Millions of Americans Are Becoming Economically Invisible
bloomberg.com
bloomberg.com
> What we do see are troubling signs that low- and middle-income consumers are fading in the economic data. The top 10% of earners now account for about half of consumer spending, the highest share since at least 1989, according to an analysis by Moody’s Analytics. The top earners’ share of spending has trended higher since the early 1990s from a low of 35%, matching a rise in income inequality over the same time. Meanwhile, the bottom 60% of wage earners account for less than a fifth of consumption, down from more than 26% three decades ago.
Having such a large portion of the population not matter anymore, from an economic standpoint, doesn't seem... sustainable.
There are academic articles on that such as [1].
[1] "Crisis and the Role of Money in the Real and Financial Economies—An Innovative Approach to Monetary Stimulus" <https://www.mdpi.com/1911-8074/14/3/129>
Neither the claim nor the implied conclusion holds water. If the top 10% of earners account for half of spending, it means that 90% account for the other half, which is not insignificant or "invisible". On top of that, the marginal propensity to consume (MPC) is repeatedly shown in economic studies to be higher for lower-income groups [0]:
> For low-wealth households, the MPC is 10 times larger than it is for wealthy households.
Due to the higher MPC, there is clear policy and business incentive to support and market to lower-income households. And even if the economy grows despite a smaller share of consumption from lower-income groups, it does not imply that if the consumption were to fall even further ("without the spending"), that there wouldn't be deleterious effects on the economy as a whole.
0: https://www.bostonfed.org/publications/research-department-w...
You wrote this in response to a quote that pointed out that businesses have little inventive to serve the 80 million workers who account for low spending. FYI, 80 million workers are below 60% of the US non-farm workforce and those 60% account for less than 20% of spending, which is insignificant compared to their number.
> Neither the claim nor the implied conclusion holds water.
Actually your math is wrong and the water it holds is rather muddy.
> On top of that, the marginal propensity to consume (MPC) is repeatedly shown in economic studies to be higher for lower-income groups
This is another muddy statement on top of the previous one. FYI, the Propensity to Consume (PC) is 1 minus the propensity to save (PS) and PS equals the fraction of income that is saved. Although rich people consume more they save more too, thus their PS is high and their propensity to consume is LOW. In short, rich = low PC and low MPC.
On the other hand poor people save very little having to spend everything to survive, thus poor = high PC and high MPC.
> Due to the higher MPC, there is clear policy and business incentive to support and market to lower-income households.
Given my previous analysis, this is a nonsensical statement, MPC doesn't matter to business, total spending does, but high MPC means poor customers and low spending - nobody cares about this segment which is manifested as declining product quality for the mass market, something a lot of us observe every day.
Decreased inequality with the same level of consumption would mean higher velocity of money, and thus higher total tax liabilities b
Please complete the security check to access
https://accountinginsights.org/what-is-a-parallel-economy-an...
Publicly available data show that the middle 40% are responsible for more than one-third of consumption; the labor force is large and strong; and lower income spending is relatively flat over the past ~10 years.
The upper income group is indeed spending more--and that is something to watch carefully with respect to broader market business trends. There may even be opportunities to exploit if the smaller segments are less served.
Obligatory Manna link