Everybody with a family and a car has seen their costs at the pump and at Wal-Mart go up in recent years. Gas prices are a function of the price of a barrel of oil, which has risen about sevenfold between 1999 and 2008. Fertilizer and agricultural machines are dependent on oil which makes food cost dependent on oil price. So were we better off before than we are now or are we just nostalgic for the good old days?
The Bureau of Labor Statistics (BLS) has some very detailed statistics on America's spending habits (sources: here, here). These tables show the items Americans spend their income on, seperated by income bracket. (Tthey talk about consumer units as opposed to individuals. I'm assuming it's an expensive word for households.)
The table below gives an interesting look in 2009 expenditures per income group: above or below $150,000.
| Item | All consumer units | below $150,000 | $150,000 and more |
|---|---|---|---|
| Number of consumer units (in thousands) | 120,847 | 112,398 | 8,447 |
| Income before taxes | $62,857 | $49,826 | $236,246 |
| Expenditures as % of pretax income: | |||
| Food | 10.1 | 11.7 | 5.6 |
| Housing | 26.9 | 30.6 | 16.4 |
| Utilities, fuels and public services | 5.8 | 7.0 | 2.5 |
| Transportation | 12.2 | 13.8 | 7.5 |
| Gasoline and motor oil | 3.2 | 3.8 | 1.4 |
Above 150k was the highest income group stated by BLS, and I consider them to be "the rich". Consumer units earning below that figure I consider "the rest". (Note that less than 7% earn over 150k. Also note that I chose % of pretax instead of posttax, because those numbers didn't seem to differ very much: for example in the top range pre/posttax are given as 236k vs. 222k.)
To me, three items in the above table are essential: food, utilities and gasoline. What is clear is that "poor" families spend more than twice as much of their income on these essentials as "the rich": 22.5% vs. 10.5%.
Now let's look at the same figures in 1984 (source table). Mind you, the highest income bracket is $50,000 or 3x less than today's numbers!
Now let's look at the same figures in 1984 (source table). Mind you, the highest income bracket is $50,000 or 3x less than today's numbers!
| Item | All consumer units | below $50,000 | $50,000 and more |
|---|---|---|---|
| Number of consumer units (in thousands) | 81,178 | 73,662 | 7,516 |
| Income before taxes US | $23,464 | $18,358 | $73,511 |
| Expenditures as % of pretax income: | |||
| Food | 14.4 | 16.7 | 8.7 |
| Housing | 28.7 | 32.4 | 19.4 |
| Utilities, fuels and public services | 7.0 | 8.3 | 3.6 |
| Transportation | 18.7 | 21.3 | 12.4 |
| Gasoline and motor oil | 4.6 | 5.5 | 2.3 |
Again we see a difference between poor and rich: 30.5% of income was diverted to food, utilities and gasoline among the poorest ~90% of Americans while this number was 14.6% for the richest.
So although Americans spend less of their income on essentials today than 25 years ago, the difference between top and bottom incomes is still the same. The poorest 90% spend about 2x as much of their income on essentials compared to the rest. (1984: 30.5% vs 14.6%, 2009: 22.5% vs 10.5%)
Fair? Perhaps--rich people spend a good deal more of income on taxes, which isn't included in these numbers. Will the pressure of food, energy and utilities on income go down in the future? I think we've reached a lower limit. With unemployment in the high single digits, wages won't go up anytime soon--but the price of energy sure will.
Why do you not consider housing as 'essential'?
ReplyDeletePerhaps I should explain, I haven't been exactly clear in this in my post. I see "essential" expenditures as energy-related.
ReplyDeleteMortgages/rent, while important, are a tier below food and gas in that they are easier to give up--this is what caused the 2008 crash.