From: A.B.Trigg (A.B.Trigg@OPEN.AC.UK)
Date: Wed Nov 23 2005 - 06:57:19 EST
Even if expenditure is so high on the part of the rich, is their stil an Engel curve? Are they spending proportionally less of their income? Andrew. -----Original Message----- From: OPE-L on behalf of glevy@PRATT.EDU Sent: Wed 23/11/2005 01:54 To: OPE-L@SUS.CSUCHICO.EDU Cc: Subject: [OPE-L] [Jurriaan] A class dimension in aggregate demand ---------------------------- Original Message -------------------------- Subject: A class dimension in aggregate demand From: "Jurriaan Bendien" <adsl675281@tiscali.nl> Date: Tue, November 22, 2005 1:57 pm ------------------------------------------------------------------------ According to some theories, it is US consumer expenditure that sustains the world economy, and I wanted to find out the share of high-income households in this expenditure. According to some estimates, for example, the top 10% of German households are good for about a quarter of total consumer expenditure. How are things in the USA? I referred to the 2003 Consumer Expenditure Survey (CES) to get some indication. The consumer expenditure survey covers income earners aged 14+ within households in the civilian non-institutional population, excluding the military and nursing home residents. "Consumer units" surveyed are broadly the same as households, with some small differences. Excluded from these expenditure estimates, are all purchases by individuals for business purposes, rather than personal consumption, as well as all credit/installment payments on items bought before the reference period. So essentially we are dealing with new personal consumption expenditure during the reference year. Because of this coverage and exclusions, the CES total consumer expenditure estimate will be significantly less than the NIPA total, i.e. it may capture only 60% of total personal expenditures, relating specifically to new goods and services bought during the reference year. The conclusion I reach from the data, is that the top 10% of civilian households by income (about 30 million people) account for 22.9% of new personal consumption expenditure in the CES sense, and if you take the 20% of households earning $70,000+ a year (about 60 million people), they account for 38.8% of new personal consumption expenditure, or about 1.8 trillion of final consumption demand. As said, these figures understate the true expenditure situation, because credit or installment repayments on items previously bought as well as purchases for business purposes are excluded, we are only talking about new personal purchases of goods & services. The military (about 1.1 million people) are excluded as well. But anyway it's probably realistic to say, that the top quintile of consumer units - 23.6 million households, or about 60 million people - are good for half of total household expenditure in the US, if you included credit repayments previously contracted, and personal business purchases. How does this final demand relate to imported goods? Taking the 2002 data, the total dollar value of consumer goods (not services) used by households which are imported into the USA (not re-exported) was around $440 billion, of which (perhaps) $70 billion worth of luxury consumption goods. But even if we assume that the mentioned 23.6 million households bought all the imported luxury items, that would only about 3-5% of their total expenditure. My simple calculations were as follows: Total "consumer units" covered in the CES, 2003 = 115.4 million Average annual consumer expenditures per unit, 2003 = $40,817 Total consumer expenditure, 2003 = $4.7 trillion (for comparison, NIPA total consumption expenditure, 2003 = $7.7 trillion, including part of the military and credit repayments etc.) Consumer units in survey with income of $100,000+, 2003 = 11.5 million Percentage of $100,000+ income units in total consumer units counted = 10% Average after tax income, consumer units with income of $100,000+ = $144,146 Average annual consumer expenditure 2003, consumer units with income of $100,000+ = $93,515 Percentage of $100,000+ after tax income spent on consumer goods and services = 64.9% Total consumer expenditure 2003, consumer units with income of $100,000 and over = $1.08 trillion Percentage share of $100,000+ income units in total consumer expenditure = 22.9% Consumer units with income of $70,000+, 2003 = 23.6 million Percentage of $70,000+ income units in total consumer units = 20% Total consumer expenditure 2003, consumer units with income of $70,000 and over = $1.8 trillion Percentage share of $70,000+ income units in total consumer expenditure = 38.8% Source: ftp://ftp.bls.gov/pub/special.requests/ce/standard/2003/higherincome.txt
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