Arnold Kling  

The Distribution of Consumer Spending

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Diana Furchtgott-Roth writes,


Last year Americans in the lowest income quintile spent an average of $11,247 per person, according to the Bureau of Labor Statistics, compared with $15,843 for middle income quintiles, and $28,272 for the top quintile. The top group is spending only 2.5 times as much as the bottom group, and 1.8 times as much as the middle classes...

The lowest quintile is spending 14% more in 2005 than it was in 1985, the second quintile 16%, the third quintile 11%, the fourth 13%, and the top quintile is spending an additional 16%.


Just as a reminder, if you want to measure inequality, the ranking of disparities is:

1. financial wealth
2. annual earnings
3. lifetime earnings
4. consumer spending

That is, if you look at financial wealth or one year's earnings, you will see lots of disparity. If you look at consumer spending, you will see much less disparity.


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CATEGORIES: Income Distribution



COMMENTS (10 to date)
Randy writes:

Interesting. But the idea of being able to spend almost double what I'm currently spending doesn't seem like a small matter. I could live in a bigger house in a better neighborhood, buy a second car or maybe a boat, keep my kids from taking out loans for education, maybe even have "extra" money to save. That's the word - extra.

Don't get me wrong. If I don't earn it, I don't expect to have it. Just saying that 1.8 and 2.5 only look like small numbers. They're huge - because they're extra.

ocmpoma writes:

There's not much disparity if one looks at the average amounts spent by each quintile, but what percentage of their income does each amount represent?

Michael writes:

Friedman's Perment Income Hypothesis at work.

David N. Welton writes:

So... the sales tax is relatively quite regressive, no?

bill shoe writes:

Hmmmm. The small disparity in category 4 despite larger disparities in 2 and 3 appears to explain the very large disparity in 1. This is encouraging-- it tells me I can rise high in category 1 by making good choices.

quadrupole writes:

I hate to be a wet blanket here, but the information that you are reporting (admittedly, quoting another author) does not seem to reconcile with what I find at BLS:

ftp://ftp.bls.gov/pub/special.requests/ce/standard/2005/income.txt

Am I misreading the tables or reading the wrong tables?

Brandon Berg writes:

So... the sales tax is relatively quite regressive, no?

If you mean as compared to an income tax, maybe. Untaxed items (e.g., groceries) probably account for a higher percentage of the poor's consumption than the wealthy's.

But in any case, the assumption underlying your question is that income is the One True Yardstick by which a person's tax burden is to be measured, and it's not at all clear why this should be the case. Why should we concern ourselves solely with progressivity of taxation relative to income, rather than progressivity of taxation relative to consumption?

liberty writes:

Actually, this is the right table I think (broken down by quintile), but it also disagrees with the article:
ftp://ftp.bls.gov/pub/special.requests/ce/standard/2005/quintile.txt

The link is available from the main Consumer Expenditure Survey page which the writer said was the source: http://www.bls.gov/cex/

I am not sure where the author saw the data cited though, as the appropriate table says something completely different than what the article says.

I'm still looking - maybe I am missing something. Surely, there must be some table that cites those numbers somewhere...

Cheng-Jih Chen writes:

Liberty, it looks like the NY Sun writer is dividing the "Average Annual Expenditure" line with the "Average Number in Consumer Unit (persons)" line. If you do that, the lowest and highest quintile BLS numbers for per person expenditures match the article's numbers, after rounding to the nearest dollar.

liberty writes:

Cheng-Jih Chen: good catch!

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