Collapse of the Middle class and Changes in Consumer Sentiment

Standard

-Written by Hyok Hee Kwon

One of the distinctive post-financial-crisis phenomena is that the consumer sentiment of the middle class is deteriorating. This is quite an important issue for Korea’s exporting firms. According to Samsung Economic Research Institute the living condition of the middle class is worsening in almost every developed country around the world. The two factors that have contributed to this phenomenon are low growth rate and high unemployment rate. You might wonder how these factors affect the middle class. It is because the middle class highly depends on wage as a source of income. Most of the renowned economists predict that as the global financial crisis continues, this phenomenon will prolong.

그림1

As the condition of middle class worsens, their consumption behavior is also changing. Major change is that the middle class households are spending less on durable goods such as furniture, electronics, and automobiles but increasingly spending more on catering their health and self-development such as education, health and medical treatments. In response, governments have provided momentary subsidies but it is predicted that these instant prescription wouldn’t work in the long term. Making things worse, the currency rate and international price of petroleum seem to be fluctuating too.

그림2

Looking at the fact that the US government decided to maintain quantitative easing, it seems that the global financial crisis will linger. Most of the economists estimate that the aftermath of global financial crisis will be continued for a while. Companies should make reliable plans to get through this tornado meaning that they should research and develop products that have reasonable value compared to their price. In other words, they should focus on products that the middle class consumers consider important.

Middle class is the major consumer of the real economy. Economists and most of the renowned economic research institutes forecast that the boundary line that distinguishes the middle class with others will collapse due to the slow economic recovery. Governments and the major central banks are introducing countermeasures but, in my opinion, they should focus more on medium to long-term plans rather than short-term pump-priming policies.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s