Saturday, April 25, 2009

Luxury or Necessity? The Public Makes a U-Turn

From the kitchen to the laundry room to the home entertainment center, Americans are paring down the list of familiar household appliances they say they can't live without, according to a new national survey by the Pew Research Center's Social & Demographic Trends project.
No longer do substantial majorities of the public say a microwave oven, a television set or even home air conditioning is a necessity. Instead, nearly half or more now see each of these items as a luxury. Similarly, the proportion that considers a dishwasher or a clothes dryer to be essential has
dropped sharply since 2006.

These recession-era reevaluations are all the more striking because the public's luxury-versus-necessity perceptual boundaries had been moving in the other direction for the previous decade. For example, the share of adults who consider a microwave a necessity was just 32% in 1996. By 2006, it had shot up to 68%. Now it has retreated to 47%. Similarly, just 52% of the public in the latest poll say a television set is a necessity -- down 12 percentage points from 2006 and the smallest share to call a TV a necessity since this question was first asked more than 35 years ago.

Along with a new creed of thrift, there's another factor -- technology adoption -- that appears to be shaping public judgments about some of these items. Take cell phones. A relative newcomer in the everyday lives of most Americans, the cell phone is among a handful of newer gadgets that have held their own on the necessity scale from 2006 to 2009. Moreover, it may have contributed to a drop in necessity ratings for the older-era appliance it has partially supplanted. The survey finds that people who consider a cell phone a necessity -- some 49% of the public, including a disproportionate share of young adults -- are less inclined than others to feel the same way about a landline phone.

In addition to exploring these shifts in consumer perceptions, the Pew Research survey asked respondents about a range of belt-tightening strategies and behaviors triggered by the recession, which officially began in December 2007.

It finds that eight-in-ten adults have taken specific steps of one kind or another to economize during these bad times. Almost six-in-ten say they are shopping more in discount stores or are passing up name brands in favor of less expensive varieties. Nearly three-in-ten adults say they've cut back spending on alcohol or cigarettes. About one-in-four say they've reduced spending on their cable or satellite television service or canceled the service altogether. About one-in-five say they've gone with a less expensive cell phone plan, or canceled service. One-in-five say they've started mowing their own lawn or doing home repairs rather than pay others for the service. And about one-in-five adults say they are following the example of first lady Michelle Obama and are making plans to plant a vegetable garden to save money on food.

As expected, the survey also finds that people who have taken the biggest economic hits during this recession are the ones most inclined to have tightened their belts. So, for example, if a respondent or someone in that person's household lost a job in the past year, had trouble paying the mortgage or rent, or lost more than 20% in a retirement account or other investments, the respondent is more likely than others surveyed to have economized in a variety of ways.

However, this distinction doesn't apply to changing perceptions about what's a luxury and what's a necessity. These shifts have occurred across-the-board, among adults in all income groups and economic circumstances -- perhaps suggesting that consumer reaction to the recession is being driven by specific personal economic hardships as well as by a more pervasive new creed of thrift that has taken hold both among those who've been personally affected and those who haven't.

The survey does find that the recession has touched the lives of most Americans in one way or another. About one-in-four respondents say they or a member of their household has lost a job in the past year. Nearly half say they or another household member has lost more than 20% in a retirement account or other investments. About one-in-five say they or another member of their household has had problems making mortgage or rent payments. Taken together, about two-in-three American families have faced at least one of these problems in the past year -- with young adults, women and the less affluent more likely than others in the population to have been affected.

The Pew Research Center's Social & Demographic Trends survey on the effects of the recession was conducted by landline and cell phone April 2-8, 2009, among a nationally representative sample of 1,003 adults ages 18 or older.

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