The new frugal

A few months ago, I started hearing a lot of young people, in Sacramento and elsewhere, talk about being “on the dole.” It triggered memories from growing up in Margaret Thatcher’s England in the 1980s, when more than 3 million Brits were unemployed.

Back then, “being on the dole” was something of a badge of honor amongst the young, the poor and the dispossessed in England. On the surface, it just meant being out of work and relying on government aid to survive. Underneath, however, the term implied defiance—a rejection by the at-least-temporarily down and out of the 9-to-5 world that had rejected them.

Being “on the dole” also implied an embrace of thrift, a pride in crafting existences devoid of luxury, of padding. It involved stretching pennies and pounds as far as possible, always seeking value instead of brand names, always looking for ways to score a bargain. It implied wearing gloves inside in winter, so as to keep the heating bill down, and wearing one’s sneakers until the toes wore through and the treads on the soles disappeared. There was a sensibility to being on the dole that was as much psychological and aesthetic as purely economic.

Until the recent economic implosion, I’d never heard middle-class people in America talking about being “on the dole.” In a land as wedded to the work-hard-and-prosper story line as is the contemporary United States, unemployment, or underemployment, carried too many negative associations. Today, however, with the national unemployment rate at 10 percent (note: Sacramento’s rate is 13 percent) and another 8 to 10 percent underemployed, that’s changed somewhat.

It’s not that being short of cash and out of work has suddenly become cool; it’s just that it’s no longer seen as shameful.

“I was getting pretty well-paid at the University of California Center,” says 24-year-old Kelly Bradfield, a Berkeley graduate who worked as a policy associate at the UC Center on K Street until it downsized, and she lost her job, a few months back. “I was saving up a lot of money because my fiancé and I were trying to start up a ballroom dance studio. So when the job disappeared, I had this nest egg saved up. I took a sabbatical in September. I started volunteering—I wanted to keep busy. From October to now, I’ve been teaching dance part time and doing an after-school tutoring program part time. I decided to really look at my spending habits and really cut down. I cut out everything inessential. The Netflix account … ”

So Bradfield gave up driving her own car and began sharing wheels with her fiancé. “For me it hasn’t been stressful, it’s been fun. Maybe we don’t want to engage in keeping up with the Joneses. We’re happier, because we’re able to keep our expenses really low.”

Out of necessity, an increasing number of people, either literally on the dole or with a job but on the edge, are making a virtue of toned-down consumerism. Forced to cut their spending, forced to find entertainment in cheaper ways, forced to conjure the trappings of style out of austerity, people are changing their spending habits in ways little and large.

In our “on the dole” era, Sacramentans and their out-of-town visitors are spending fewer dollars, they’re shopping at less illustrious stores and eating at less fine-dining establishments. Mall attendance is down, as is the amount individual shoppers are spending during each visit to the mall. It’s not that shoppers are necessarily spending less in each store—in fact, some malls report that shoppers are spending more per transaction—but they’re shopping in fewer stores during each mall visit.

“Our traffic in ’09 was down 2 to 3 percent,” explains Tod Strain, senior property manager at the Arden Fair mall. “In ’09, the average conversion went up and the average transaction was higher, but fewer people were walking through the door.” Where are the disappearing mall rats going? To discount outlets. Dollar-store attendance is up (nationally, the Dollar General chain recently announced it was opening 600 new stores). And consumer habits are changing outside of retail as well: Appetizers and cocktails are out for diners, menus prix fixe are in. Within supermarkets, upscale items—fancy cheeses, the better cuts of meat and so on—are being replaced by simpler staples in many shoppers’ baskets.

“People have locked-in needs,” explains Ryan Sharp, director of the Sacramento-based Center for Strategic Economic Research. “They have to have housing, they need to eat. But you’ll notice changes in the pattern of consumption.”

Hotels that saw 68 percent occupancy rates in 2008 (already way off from the boom times) and average room prices of $102 reported a dismal 60 percent occupancy in 2009 and $94 average rates. At least in part, says Sonya Bradley, vice president of marketing for the Sacramento Convention and Visitors Bureau, that’s because companies that used to send three or four representatives to conferences or conventions in the city are now only sending one or two.

As for trips up to the mountains, well, if El Dorado County’s gas receipts are anything to go by—and they should be, since travelers drive through the county from Sacramento to get up to Tahoe—those weekend expeditions took a huge hit from mid-2008 through mid-2009. “We saw a dramatic drop in fuel and service sector spending,” says Sam Driggers, of El Dorado County’s Office of Economic Development. Across the board, in the latter part of 2008, sales-tax revenues for the county plunged 16 percent, and they continued falling for much of 2009.

Those who were poor or just scraping by during the good times are now really poor, their credit lines stopped up and their income streams collapsed. Their lives are now comparable to those of their great-grandparents’ during the Great Depression. As I have detailed in earlier articles for SN&R, many of them have essentially been removed entirely from everyday patterns of consumption; unable to afford even the basics of life, they now frequent food and clothing banks to survive. They have become ghosts in the capitalist machine—citizens without any consumer muscle.

It is, says Shannin Saulnier, operations manager for the Sacramento Food Bank and Family Services, “an extremely frightening and humbling experience for those individuals.”

“Nonprofit and social service organizations are being challenged to find new ways to address the burgeoning need in our community. Volunteers are able to see faces which resemble their own in the people we serve, clients are able to see people they may have once envied in food assistance lines with them and are kindly reaching out to welcome them and comfort them. We have turned a corner from helping ‘them’ to helping our community, our neighbors and our friends.”

But what about the subtler, less brutal changes in daily life? What about the middle-classes—people who still psychologically consider themselves to be a part of the great spending mass that makes America tick, who are still surrounded by the accouterments of affluence from the flusher times, but who have seen their incomes decline by 10 or 20 percent—and in some cases far more—their home equity evaporate, their benefits erode and their security crumble?

For young people such as Kelly Bradfield, not tied down to a mortgage, unencumbered by the costs of raising children, the new world can be a sometimes exhilarating challenge—how to make do with less. For those with mortgage and children, oftentimes the choices are less pleasurable.

“I’ve had a net change in my income of $8,000 a month,” explains a one-time Sacramento sales executive in her early 40s who lost her high-paying job last year and reinvented herself as a not-nearly-so-well-paid public school teacher. Underwater on her mortgage and raising a young son on her own—she was reluctant to give her name, as she didn’t want her son’s friends to read about him in the newspaper—she has watched her carefully built-up credit rating deteriorate and her lifestyle become more circumscribed.

“There are a lot of things I took for granted; I shopped at Whole Foods and the Co-op. Even as an undergrad. I couldn’t tell you till this last year when the last time was that I set foot in a conventional grocery like Safeway.” Now, however, she shops at Safeway to save money.

“We don’t have disposable income to spend on the extra things, no money for personal care—yoga, vacations, massages. They sound like luxuries, but if they’re fundamental values built into how you care for your family, for your well-being … ” She trails off, but the point is made. When she occasionally caves to her son’s fast-food demands and takes him to get some junk food—a far cry from the upscale restaurants she used to frequent—she’s amazed at how cheap it is and tries to forget about how unhealthy it also is. “I’m like, ‘Wow, he can get full on a dollar.’” She has started buying clothes for her son at consignment stores; for herself, she isn’t buying much of anything anymore. She has held off on getting necessary dental work done, and when she recently lost her iPhone, she gritted her teeth and didn’t replace it. Not the stuff of poverty exactly, but nevertheless a significant curtailing of lifestyle.

For Tom Beamish and Jacqueline Romo, the shifts in their spending habits have also been noticeable. Beamish is a sociology professor at UC Davis; Romo is on staff at the university’s Graduate School of Management. They are comfortably middle-class, and yet the 7 percent pay cut they have taken as a result of furloughs has eroded most of their margin for error. When unexpected bills arise, they now have to dip into savings. When they think about taking weekend trips, they have to calculate the gas costs in a way they never used to do. The psychological security that used to underpin middle-class spending habits, that sense that tomorrow will be better than today, and the day after better than that, has disappeared.

Looking for ways to save money, the couple stopped employing their twice-a-month housecleaner, they downgraded their cable-TV package, and they went from eating out in restaurants on a weekly basis to going out perhaps once a month. Romo started buying thrift-store clothes for herself and their 3-year-old son.

Many of her colleagues, she recalls, used to sneer at the very notion of buying used clothing. Now she says, there’s been a complete change of sentiment. “They’re bragging at the great deals they’ve found at Goodwill. That’s a big change; these are minivan-driving, 5,000-square-feet-house people.”

When Beamish wanted to buy a new bike recently, instead of simply putting the purchase onto a credit card, the couple sold off some furniture on Craigslist to raise the cash. When Romo needed a new swimsuit, she went out of her way to find one on sale. “I’d have never worried about it before,” she asserts.

“Fewer people are shopping as a browsing sport,” says Arden mall’s Strain.

While a higher proportion of those who are at the mall are now going into stores to buy goods—the “conversion rate” is up, he says, at least in part because so many retailers are offering so many bargains, and stores are now staying open all night on days like Black Friday to lure in buyers. These days there are fewer casual shoppers—people who go to the mall on a whim without any specific needs in mind—and less people opting to spend their free time at places like Arden Fair.

Window shopping is down says Strain, “because [casual customers] aren’t coming to the mall in the first place.” In other words, if you want to buy an iPod or some other must-have item that you’ve been contemplating purchasing for months, you’ll still hit the malls. But if you’re vaguely thinking about maybe buying a shirt or getting a new hair treatment, about spending just for the sake of spending, then you’re less likely to make the trip mall-ward than you would have been pre-recession.

In many ways, these lowered consumer expectations reinforce the downward consumer trend locally. Furloughed government workers and penny-pinching young dolers mean empty restaurants and sparsely populated malls. And, since Sacramento’s is an economy overwhelmingly reliant on consumption to generate wealth, that means more regional unemployment and even less spending. Last July, the Center for Strategic Economic Research calculated how the furloughs were affecting local employment. It estimated that a continuation of the furlough policy over months (a continuation that has, in fact, been realized) would cost the region an additional 2,800 jobs, including more than 700 in trade, transport and utilities, more than 600 in education and health services, and more than 400 in the leisure and hospitality industries. While the study covered a six-county region, Ryan Sharp believes that most of these job losses occurred in the “core region,” the four counties surrounding the capital.

In January of this year, the National Restaurant Association published a tracking survey for California. Close to 60 percent of the restaurants surveyed said they had seen a drop-off in customers and in receipts over the past year. Only 3 percent of restaurants had increased the number of employees. By contrast, 47 percent had reduced their staff and 53 percent had reduced their employees’ hours.

“Our industry, our income, is very much tied to discretionary consumer spending,” observes Daniel Conway, of the California Restaurant Association. “So the restaurant industry was one of the first to feel the effects of this recession two years ago. Folks who would go to a family-style sit-down restaurant would go to a fast-food restaurant, or they wouldn’t order cocktails anymore, or they’d stop ordering appetizers. In the media, every fast-food place is now advertising its ‘value menu.’”

White-tablecloth restaurants whose owners initially thought they were immune from the downturn started seeing corporate clients trimming back their expenses. Fancy dinner places desperate to survive the collapse started offering cut-rate lunch specials.

“I still go to restaurants a little bit,” says a 40-year-old employee of the Department of Fish and Game. “But I used to be able to eat out once a week. Now it’s once a month.” The woman, who also asked to have her privacy protected, had purchased a home in Oak Park a couple of years back, on the assumption her income would stay stable; a few months later, the furloughs kicked in and she took a close to 15 percent reduction in pay.

“I haven’t bought new clothing in a while; I buy most of my clothes in a thrift store. I haven’t bought a pair of shoes in two years. I used to have quite a wardrobe! Last Sunday, I went to the thrift store and tried on every pair of jeans—and bought a $6 pair acceptable for work. I never even considered the mall. I no longer can afford things like giving to charity or buying my friends’ books or supporting small cottage industry, or going to see bands.”

Commercial real-estate brokers believe these changing habits will ultimately result in a dramatically altered geography of consumption in Sacramento. National studies have shown consumers in a given area tend to generate enough business for 12 square feet of retail space per person. Sacramento, during the boom years, over-reached this not by a little bit but by a lot, ending up with 19 square feet per resident. Now, with the ongoing recession and people’s altered consumer habits, that’s going to come back down. Indeed, there are now more than 9,500 vacant businesses in the greater Sacramento region, and things will likely get worse for a while longer before the vacancy numbers start to reverse.

If and when malls like Woodland’s County Fair Mall recover, if the construction of Lent Ranch Marketplace in Elk Grove is ever completed, they’ll have fewer big stores and chain restaurants and more social service agencies, medical clinics, even churches. “Alternative kinds of uses other than retail,” explains Ken Noack Jr., of the commercial real-estate company Grubb & Ellis. “Retail is driven by rooftops, and if you aren’t building the houses, you can’t justify the retail.”

Moreover, in addition to their being fewer stores in a post-recession Sacramento, many of the big-name stores that do survive will likely end up cutting back their size in a quest for ever-more efficient business models. Partly that’s because there will be fewer dollars available for shoppers to spend; partly it is because the recession has resulted in an explosion of online shopping. People who used to go to the mall for entertainment are now realizing it’s cheaper to shop from home, allowing them to save money on gas, parking, even sales taxes, as well as to access huge national, and even international, inventories in the search for the perfect bargain.

In 2009 alone, online sales for some categories of retail increased nationally by a whopping 35 percent. Taken as a whole, the Department of Commerce estimated that e-commerce sales in the United States in 2009 came to $134.9 billion. This represented a small increase over 2008, at a time when the value of non-e-commerce plunged by more than 7 percent. Break down the numbers, says Noack, and you see a 10 percent increase for books and a 36 percent increase for clothing.

When the recession ends, many of those customers will retain their new online shopping preferences. As a result, anchor stores like Barnes & Noble or Macy’s may well downsize, keeping most of their inventories not in stores but in warehouses. After all, according to Noack, it costs companies $2 dollars per square foot for downtown real-estate space in Sacramento, but only 35 cents per square foot for an out-of-town warehouse.

Not too long ago, remembers Kelly Bradfield, “I might go clothes shopping, that kind of thing. I wasn’t being very mindful. I’d spend more money on plays, eating out. I figured, ‘I have enough money, I go see this show.’ Then I lost my job.”

At Christmas, Bradfield and her friends, many of whom were also out of work, decided to forgo the usual gift-giving ritual. They bought small presents for family members, but figured their friends didn’t need the usual gift-for-the-sake-of-a-gift offering.

“I have changed the stores I shop in,” says Bradfield, whose monthly income went down from about $3,000 to less than $1,000. “I live next to a Raley’s, and I like its fresh produce. But WinCo is less expensive. So we get our nonperishable goods there now. No new clothes on the horizon. It’s off the table—not something you even have to think about. It’s kind of fun. I have my set infrastructure of clothing. It’s serving me very well.”

For Bradfield, and countless other Sacramentans, the recession has altered not just their bank accounts but their psyches. They’re buying less, and when they do buy, they’re planning through the expenditures more carefully; they’re creating new, more affordable fashions and downscaled lifestyles. When the recession ends, they will, like the children of the Depression three-quarters of a century ago, likely take these new financial priorities with them as they navigate the next chapters of their lives and help remold a post-bubble America.