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 books:





RECENT COMMENTS

June 24, 2019 3:49 am

From RASHMI GUPTA on Why are large companies so difficult to rescue (regarding bad internal technology)

"History and Trust..wonderfully summarized..."

June 10, 2019 8:21 pm

From Sean Hull on Nils Meyer: there are advantages to containers, but fairly easy to get wrong

"Some great points. Especially the one about storage systems. A lot of micro services encourages breaking up ..."

June 1, 2019 11:26 am

From Chris on The winners of globalization will now fight it out in the political sphere

"That explains exactly what happened here in the Australian election. The polls were drastically wrong. This ex..."

May 31, 2019 7:22 am

From Piers B on Object Oriented Programming is an expensive disaster which must end

"Having been developing software in both functional and OO languages for 30+ years, this is all about education..."

May 31, 2019 5:45 am

From HC on Billions were wasted on Hadoop startups, and the same will eventually be true of Docker

"This seems like a weird Docker hatchet piece. You're taking one piece of news about Hadoop and then weirdly re..."

April 14, 2019 4:34 pm

From lawrence on Abuse on Wikipedia

"Just An Observer, please post the link if you find it...."

April 14, 2019 12:28 pm

From Just An Observer on Abuse on Wikipedia

"Well, wouldn't you know, the slagging of Katy Bouman who is the algorithm designer for the black hole image is..."

April 11, 2019 4:30 pm

From Just An Observer on Abuse on Wikipedia

"In a similar vein, yesterday a woman scientist wrote about how Wikipedia articles about woman scientists are o..."

March 30, 2019 5:31 pm

From lawrence on Don't waste your life on Twitter

"Orbay, with any type of creative endeavor, I think you'll find 90% of the output is mediocre. That is true for..."

March 30, 2019 4:51 am

From Orbay on Don't waste your life on Twitter

"I agree, but you consider a great game a great achievement, not money from wasting other people's lives? I..."

March 21, 2019 10:38 pm

From Adam Trepanier on Object Oriented Programming is an expensive disaster which must end

"Thank you for this post. This sums up what I have been feeling for years now with OOP in such a great way. I..."

March 13, 2019 1:58 pm

From ball on Facebook activated my dormant account and it won't let me deactivate it

"Same shit here. I regret ever making a spraybook account..."

February 20, 2019 10:41 am

From Just An Observer on Don't waste your life on Twitter

"A couple of my favorite bloggers started doing twitter. Instead of permanent additions to knowledge, there is..."

February 20, 2019 3:24 am

From Brennan on Did sleep paralysis start the Salem Witch Trials?

"If you have occasional sleep paralysis, you can take steps at home to control this disorder. Start by making s..."

February 19, 2019 11:09 am

From Ryan Earp on Why I prefer dynamic-typing over static-typing: the speed of adapting to change

"If static typing lead to greater programmer productivity (via a reduction in bugs) then corporate Americ..."

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>