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Characteristics of households with discretionary income.

About 26 million American households have some discretionary income, and this income accounts for more than 53 percent of total personal income, according to a 1989 joint study by the Consumer Research Center of The Conference Board and the U.S. Bureau of the Census.

Discretionary income was determined by cross-tabulating and classifying the 60,000 households in the March 1987 Current Population Survey by income, age, occupation, education, number of earners, and other demographic characteristics. After-tax, or spendable, income was then calculated. Households with spendable incomes at least 30 percent higher than average expenditures for their comparable group were considered to have discretionary income. The previous survey of discretionary income was in March 1983.

The total number of households in the United States increased by 5.4 million over the March 1983 to March 1987 period to a total of 89.5 million. The number of households with discretionary income rose by 2.1 million (from 28 percent to 29 percent of households). The mean amount of discretionary income was up 12 percent to $12,330. This translates into a $57 billion increase in aggregate discretionary income to $319 billion, or a 22-percent rise from 1983. The study suggests that this significant increase in the size of discretionary income reflects both recovery from the 1980 and 1981-82 recessions and continued growth of the economy since that time. Mean income of all households rose I I percent, which is reflected in the large increases in the discretionary income bracket.

The average after-tax income in 1987 was $42,000 for households with discretionary income, compared with $17,000 for all other households and $30,800 for the Nation as a whole. Discretionary income was found largely in the 35-60 age group, and also was prevalent among those in professional and managerial positions. Blue-collar workers' incomes accounted for only 15 percent of discretionary income. A majority of those with discretionary income have college degrees. Almost one-third of white households have discretionary income; black households have 6 percent and Hispanic households have 2 percent of all discretionary income.

The study revealed other characteristics individuals in the discretionary income category share: most are homeowners who pay an average of 26 percent of their earnings in taxes. The homeowners have more discretionary income than do renters, as do those who live in the suburbs, compared with those who live in other areas. Furthermore, households with two or more workers make up 45 percent of all households but almost 65 percent of the country's households with discretionary income. Fewer than 25 percent of homes with discretionary income have only the husband working.

A Marketer's Guide to Discretionary Income also lists discretionary income according to salary, age, race, size of household, number of earners, education, occupation, region, metro and nonmetro residence, and housing tenure. It is available from the U.S. Bureau of the Census.
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Title Annotation:Research Summaries
Author:Lande, Laurie
Publication:Monthly Labor Review
Date:Jun 1, 1990
Words:478
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