Nathan Wilmers, a sociology Ph.D. candidate at Harvard, looked at how the growing impact of wealthy consumers is reshaping the economy and wages. Others have termed this phenomenon “the plutonomy,” or an economy in which earnings and spending are dominated by those at the top.
Consumer spending by the top 5 percent of households has grown 5.2 percent a year since 1989, while spending by the bottom 95 percent has grown at 2.8 percent, Wilmers said. In the past, economists have estimated that the top 5 percent of consumers account for nearly 40 percent of consumption…
Wilmers said that “the increased influence of these consumers sets up big rewards for businesses that create and sell the sorts of products the affluent want.” Specifically, he looks at salaries for butlers, wine producers, Realtors, lawyers and bankers and found that those who are best at their professions and excel at skills valued by the wealthy have the highest wages.
Even within the same industry—say, law or household staff—people hired by wealthy patrons make more than those that serve the middle class or affluent. Companies favored by wealthy consumers also have higher margins (as anyone who’s looked at Hermes profits in Birkin bags can attest).
A few thoughts:
1. At what point does the market become saturated with people and businesses trying to sell to the wealthy?
2. Some historical context would be helpful here. How much does this differ from previous eras? It makes sense that the wealthy consume more but is this significantly different than a few decades ago?
3. Isn’t this a reasonable outcome for a capitalistic system? If you want to make money, you want to find consumers who can pay for your products. Having smaller profit margins may provide for a need or exhibit altruism but a purely profit-motivated firm would seek out the wealthy.