American retailers face influx of ‘survivalists,’ or low-wage workers, an increasing part of the US buying public with little disposable income

Winter is coming – and the ranks of the survivalists are growing.

Every holiday season, argues accounting giant PwC, there are two kinds of consumers: survivalists and selectionists.

Survivalists earn less than $50,000 a year and have to make sure they can afford every purchase.



Selectionists are more affluent. They may still be “careful”, in PwC’s parlance, but they have more disposable income and don’t insist on waiting for the deepest discounts to kick in before buying.

In each of the last three years, however, the survivalists have become an increasingly important part of the mix, rising from 63% of PwC’s annual holiday shopping poll in 2012 to 65% in 2013 and to 67% this year.



So perhaps it’s not surprising that the firm is forecasting that the average household will spend only $684 this holiday shopping season, down from $735 in 2013. That jibes with other predictions that holiday spending will be a disappointment.



Facebook Twitter Pinterest It’s a jungle out there. Shoppers attend the opening of Sydney’s first Sephora store at Westfield Pitt Street Mall. Photograph: Mark Metcalfe/Getty Images

This is confusing to the cheerleaders of the retail industry. Donning their rose-tinted glasses, they had argued that it was just a matter of time; that the fact that stores had begun their sales earlier and that consumers felt relieved by a stronger economy meant that it would all work out in the end.

After all, the private sector may have added an impressive 321,000 new jobs in November, far more than the 230,000 or so that economists predicted.

That ignores the 800-pound pink elephant sitting quietly in the corner of the room, however: the question of low wages.

Notably, the holiday shopping season has featured protests by low-wage workers at Walmart and some other retailers trying to raise awareness of their inadequate pay, lack of benefits and other issues.



The irony? The same customers that patronize Walmart are likely to be earning equally low wages elsewhere; they can’t afford to give up a bargain, even if it means they have to do battle for it on Black Friday and be greeted by a judgmental chorus of television anchors.

Because even if jobs are being created, wages are stagnant; indeed, median family income has been in decline for the last 14 years.



The low unemployment rate (now at 5.8%) masks a lot of de facto underemployment: people working two or three part-time jobs but who need or want a full-time job and simply haven’t been able to find one, as well as people who simply have stopped looking for work.



Facebook Twitter Pinterest A fast food worker participates in a protest to raise the federal minimum wage. Fast food chains like McDonald’s are suggesting to investors that low wages are resulting in lower spending. Photograph: Ringo Chiu/Ringo Chiu/ZUMA Press/Corbis

Wages haven’t increased along with job creation – and some economists say the unemployment rate may have to decline a lot more in order for that to happen. Some say we may need unemployment to hit 5% before we see a significant and lasting improvement in incomes across the board.

As in past recessions, many of the jobs that were lost were in relatively high-paying sectors of the economy, such as manufacturing and construction. Those that were created tended to be concentrated in the services sector: hospitality, fast food and, yes, retail. Those jobs paid an average of only $21,000 a year, and in aggregate the new jobs created pay 23% less than the jobs lost, according to a study by IHS Global Insight for the US Conference of Mayors.

Those are the kinds of numbers that are almost certainly going to spawn a lot of survivalists.



It’s one thing to have a bad year, income-wise. But after you’ve had a succession of them, drawing down family savings and selling off assets ranging from retirement plans to jewelry or electronics to pay the bills, holiday spending falls into the category of a luxury rather than a necessity.

Only days before Black Friday, the Conference Board announced a surprise in the form of a big drop in consumer confidence levels in November, to 88.7 from 94.5 in October.



American superstores may want to kid themselves that the recent decline in gasoline prices will translate into a “tax break” for Americans that will lead them to spend more.



Facebook Twitter Pinterest Selective shopper or survivalist? Photograph: Anthony Devlin/PA

But is that enough to offset the lack of wage growth? After years of coping with very volatile gasoline prices, consumers are apt to look at the most recent data point warily, knowing that while it might vanish quickly, low wages aren’t likely to begin rising any time soon.



Meanwhile, there will be other demands on the limited disposable income of those survivalists: the biting cold weather could well end up wiping out some or all of the benefits of lower fuel prices in terms of home heating, and many families may face steeper health insurance premiums in 2015. The less affluent a family is, the more likely it is to rent, and rental costs are climbing rapidly even as mortgage rates remain near record lows.

Even retailers – some of whom are notorious themselves for paying low wages – have been flagging low wages as a major source of concern. Two-thirds of the 100 largest US retailers – a group that includes those catering to the country’s most affluent as well as McDonald’s and Walmart, which serve the survivalists amongst us – have warned their own investors that low wages could cut into their profits, according to a recent study by the Center for American Progress. Now, there’s irony for you.