Being Economically Stuck
While socio-economic status (SES) is typically defined as one’s relative economic and social position in the social structure, research often measures or manipulates SES with a focus on one’s financial placement in relation to others. Having more or fewer socioeconomic resources determines the number of choices an individual has in his or her life. Indeed, high SES people have more opportunities to positively shape their lives (e.g., education, network) while low SES people often lack such opportunities.
However, one’s SES is not necessarily fixed in modern society where an individual’s movement across classes is allowed, and, thus, what might be of concern is economic mobility. Because people perceive different levels of mobility in a single society or even in a single community and because the perception, not the reality, is what really matters in affecting their behaviors, this note focuses on the role of perceived economic mobility, the individual belief about the degree to which a society enables its members to achieve better economic status contingent upon individual actions.
Perceived economic mobility is likely to be a bigger concern for low SES consumers because it plays a key role in determining whether they can escape from low SES. In particular, low SES consumers perceiving low economic mobility might feel that they are stuck in their current aversive state, and this feeling of inability to change it should lead to a low sense of personal control. If low SES consumers believe in their chances of changing their current SES (i.e., high perceived economic mobility), however, they are likely to feel some sense of control. Thus, it is suggested that perceived economic mobility and SES jointly affect one’s sense of personal control, which is typically defined as the degree to which individuals feel that events are influenced by and contingent upon their own behavior and not by external factors. In this regard a sense of control is about control over one’s own situations and, thus, different from the notion of social power, generally defined as asymmetrical control over another person’s outcomes.
Since personal control is fundamental to human life, a lack of control causes a self-threat, a negative psychological state that people are motivated to restore, and, thus, is likely to trigger some compensatory mechanism. That is, those who feel a low sense of control are likely to engage in some activities that seem to restore their sense of control. For example, it is well-known that consumers are likely to prefer conspicuous high-status products to inconspicuous equivalents when they feel a sense of low control; the reason is that owning or consuming products that easily signal high status gives them some sense of (illusory) control.
A recent paper by me and Professor Sunyee Yoon at the University of Buffalo shows that economically stuck consumers seek more variety in purchase situations. For example, according one study reported in the paper, economically stuck consumers (i.e., low SES consumers perceiving low economic mobility) chose significantly more diverse yogurt flavors than economically nonstuck consumers. Why? Trying to regain a sense of control is the main reason. One simple way to regain one's sense of control is to exercise multiple choices. Even exercising mundane choices (e.g., choosing more flavors of yogurt) tends to give us some sense of control, compared to a situation when we do not make choices. This finding suggests that what is crucial in driving compensatory behaviors is belief in changeability of the adverse economic situation, not necessarily the unfavorable situation itself.
The aforementioned finding offers several managerial implications. Economically stuck consumers’ compensatory behavior can be mitigated by promoting perceived economic mobility. Given that deprived consumers’ compensatory behaviors are often self- and other-defeating in the long run, and that perceived economic mobility can be manipulated by presenting different pieces of information, enhancing people’s perceptions of economic mobility via external interventions would be a worthwhile strategy to reduce such costly compensatory behaviors. Furthermore, when targeting a market segment where consumers tend to feel economically stuck (e.g., low-income consumers with low education), business practitioners might consider adding more varied options in their product line to facilitate variety seeking as long as the number of choices is not overwhelming and consumers are not so motivated to maximize their utility of end result. A related implication would be that when business practitioners want to encourage repeated choice or keep their low-income customers from switching to their competitors (i.e., to reduce variety seeking), they might want to emphasize high economic mobility in their promotional messages. In addition, research shows that when consumers seek variety, delayed sales promotion (e.g., mail-in rebates) is relatively more effective than immediate sales promotion (e.g., coupons). It follows that, for example, mail-in rebates might be more effective for economically stuck consumers than for economically mobile consumers. Finally, an ethical ramification needs to be discussed; it is possible that firms can take advantage of low-income consumers in order to increase their variety seeking by emphasizing low economic mobility. It would undermine consumer well-being to allow such business practice.
In conclusion, this note highlights the unexpected role of the combination of low perceived economic mobility and low SES (i.e., the feeling of being economically stuck), which describes many consumers’ current economic sentiments. Indeed, a recent poll study shows that Americans are increasingly pessimistic about their chances of achieving success by hard work. This research note shows that such a pessimistic view on their economic future, when coupled with economic deprivation, results in low perceived control. Speaking of the seriousness of the economic perception of being stuck, the executive editor of City Limits, a New York City non-profit for fostering a more just society, has stated, “If people think there’s no way to get to a better place, it undermines a basic offering of the marketplace, not to mention democracy.” It is hoped that future research pays more attention to this important issue.