It is a puzzling but frequent behaviour: low-income individuals often spend a proportionally higher percentage of their earnings in high-status goods than their wealthier counterparts. The result? Cumulative levels of debt and stress, sometimes spiralling out of control.
What can explain high levels of conspicuous consumption among those that can least afford it?
One explanation traditionally put forward is that high-status goods act as signals to others. So, for instance, wearing designer branded jeans, or buying the latest smartphone, would signal to those around you that you are hip, well-informed, successful, and so on. And, as numerous experiments have demonstrated, serotonin levels increase with status. Status, literally, feels goods.
But what about spending in those expensive items that are not observable by others? You might be surprised how many of my cash-strapped students confessed to ‘investing’ in very expensive non-observable items like underwear or body lotion ahead of a stressful event, like a job interview. There must be other justification(s) for conspicuous consumption.
Research recently published in the Journal of Experimental Social Psychology presents an interesting explanation. Through a series of experiments with individual consumers, the authors – Sivanathan and Pettit – concluded that the purchase of high-status goods provides a sense of comfort. Moreover, this effect is higher when individuals feel a threat to their self-esteem or social selves. In other words, individuals with low self-esteem seek high-status goods because the acquisition of such items provides temporary relief to a bruised ego.
The implications of the Sivanathan and Pettit study are far-reaching.
The acquisition of high-status goods provides only a temporary relief to the negative feelings that sparked the purchase. The underlying emotional and social problems remain and, indeed, may worsen when the buyer is pushed further into debt. So called ‘retail therapy’ can only mask the symptoms, not treat the cause of the problem. Moreover, a vicious circle (figure 1) may be created in the sense that the emergence of debt problems resulting from the purchase of expensive high-status goods may further lower the consumer’s self-esteem, who may again seek relief in the purchase of such goods, thus perpetuating the problem.
Figure 1. The vicious circle of conspicuous consumption
The role of bruised emotions in the consumption of high-status goods also helps understand why government programmes that award financial incentives to debt-ridden families have limited success. Without addressing the psychological problems that led to the initial over-spending, cash benefits do little to break – and may, indeed, fuel – the pattern of conspicuous consumption.
But all is not lost. Sivanathan and Pettit also conducted a study to further explore the psychological mechanism accompanying the acquisition of high-status goods. That particular study showed that the desire to acquire a luxury good decreased when prospective buyers were asked to reflect on values important to them, such as relationships or health. Perhaps insolvency practitioners should include this insight into the guidance they provide to debt-ridden families and individuals.
In the meantime, let’s make sure that we purchase high status (or other) goods for the right reasons.