Analysis: Wealthy have gotten wealthier
I had reason to review material about income distribution and class rigidity after reading an entry at Blue Oregon, and, articles about holiday spending at the New York Times and Reuters. The blog entry cited an essay published at the Economist. The authors examine a greater trend toward income inequality.
The past couple of decades have seen a huge increase in inequality in America. The Economic Policy Institute, a Washington think-tank, argues that between 1979 and 2000 the real income of households in the lowest fifth (the bottom 20% of earners) grew by 6.4%, while that of households in the top fifth grew by 70%. The family income of the top 1% grew by 184%—and that of the top 0.1% or 0.01% grew even faster. Back in 1979 the average income of the top 1% was 133 times that of the bottom 20%; by 2000 the income of the top 1% had risen to 189 times that of the bottom fifth.
Thirty years ago the average real annual compensation of the top 100 chief executives was $1.3m: 39 times the pay of the average worker. Today it is $37.5m: over 1,000 times the pay of the average worker. In 2001 the top 1% of households earned 20% of all income and held 33.4% of all net worth. Not since pre-Depression days has the top 1% taken such a big whack.
. . .America is increasingly looking like imperial Britain, with dynastic ties proliferating, social circles interlocking, mechanisms of social exclusion strengthening and a gap widening between the people who make the decisions and shape the culture and the vast majority of ordinary working stiffs.
. . .Earl Wysong of Indiana University and two colleagues recently decided to update the study. They compared the incomes of 2,749 father-and-son pairs from 1979 to 1998 and found that few sons had moved up the class ladder. Nearly 70% of the sons in 1998 had remained either at the same level or were doing worse than their fathers in 1979. The biggest increase in mobility had been at the top of society, with affluent sons moving upwards more often than their fathers had. They found that only 10% of the adult men born in the bottom quarter had made it to the top quarter.
It seems to me that any intelligent person who observes American society from academia or the workplace would reach that conclusion based on experience. People who come from low-income backgrounds are as scarce as hen's teeth at elite colleges, in professional schools and, particularly, in the managerial and executive offices of corporate America. Between 70 and 80 perecent of Americans have remained in the socioeconomic class in which they were born for the last several generations. Increasingly, those who alter their class position are downwardly mobile. It is amazing that so many Americans somehow maintain a ridiculous faith in the myth that any citizen of the United States can rise to wealth.
Those who have money must find ways to spend it. Analysts predicted an increase in purchases of luxury items by the wealthy before Christmas.
NEW YORK: Fancy a $20,000 suit of armour under the Christmas tree? Or how about a crystal-encrusted Mrs Potato Head for $8,000? Or maybe a $50,000 Ferrari go-cart?
While many US retailers are cutting prices to draw crowds and bolster holiday sales, upscale US retailers are making merry meeting strong demand for luxury gifts.
The International Council of Shopping Centres expects the luxury market to be the retail story of ‘04, with strong sales at upscale Neiman Marcus Group and Nordstrom stores, and Coach handbags being snapped up.
. . .No one was available at Neiman Marcus to comment on how many Americans would be getting a suit of armour for Christmas. Lower-end retailers aren’t having as much fun, with slow sales over the key Thanksgiving-to-Christmas period that accounts for 23% of annual US retail sales, the latest data show.
The New York Times confirms that -- surprise? --- the well-off had a very good Christmas.
America's merchants hustled for sales this holiday season, marking down a substantial part of their inventories right before Christmas to bring in enough last-minute and postholiday buyers for a decent, if unexciting, 3.1 percent gain over the previous year.
. . .The continued climb of luxury stores like Neiman Marcus was not a surprise, although Saks Fifth Avenue's 12.1 percent increase in sales in stores open at least a year exceeded analysts' predictions.
Overall Christmas sales were lackluster. Slow job growth and high oil prices may have influenced the large majority of Americans who are not wealthy to conserve any savings they have. Analysts say sales were depressed middling in all areas of retail, except luxury items and the teen market.
The article in the Economist, despite a somewhat conservative tone, is worth reading in its entirety. However, the authors do not address a dilemma the wealthy face: spending the money they have accrued. How many suits of armor does a person need?