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

December 4, 2018 9:22 am

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

"GK, thank you for writing, but I don't understand what you mean when you write: "However, at that point you..."

December 4, 2018 7:14 am

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

"A development VM is a fine choice, provided that it comes with tools that make it just as easy to run commands..."

November 30, 2018 7:04 pm

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

"GK, thank you for writing. About this part: "That thing is writing portable shell scripts. The moment you n..."

November 30, 2018 1:41 pm

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

"The fat binaries article was nice, but full blown fat binaries are not really necessary. Whats needed is that ..."

November 27, 2018 1:13 am

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

"Andres Moreno, thank you for writing. Among other points to be said, I'll say I'm almost heart broken about Py..."

November 26, 2018 9:11 pm

From Andres Moreno on Object Oriented Programming is an expensive disaster which must end

"I am stunned! Why did it take so long to show that the Emperor has no clothes? I got bit by the Lisp bug early..."

November 23, 2018 8:24 am

From Just An Observer on Hillary Clinton keeps making the same mistakes

"Similar to the "Let's dump Nancy Pelosi, since the Republicans don't like her" talk we hear all the time...."

November 22, 2018 11:49 pm

From Free Speech Message Board on Zed Shaw is angry (abstraction and indirection)

"Americans used to think hippies were lazy fruits for dropping out during the Vietnam War, but maybe the hippie..."

November 19, 2018 5:13 pm

From Justin McGuire on To start with, tran­sient query surges are no longer a prob­lem?

"I think the idea is that a surge in traffic results in more messages on the queue, which can be handled at a n..."

November 19, 2018 12:45 pm

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

"What are everyone's recommendations for fat binary bare metal deployments preferably with hooks into continuou..."

November 19, 2018 11:07 am

From lawrence on Has the Internet destroyed our ability to read?

"Gábor Hidvégi, I agree with "too many pieces of information" especially small pieces of information. Most of t..."

November 19, 2018 10:50 am

From Gábor Hidvégi on Has the Internet destroyed our ability to read?

"The problem is that too many pieces of information reaches us (thanks mostly to the internet), and our brain a..."

November 19, 2018 10:19 am

From Gábor Hidvégi on What's wrong with Hacker News

"I think the problem is broader: web 2.0 failed. One part of Web 2.0 was about "user content", everyone is c..."

November 12, 2018 9:44 pm

From Roberto on Poland was shockingly liberal during the 1400s

"Also check out Laurentius Goslicius: https://en.wikipedia.org/wiki/Wawrzyniec_Grzymała_Goślicki Richard Cal..."

November 7, 2018 6:04 pm

From Henry Longmore on Why not use asserts in Python?

"Thanks for the article. I used to mock Eiffel for its "Design By Contract" as that seemed to be the only good ..."

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>