide toward cheaper products is more than just a blip. In fact, it's betting that the downward change in consumer choices will be long-lasting, so long that the company is developing new products in order to reduce prices to appeal to burgeoning numbers of cash-strapped Americans.

Normally, new product development by a big company isn't remarkable. But this is extraordinary because, according to the Wall Street Journal, it's been 38 years since P&G launched a new bargain-priced dish soap. Thirty-eight years ago, Richard Nixon was president of the United States.

The newspaper also reported that economic analysts at many companies have concluded that American incomes are now shaped like an hourglass with the wealthy on top, few in the middle and more on the bottom. In other words, the middle class really is disappearing.

In just two years, 2008 and 2009, the net worth of American households dropped by a whopping 26.2 percent, largely because of the drop in home values.

A P&G analyst pointed out that one economic measure paints a picture of income disparity in America that now is similar to the Philippines and Mexico.

This is horrifying. These are economic conditions that most Americans have never seen. With an economic profile like this, it's no wonder that Americans are grumpy and out of sorts.

We need to turn that anger and discontent into action. We need to demand real-world plans and real-world action instead of platitudes and foot dragging from political leaders who need to recognize that laundry detergent doesn't lie.

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