Smash Company Splash Image

December 25th, 2017

In Business

4 Comments

Retail is suffering because the middle classes have lost $1,355 trillion in income since 1970

(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at: lawrence@krubner.com

Nowadays, there are a lot of articles being written about the collapse of retail in the USA. Some people blame Amazon and online shopping, but that is only a trivial part of the problem.

$1,355,610,000,000 of consumer spending is missing from the demand side of USA spending, and that should be kept in mind whenever you read an article about retail going through hell. The big boom in retail in the mid-20th century was thanks a strong middle class. Conversely, the collapse of income of the middle quintiles of income must lead to a contraction of retail. Consider these charts:

Table H-2. Share of Aggregate Income Received by Each Fifth and Top 5 Percent of Households

https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-income-households.html

Percent of income for the 3 middle quintiles in 1970:

10.8

17.4

24.5

total: 52.7%

In 2016:

8.3

14.2

22.9

total: 45.4%

The difference: 7.3%

The GDP of the USA in 2016:

18.57 trillion

https://www.google.com/search?q=usa+gdp+2016&oq=usa+gdp+2016&aqs=chrome..69i57j0l5.5605j0j7&sourceid=chrome&ie=UTF-8

So if the middle classes still had the same share of national income as they had in 1970, they would have an additional $1,355,610,000,000 to spend or save.

Retail spending in the USA in 2016 was around $5 trillion:

https://www.emarketer.com/Article/US-Retail-Sales-Near-5-Trillion-2016/1013368

Hold the spend/save ratio constant and we can say that retail spending would be 27% higher in 2016, if the middle quintiles still had the same percentage of national income as they had in 1970.

You can make some adjustments for the increased spending in the top quintile, but most of the income has gone to the top 1% and most of that goes to savings rather than spending.

Obviously, all of our current stories about retail would be different if the middle classes still had the same percentage of national income that they had in 1970.

And please, please, please note, Amazon only had $131 billion in sales during 2016. It’s impact is very small compared to that missing $1,355 trillion.

Source



Check out my book:





RECENT COMMENTS

May 30, 2018 4:35 pm

From Thomas on Docker is the dangerous gamble which we will regret

"Thank you for this beautifully written and relevant piece. I think it has saved me a whole world of pain. ..."

May 29, 2018 10:46 am

From lawrence on Docker is the dangerous gamble which we will regret

"Andrew Reilly, thank you for writing. You make several good points, especially this: "Also an extra layer o..."

May 28, 2018 11:17 pm

From Andrew Reilly on Docker is the dangerous gamble which we will regret

"Nice article, thanks! I think that it's interesting to also look around at the problem from a greater dista..."

May 21, 2018 2:39 am

From xulin on Docker is the dangerous gamble which we will regret

"Elixir & Erlang..."

May 16, 2018 3:28 pm

From Steffen on Docker is the dangerous gamble which we will regret

"I'll never regret the use of docker cause I never used it (and never will). My advise is the the anti docker ..."

May 15, 2018 1:36 pm

From Clayton Gulick on Docker is the dangerous gamble which we will regret

"Great article. The current Docker craze, imho, is the same old problem where engineers get a hammer and every ..."

May 15, 2018 10:38 am

From lawrence on Docker is the dangerous gamble which we will regret

"Yawar, yes, I have looked at Elixir. And as I mentioned in the article: "They are now examining Go and E..."

May 15, 2018 10:32 am

From lawrence on Docker protects a programming paradigm that we should get rid of

"Agam Brahma, thank you. I have now fixed the typo...."

May 15, 2018 12:11 am

From Agam Brahma on Docker protects a programming paradigm that we should get rid of

"Great article, so true @ "unwillingness to confront the reality of the emerging solution". Minor typo: s/On..."

May 14, 2018 8:41 pm

From Yawar on Docker is the dangerous gamble which we will regret

"Just wondering, have you looked at Elixir? It seems to fit perfectly with the ideals you describe: based on de..."

May 14, 2018 7:00 pm

From lawrence on The Coral Reef Pattern of incremental improvement

"Andrew Whitworth, thank you for writing. About this: "Rails might not have been such a big problem for u..."

May 14, 2018 4:05 pm

From Andrew Whitworth on The Coral Reef Pattern of incremental improvement

"I like the coral reef metaphor, but this and your tangent about using separate languages both suffer from the ..."

May 14, 2018 12:43 pm

From Mickael on Docker is the dangerous gamble which we will regret

"Hi, I agree with some of your points, especially that docker is maybe more a dev tool than a production tool...."

May 14, 2018 6:25 am

From Eduardo Moroni on Docker is the dangerous gamble which we will regret

"Hey dude, Nice work. pretty awesome essay...."

May 14, 2018 6:18 am

From Pietro on Docker is the dangerous gamble which we will regret

"Hi, I wish there were more people like you around. The real mess I see coming, or, I should say, which has ..."

4 COMMENTS

Pingback: Retail is suffering because the middle classes have lost $1,355 trillion in income since 1970 via /r/economy | Chet Wang

December 28, 2017
7:15 pm

By Anonymous

Apparently, $1,355,610,000,000 = $1,355 trillion.

December 28, 2017
7:59 pm

By lawrence

I suppose we should round that to $1.356 trillion.

Pingback: Retail is suffering because the middle classes have lost $1,355 trillion in income since 1970 – Snapzu Business

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>