For anyone spending time in the actual country, it’s been obvious for a while that the renewed interest in economic inequality hasn’t flowed from government reports or anybody’s statistics, but from the very clear feeling that the recent and ongoing “recovery” is benefitting one portion of the population and leaving an even larger part farther behind. It’s good times for people with secure upper- and even upper-middle-class incomes and assets that weren’t wiped out by the Great Recession; housing bargains (many harvested from other people’s ruined dreams) are available in many cities; the stock market (until last month at least) has been doing extraordinarily well); there’s renewed demand for certain skills; and in general life has returned to “normal.”
As politicians and pundits in Washington continue to spar over whether economic inequality is in fact deepening, in corporate America there really is no debate at all. The post-recession reality is that the customer base for businesses that appeal to the middle class is shrinking as the top tier pulls even further away.
If there is any doubt, the speed at which companies are adapting to the new consumer landscape serves as very convincing evidence. Within top consulting firms and among Wall Street analysts, the shift is being described with a frankness more often associated with left-wing academics than business experts.
“Those consumers who have capital like real estate and stocks and are in the top 20 percent are feeling pretty good,” said John G. Maxwell, head of the global retail and consumer practice at PricewaterhouseCoopers.
In response to the upward shift in spending, PricewaterhouseCoopers clients like big stores and restaurants are chasing richer customers with a wider offering of high-end goods and services, or focusing on rock-bottom prices to attract the expanding ranks of penny-pinching consumers.
“As a retailer or restaurant chain, if you’re not at the really high level or the low level, that’s a tough place to be,” Mr. Maxwell said. “You don’t want to be stuck in the middle.”
The numbers are pretty shocking:
About 90 percent of the overall increase in inflation-adjusted consumption between 2009 and 2012 was generated by the top 20 percent of households in terms of income, according to [a] study…sponsored by the Institute for New Economic Thinking, a research group in New York.
So it that how it’s going to stay, with a growing economy distributing more and more of its fruits to the fortunate few? Maybe not, if you believe aggregate consumer demand matters:
While spending among the most affluent consumers has managed to propel the economy forward, the sharpening divide is worrying, [Washington University economic Steven] Fazzari said.
“It’s going to be hard to maintain strong economic growth with such a large proportion of the population falling behind,” he said. “We might be able to muddle along — but can we really recover?”
Let’s hope the people who own and run our private-sector economy and heavily influence our public policies think the answer to that question is “no,” or an awful lot of us are going to become officially superfluous.