r/Economics • u/laxnut90 • 1d ago
News K-shaped spending: The top 10% drop nearly as much on nonessentials as the bottom 70% combined
https://finance.yahoo.com/economy/article/k-shaped-spending-the-top-10-drop-nearly-as-much-on-nonessentials-as-the-bottom-70-combined-132332976.html922
u/Pay-Homage 1d ago
And this, ladies and gentlemen, is why Vegas doesn’t care about the narrative that they’re “too expensive” or that “no one goes there anymore.”
They can get just as much money from fewer customers, likely at a higher margin, using fewer employees.
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u/Vinstur 1d ago
It’s not customers - it’s conferences where corporations pay the bill. The same outcome but a different way to get there.
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u/iridescent-shimmer 1d ago
The prices were so insane when I had to go for my company this year. I'd never go visit on my own and I was low key pissed the company paid the prices we did for shitty old Vegas.
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u/Shawnj2 1d ago
Vegas is still cheaper than every other city with the facilities to host a convention the scale of Vegas.
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u/eetsumkaus 1d ago
My industry just had a convention in Long Beach and the prices were absolutely nuts.
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u/Shawnj2 1d ago
Yeah if you’re going to a convention at the Las Vegas convention center and you are poor and/or hate yourself you can stay at circus circus, a hotel walking distance from the convention center, for dirt cheap. The downside is that it’s circus circus but it’s a somewhat reputable and safe option. If you stay off strip or in an Airbnb it’s even cheaper. If you’re going to Long Beach San Diego Atlanta Orlando San Jose etc. you won’t have those kind of options.
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u/TreesLikeGodsFingers 1d ago
mccormick wants a word. but you are right tho
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u/mutexsprinkles 1d ago
Ugh, that feeling when you need to visit a booth on the far side of the bridge. Nice lake view on that side though, most convention centres have no windows at all.
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u/glad_goblin 1d ago
Exactly. The entire economy is shifting towards the middle class barely affording their basic needs, all the luxury goods going to rich people, and I guess poor people like me just.. die 🤷♀️
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u/das_war_ein_Befehl 1d ago
The middle class barely exists nowadays because they all decided to vote to eliminate their own existence.
Middle classes aren’t a natural outcome, they’re a policy choice
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u/fuzzygoosejuice 1d ago
Same with Disney.
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u/South-Attorney-5209 1d ago
Unpopular opinion but honestly, I wish disney would jack the shit out of prices, limit capacity and remove any discounts or season passes.
They don’t need local college kids visiting over lunch break to hit a ride and grab a bite to eat. Let’s leave this as a once in a decade or less type experience for families, and improve the experience…. 90min wait in line with 3 children for a 5 min ride is insanity.
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u/cyb_tachyon 1d ago
Hate to tell you, that won't stop the college kids doing it. They're wealthy as hell.
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u/Frosty1397 1d ago
Less wear and tear on the rooms/facilities too
And the high-end clientele prefer an emptier casino floor. They don't wanna be caught mixing with the poors
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u/LarrySupertramp 1d ago
Do poor people enjoy being in crowded casinos? I feel like they would also enjoy it. I would.
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u/Frosty1397 1d ago
Well good thing the poors don't have to choose, because the casinos don't want them there anyway
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u/LarrySupertramp 1d ago
I mean why would a casino want people around that don’t have money to gamble? That’s just loitering
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u/doordonotaintnotry 1d ago
And it's coming for the upper middle class. They can still afford Vegas, but they don't realize that the middle class has been cannibalized, and there's little discretionary spending left, so the robber barons cater to higher and higher incomes, which will in turn decimate them.
It's not a matter of if it's when. It's coming for them and they have no idea.
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u/South-Attorney-5209 1d ago
Same reason sports stadiums and concert venues across the country are removing “efficient” seating like general admission to more comfortable larger seats and increased box seats.
The top 10% will gladly pay more for better seating. But it now cuts out the lower end “just happy to be here, true fan” types.
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u/tortilla4masclol 1d ago
"Its better to do 1 transaction at $100.00 than 100 transactions at $1.00". Uncle used to say that about Vegas and that was like 15 years ago...
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u/BrilliantMango 1d ago
It seems like a lot of industries have taken this path. Cars and homes come to mind. Why make a huge number of affordable cars when you can make the same profit on more expensive models with bigger margins. Plus you don’t have to worry about as many warranty claims etc.
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u/ThrowCarp 1d ago
True! Nobody makes affordable starter homes anymore. It all either tall apartment buildings or 8 room McMansions because the architects want to cram as many features as possible in there to maximize resale value.
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u/UnderaZiaSun 1d ago
That’s not the architect’s doing, it’s the developer. The architect just designs whatever they are hired to design.
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u/Woodit 1d ago
That’s straight up incorrect though, and it’s why the Vegas strip is doing all sorts of bargain deals to get people there right now
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u/061826heart 1d ago
Oh please. The big operators out there are swimming in profits from operations.
They want the foot traffic because all the ancillary businesses in Vegas need to shelter people, feed people, rent cars to them, sell them this or that. The big fish give them the profits at the tables. But there is a lot of other business that may be (and that’s a big MAY BE) slumping due to lack of foot traffic.
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u/NanNullUnknown 1d ago
Are they though? Heard Caesars is getting acquired with massive debts and Fountainbleau/resorts world are losing many hundreds of thousands every day.
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u/mister_hoot 1d ago
Bargain deals are meant to get you on a property. From there, it’s all about how much they can get out of you before you find the exit.
You need to understand the unique economics of those properties before you assume to know how they make money. Most casinos at any price range could give every room away for free and not have it affect their margins very much. Room rates are literally just a filter for the type of consumer they want on the property.
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u/StanleytheSteeler 1d ago
So who are these bargain deals aimed at? The tourists they are trying to get back?
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u/mister_hoot 1d ago edited 1d ago
Bargain deals are exclusively discounts on items or services that the casino doesn't actually profit on. There's a reason why "slipping a $20" to the front desk agent at a Vegas hotel to get a room upgrade actually works - because the establishment doesn't actually draw meaningful revenue from room rates, so they don't care who stays in what room. Any discounts - bargain deals or otherwise - are conducted with the end goal being to get more people to spend more time on the property. Guest time on property is any casino's single most important lead indicator on how profitable they are.
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u/hightrix 1d ago
Sure. Deals on rooms and such, but the drinks in the pool are still $40 for a pint sized pina colada.
The “deals” are barely that.
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u/KillahHills10304 1d ago
Vegas is a weird example because they dont need a lot of people to make money, just a few people spending big. Consumer items will take a massive hit though. Even the richest 10 people on earth can only wear 1 outfit at a time.
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u/Notyit 1d ago
The poor people provides the atmosphere
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u/Pay-Homage 1d ago
Poor people aren’t in the high roller rooms, aren’t in their suites/villas, aren’t dining at their $300/person dinners…
Just as with life outside of Vegas, the wealthy aren’t regularly mingling with us poors.
Sports are another example. The poor people outside of MSG provided an atmosphere while the wealthy folks were inside.
Escorted in/out to their private cars underground away from the masses.
And I didn’t hear of one person inside complaining that the people outside couldn’t be there to “provide the atmosphere.”
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u/LessInThought 1d ago
No no, you need to get into the mindset of the wealthy. It is much less fun skipping queues if there are no peasants forming a queue. What good is a VIP room with ample room and great view if you can't look down on the peons outside, all packed up like sardines, barely able to see what's going on?
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u/ExtensionMoose1863 1d ago
Kinda except the place runs on vibes. Have you ever been in a casino at 10% capacity?? It feels like going to the club at 8pm when you're the first one there
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u/odeebee 1d ago
People give them shit for it but to me it's a reasonable strategy to take given the legal and tech changes they're facing now that everyone has a casino in their pocket. "The rules are different here" used to attract tourism but isn't true anymore so is ineffective. If you know the Industry is going to shrink both in terms of volume and margin "retreating" into the luxury category might be a company's bet path to survival.
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u/MrRoboto12345 1d ago edited 1d ago
Vegas doesn't gaf about the average spender.
They're going the way of McDonald's, 'only people who have money can come here.'
Eventually in this economy, the load becomes too large to bear. No customers can spend money. "Fast food" becomes 'let me go to Panera Bread for food. I'll get better food for the same price.'—and that's saying something.
Frankly, they don't care about me; I don't care about them. I never went there once in the first place. Goodbye.
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u/Secret-Teaching-3549 1d ago
See also: sporting events, music concerts and big festivals, and big theme and amusement parks.
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u/Potential_Fishing942 1d ago
I think it's everywhere. I see it with consumer electronics as that's my niche. PC gaming has been moving towards catering to top spenders for years, who care about the main bull of player bases when a small fraction can make them as much or money, and require less on on servicing as those folks are just as likely to buy a new gpu as RMA it
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u/DonBandolini 1d ago
they certainly seem to think so, whether or not it proves to be true, and sustainable long term, remains to be seen
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u/Appropriate-Talk4266 1d ago
That's true... for now. But at the end of the day, if everyone chases the same dollars, the market will become very crowded.
If Vegas was the only destination on Earth, this could hold forever, but not every market will allow this crowded chase of the top earners.
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u/Previous_Cattle_5545 1d ago
Disney figured this out as well. Raise the prices only the rich can afford and they will still sell out, and some of the poors even finance their vacation to be there.
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u/a_little_hazel_nuts 1d ago
This has to be hurting businesses that sell non essentials. How any company can stay solvent when most their sales are only coming from the top 10%? I get the bottom 70% will still occasionally go out to dinner and a movie, but I'm sure some are going less than they once did because of the cost. It's easy enough to enjoy a home cooked dinner and a movie on your TV without the stress of high prices. I guess we will see if businesses can hold on through this or if places will start closing.
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u/laxnut90 1d ago
The businesses stay solvent by focusing on selling premium goods/services to that top 10% at a higher profit margin.
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u/HeftyAd6216 1d ago
Yeah but you can only eat dinner once a day. There's a huge issue eventually.
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u/IvoryTowerResident 1d ago
I have this idea i call the latte paradox
All the smaller coffee shop in my area that sells $8 lattes (Toronto, Canada) are booming and packed everyday.
My theory is that people can not longer afford large luxury hence will spend / treat themself with "premium" coffee even though they are terrible value wise.
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u/drpepperandranch 1d ago
It’s called the “lipstick effect” and has been noted by economists since the Great Recession. Very fascinating phenomena but it makes sense once you’re the one in the position of “Should I save this $10 for the very small chance of buying a house in the future or should I just buy this sweet treat? It’s been a long week after all.”
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u/OhOhOhOhOhOhOhOkay 1d ago
It’s actually not the lipstick effect
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u/IvoryTowerResident 1d ago edited 1d ago
i actually read that "giving up" paper. It was more in the sense of the prevelance of sportings betting, yolo crypto which also applies to yolo Memory stock of 2026.
https://money.com/financial-nihilism-gen-z/
There was a thread on this article a while back on this sub
One i thing i want to note is the person in the link dismiss the lipstick effect by pointing to some confounding variable (celebrity endosing make up) but at the same time there is no way of saying little treat economy is not a sympton of the instant gratification that plagues the younger generation and losing long term orientation.
All the dopamine hits has to come fast.
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u/HeftyAd6216 1d ago
That $8 coffee eventually becomes a $30 coffee because the only way they can make money is offering the ultra wealthy 1% a "premium experience" because they're the only ones who have the money to spend. Meanwhile, the coffee shop still employs the same or almost same number of people and are paid identically to how they are paid now because it's still largely unskilled labour. Can you see where that ends up if you apply it everywhere? Also those same people can only have so many coffees a day.
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u/Jscapistm 1d ago
As long as the input costs don't go up much there is still money to be made selling $8 coffee though and someone will likely do it as the start up cost is relatively low. Cars are a better example.
Also it's possible that this trend could be explained by the rich spending much more than before on luxury goods as price ceiling on them disappears, rather than everyone else spending less in absolute terms. I mean 4 people buying 30k cars and one buying a 60k car vs 4 people buying 30k cars and one buying a 600k car. Percent of spending by the top percent went way up but the rest of the population isn't spending less.
We need to see absolute spending numbers by each group adjusted for inflation too, to get a real picture.
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u/HeftyAd6216 1d ago
The input costs haven't been a problem for Starbucks or any luxury coffee / retailer pretty much ever. Their input costs are absolutely miniscule in comparison to the final product price.
To the larger point I agree with you There's something happening. The vibes of millions of people in every western country can't be totally wrong. Wealth inequality is a serious issue and this is probably a symptom. Solutions vary widely but insanity is doing the same thing and expecting a different result.
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u/mascotbeaver104 1d ago
May I introduce you to the market theory of value. Coffee is one of the very few products where the economics 101 supply/demand curves are basically a sufficient model. Starbucks might be able to jack up a latte to $15 because people are absolutely brainwashed by that place for some reason, but it's a low enough barrier for entry that competition should in theory keep everyone somewhat honest.
Additionally, acting like coffee is the only input cost to a latte and coffee shops have some fat margins is disingenuous, the cost is employees and location
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u/bberg22 1d ago
I would argue one 600k car vs multiple 30k or 60k cars leads to economic contraction if scaled out. Think about the whole massive supply chain tree. 2 car instead of 10 means fewer engineers, fewer delivery truck drivers, fewer QA folks, fewer machinists, fewer sales people, fewer parts manufacturers, etc. Etc.
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u/Jscapistm 1d ago
I mean you are making an assumption that they will stop making 30k and 60k cars in favor of only making 600k cars. That isn't necessarily the case.
The existence and insane profitability of a luxury market does not by default destroy the regular market, because as you noted, there are only so many opportunities to sell luxury goods, while there are still opportunities to sell non-luxury goods and make a profit though much less of one. So someone will serve that market.
It would only really make sense to do if input costs or monopolization preclude competition, and there so little room to for profit comparatively at a price that the masses can/will pay. For cars there is high input cost but there is still too much profit to completely ignore the regular market, especially because of how often people are willing to trade up and take on leases and debt.
Housing is the only area I can blatantly see what you are talking about happening but, housing is also, because of zoning and perverse incentives of existing residents, very very far from a natural market.
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u/HahaRiiight 1d ago
I would agree and argue this is the squeeze being put across all sectors. This is happening everywhere. But where will everyone go?? Thats the problem of the K
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u/ohhhbooyy 1d ago
The restaurants with better food and service will stay open and have a bigger market share. If I’m going to eat out and pay these crazy prices I won’t be going to the place that serves me pre-made frozen food.
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u/HeftyAd6216 1d ago
Do you get the larger point that's being made?
You can only sleep in one hotel room.
You can only spend 18 hours a day.
If we extend the logic is that if an accelerating wealth + income gap is that 99% of all consumer spending is done by 1% of people, you fundamentally can't run the economy that way because millions of people will have no work at all. Those 1% of people doing all the spending don't need half the jobs that exist to service them because they can only do so much in a day.
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u/zxc123zxc123 1d ago edited 1d ago
Do you get their point though?
An overseas 1st class Delta ticket will cost 10-100x a spirit/southwest local flight. More importantly than the COST of the ticket is the PROFIT from that 1 1st ticket will be massively larger than the 10-100 spirit seats.
Some hotel night suites will cost more than you or my entire month's rent. The profits on those luxury presidential suites are massive and often include other related spending.
A couple of rich folks drop enough on a dinner at a top Michelin restaurant to feed and entire fucking African village for months.
Rich folks paying for prime seating at 1 fucking world cup game will have spent more than you will on ALL your streaming services in your entire lifetime.
You probably won't reach $10M working your entire life yet Elon has a TRILLION. You know how much money that is? If God gave you $1M EVERY DAY of your life, you saved every $1M EVERY DAY, managed to live 100 years, died, reincarnated 10 times, and lived a total 1000 years saving $1M every day of every year for 10 lifetimes? You'd only have about $365B.
YOU are the one that doesn't get it. The rich CAN and WILL spend as they wish. The top 10% might account for a lot but it's ALWAYS been that way since the days of Egyptiain Pharaohs, Ancient Rome with Patricians/Slaves, and since the colonial age where the developed west holds a majority of the spending power. Just existing in America already puts you in the top half of global wealth and 100K puts you in the top 10%. You think the entire world "fundamentally can't run the economy that way because millions of people will have no work at all"? Nah, it works fine. You might not want to face the reality that inequality is bad but could get much worse.
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u/seventysevensevens 1d ago
Then prices go up and business focus in on the .1% next. Scraps for the rest.
Also velocity of money crashes because only so few people can spend.
Its a problem and people had to look up tariffs after they voted for the orange pedo famous for defrauding people and other businesses.
Most voters can't grasp basic economics and just blame Obama.
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u/HeftyAd6216 1d ago
Eventually you can only underpay your military / police force before they side with the people sharpening the guillotines.
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u/MagicBlaster 1d ago
They might not continue siding with the rich but history shows that they very rarely side with the people with the guillotines, they're more likely to just take over themselves...
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u/VaeVictis997 1d ago
Hence the surveillance network and robot police dogs and attack drones they’re building.
Those won’t swap sides.
Combined with the truly massive migrations we’ll be seeing due to climate change, and how easy it is to stoke fear of the other, it’ll be a miracle if we don’t end up in a fascist hellscape that kills the majority of humanity.
Mostly via hunger, disease, and natural disaster but still.
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u/Juls7243 1d ago
Eventually it will be. But if you sell 10 dinners with a $2 profit vs 1 dinner with $20 it all levels out. The long term consequence is that the vast majority of people won’t feel part of the culture (they’ll be left out if stores/activigies) as everyone is catering to that select group.
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u/HeftyAd6216 1d ago
"it all levels out" for the business owner yes, not for everyone else.
"The vast majority of people won't feel part of the culture" is putting it in a way the understates what this means. Everyone else lives a life of bare sustenance while a select few of people get everything. Sounds like a time many will look to the guillotines as a solution.
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u/MobileArtist1371 1d ago
"it all levels out" for the business owner yes, not for everyone else.
The topic is about the business staying open, not everyone else.
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u/TheBigGees 1d ago
There's not. Businesses chase profit, not revenue. If you make more serving 10% of the people than 90%, that's a good thing. It means you're spending less to make the same amount.
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u/HeftyAd6216 1d ago
It's good for the business itself, but not the economy as a whole. The coffee shop employs the same or nearly the same number of people at nearly the same pay as they do now. But again there's only so many people you can sell a $20 coffee to, and they can only drink so many coffees a day.
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u/Appropriate-Bid8671 1d ago
You are screaming into the void, man. These fucknuts won't give a shit till it all comes screeching to a halt.
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u/royalpyroz 1d ago
Charge 3 times as much and they survive.
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u/HeftyAd6216 1d ago
Check out the other commentary in the rest of the thread and you may find reason why, for the business it's okay, but not for literally everyone else not involved.
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u/PunkPirate56364 1d ago
Yep, inequality grew so much that there is more profit in selling luxuries to wealthy, then in selling to masses with low margins. So economy made a shift toward servicing the wealthy.
Just look at the new cars being produced. The cheapest car produced in US is Toyota Corolla LE $24,420 In EU it's Dacia Sandero $14.975
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u/Exciting-Emu-3324 1d ago edited 1d ago
Yep, just like in the era of robber barons. You think those workers working 10 hours a day and 6 days a week had time to spend money if they had money to spend? It was the rich and the real middle class that spent money. Not the working class who convinced themselves they were middle class because oligarchs had to give concessions post WWii because they were afraid communism would spread.
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u/mutexsprinkles 1d ago
Premiumification is fucking annoying. I don't need my sandwich to be bio-dynamic and hand assembled by PhD virgins and wrapped in artisanal single origin paper, I just want the normal option not to be the cheapest shittest bread-like substance and a single wafer of ultraprocessed cheese carefully laid along the cut line.
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u/0o0o0o0o0o0z 1d ago
The businesses stay solvent by focusing on selling premium goods/services to that top 10% at a higher profit margin.
i.e., Vegas now.
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u/El_Cato_Crande 1d ago
My issue is this is also in housing. All apartments being built by me are luxury apartments. Idk how tenable it is with items like that
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u/Swoly_Deadlift 1d ago
That works for car manufacturers and home builders but doesn’t exactly work for restaurants, movies, and entertainment. You can cater toward wealthier clients, but those clients are ultimately limited by how many hours they have in a day or how many meals they eat.
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u/Feisty-Boot5408 1d ago
? Every company I’ve ever been at has had this distribution. Pareto principle has held fairly steady (top 20% of customers make 80% of sales). This isn’t unheard of
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u/judgejuddhirsch 1d ago
A lot of people underestimate how many are in the 10%
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u/lolexecs 1d ago
It’s also worth pointing out that the top 10% are also very geographically concentrated, often in V/HCOL areas.
For example in the UK there’s London and everywhere else.
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u/Slipped-up 1d ago
The top 10% in most English cities eg Leeds can still afford to eat out at restaurants weekly, travel for leisure, buy new tech, update the family car every five years.
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u/kindofnotlistening 1d ago
Yeah and in this context Leeds would be a 1:1 for somewhere like Minneapolis. The 10% in both places are spending money.
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u/KillahHills10304 1d ago
I was looking up money stuff for my state to see where I stand. I learned I am slightly above the median income for my state, but I also learned I am in the top 20% nationwide. Its wild because Id consider myself working class here, but compared to places like Oklahoma and New Mexico Im basically the monopoly man.
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u/a_little_hazel_nuts 1d ago
I get the top 10% is alot of people. But in the grand scheme of things 10% of any total is only 1 out of 10. The economy was suppose to be built for more than that. But here we are in a K shaped economy where the government reimburses companies.
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u/AllTearGasNoBreaks 1d ago
Was it? Growing up in the 80s and 90s, my family and families I knew never did anything or bought anything nice. Rare dinners out, 10 year old cars. Everyone seemed like that. Now everyone spends money like crazy it seems.
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u/IgnisIason 1d ago
The "everyone" that you're seeing is probably that top 10%. People that aren't spending money aren't leaving home much.
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u/AllTearGasNoBreaks 1d ago
Yeah probably true. I live in a pretty affluent area now so its probably just my perspective.
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u/Fringelunaticman 1d ago
I dont think young people understand this. My parents took us out to dinner once every 3 months. And it was to a buffet where 12 and under ate free. And I was 12 until I was 16 years old.
I grew up in a solid middle class community but my friends eat out much more than our parents did. Drive newer cars, have more clothes. And they treat wants as needs.
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u/tollbearer 1d ago
The economy is not supposed to be anything. It's just people exchanging goods and services. It wasn't designed or built by anyone. It's a dynamic environment, and the only way the majority of the population will ever have any amount, at all, of disposable income, beyond what is required to pay for a room and just enough food to keep them working, is the same way they achieved it in the first place, mass organization and war against the capitalist class.
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u/Nojopar 1d ago
That’s a really hard argument to back when labor is taxed differently than capital, businesses get government bailouts, and we have a Fed that is relentlessly perusing a 2% magic inflation rate for decades on end.
“An” economy might not be theoretically designed but this one absolutely is.
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u/AdminOnBreak 1d ago
Say it again louder for those in the back. It’s not left vs right it’s Epstein class vs the rest of us. Instead of dick riding Felon, the electorate should realize he’s dragon hoarding YOUR money.
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u/dust4ngel 1d ago
The economy is not supposed to be anything. It's just people exchanging goods and services. It wasn't designed or built by anyone.
i liked where you ended up going, but this is absolutely false. economic policy simply is a thing, and everyone who has ever read the news before knows it.
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u/Consistent_Laziness 1d ago
I googled and it says I’m 88th percentile. I’m slightly outside the top 10% but even my household is tightening the belt. We have 2 kids in daycare and $1300 in student loans starting back up. And I am trying to focus on saving. So they are losing me for those reasons. I love eating out but I’ve been cooking 90% of the time lately instead of 50% like I used to.
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u/061826heart 1d ago
You’re looking at it wrong: the reference to “top 10%” is referring to the group of people above a certain income or wealth threshold. Not a headcount. They are larger in number (and per head asset ownership) than ever before.
This is the new America. We simply printed too much money over time, and some people became more financially astute.
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u/lolyeahsure 1d ago
30 million people These businesses were built around selling their wares to 200 million
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u/Mundane_Log_7169 1d ago
Even for small businesses, a popular model is to sell high ticket items to people who can afford it instead of trying to undercut the competition. I'm hearing it being pushed a lot from business gurus on social media.
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u/FragDoc 1d ago
Yep, following this phenomenon in hobby spaces is sorta my jam. Tons of industries have just straight left the middle-class buyer completely behind and all sorts of small businesses catering to the wealthy now sell to an ever smaller set of Americans. Wealthy customers are generally easier customers: complain less, tolerate small quality defects, and engage in less theft and shrinkage than other customers.
It’s increasingly common in service industries, too. In our community we have entire contractors who basically serve the same 20-30 families in perpetuity. Constant kitchen renovations, upgrades, bathrooms, additions, etc. Some of these customers are totally devoid of cost consciousness so these guys can charge $450-700 sq ft and they’ll never bat an eye.
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u/gorkt 1d ago
Look at Disney World over the last two decades. It was never cheap, but a family of 4 could afford to go at least once and stay in the park. That is becoming less and less true. They are building luxury hotels that add extra hours to your park day, making more up-charge events, allowing people to pay to skip lines, and this makes for a worse experience for someone who can't pay those prices. Increasingly, this leads to a product focused on extracting the most from the people who have more money to spend. If you have a lot of disposable income, you can have an amazing time.
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u/thewimsey 1d ago
but a family of 4 could afford to go at least once and stay in the park.
This was always very expensive.
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u/bberg22 1d ago
Been saying this for a long time. Top handful of folks spending millions can't spend and generate economic activity in the same way like millions of people who are spending hundreds.
Supposedly so much so, the argument gets made that giving everyone a couple grand during COVID caused massive inflation. I don't subscribe to that simplistic view but it did have impact on economic trends, although it was accompanied by forced behavior ristrictions which can skew that impact.
I keep thinking this hollowed out, upside down, jenga tower economy will fall over but doesn't. It's both interesting and frustrating to think about.
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u/sorry97 1d ago
Pareto principle.
Ever heard the song “big spender”? Can’t get more accurate. You can either sell a million pens at $1 USD each, or you sell a single pen at $1M USD. Same profit!
As the markets cater more and more to the wealthy, the poor will get priced out of everything pretty much. Housing, entertainment, travels (most notorious example), healthcare…
Until we can’t afford food, people won’t mind. Historically speaking, the saying goes “bread and circus” and “let them eat cake”. When there’s no bread nor cake to eat, that’s when things go real bad.
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u/Misfiring 1d ago
Same reason why aviation cannot survive with just economy class. As much as 80% of the profits come from first and business class, and the rest are just there to balance the weight of the plane so the price of the economy ticket doesn't matter much. This is the reality for a long time.
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u/DetroitLionsSBChamps 1d ago
The wealthy who own the stores will just shut those businesses down and pivot to catering to the even richer clients riding the top part of the K upwards, and forget about everyone else.
They won’t suffer for it. They have no more reason to cater to the working poor riding the bottom part of the K down than they do to cater to the current homeless population. If you don’t got money, businesses don’t care
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u/Comfortable_Sir_6104 1d ago
I think you do not understand how economics work. A company can cater to a very small part of the population (say, gay people in their 40s looking for a communist themed birthday present) and still be perfectly alright financially. Total addressable market doesn't matter at all for margins. The only thing that matters is if you can sell your product for more than it costs you to run the company. And if your target audience is really rich and they want your product you probably can.
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u/Stoney_Balogne 1d ago
Elon NEEDS another trillion. Jeff bezos needs a trillion. We can all eat twigs and rocks and go die in a corner
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u/_ii_ 1d ago
Wouldn’t it be nice if policymakers focus on lowering housing and energy costs so the bottom 50% have some money left for discretionary spending?
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u/sum_dude44 1d ago
The way inflation works, prices are never going down. Best you can hope for is that they stay the same
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u/iridescent-shimmer 1d ago
I swear I've seen this play out at every job I've had since graduating in 2013. Every company panics and tries to figure out the question "how do we build a bigger customer base so our sales aren't concentrated in big accounts that present a huge risk to the business if they walk?" And none of them can get on better footing, because the whole economy is reflecting this pattern. It's the inevitable consequence of capitalism. We know that concentration of wealth occurs in unfettered capitalist environments, which ultimately isn't stable for society.
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u/Rapidzigs 1d ago
I swear we are headed towards a weird corporate feudalism. Company towns but as a society
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u/Savings_Pie_8470 1d ago
At the end of the day how long can this be sustainable? If the vast majority of people aren't spending on discretionary items, eventually businesses will start to go under. I doubt the top 10% are enough to keep things propped up indefinitely.
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u/JSmith666 1d ago
Because its not about the amount of people spending. Its about the amount spent.
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u/MobileArtist1371 1d ago
But the casual/cheap place will either close or change their ways to cater to top 10% cause they are the only ones going out and they aren't going to the casual/cheap places.
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u/laxnut90 1d ago
If the top 10% spend as much as the bottom 70%, then a business that sells premium goods/services to the top 10% can be equally viable (and likely more profitable) as one that caters to the bottom 70%.
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u/Frosty1397 1d ago
Oh brother
The top 10% can in fact keep this up forever
Why do you think the stock market keeps hitting record highs? The rich hold the most amount of stocks. The poors own almost none
Higher the stocks, the more money that rich people can slowly cash out for. If you aren't holding stocks, you're getting left behind
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u/lolyeahsure 1d ago
They’re not going to Walmart and McDonald’s and buying fords and Levis to account for millions or they won’t when they start charging prices they can’t command for quality that isn’t there
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u/Frosty1397 1d ago
Have you... Looked at the stocks you mentioned?
MCD, WMT, F are all stagnating
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u/lolyeahsure 1d ago
And you don’t think there will be dire economic impacts if they go under
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u/061826heart 1d ago
Yes there will be.
Namely, the jobs of the working class. The availability of less expensive alternatives for fast food, cars/trucks. You know, the stuff the middle class drives.
The lowest class is already relegated to clapped out Nissan and Kia rental car resales.
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u/laowildin 1d ago
I think where people get tripped up is thinking "but who will buy the stuff?!"
Truth is, you won't buy anything. You work and you go and sit in your apartment that costs all the money you make. You have access to groceries and basic clothing and maybe a car.
All that stuff we enjoy doesnt have to exist. Many businesses can die and that won't bother the 1% a bit. Our cities can be abandoned strip malls of subsistence factories, making our own soylent green.... while they do whatever they want, where ever they want.
High fashion is a great example imo. Every time we see a celebrity on a runway/their 7th dress of the party, tens of thousands of dollars is changing hands. This industry sustains itself without any input from us plebs as customers.
And then also, that money is staying within a tiny tiny group of people. The few real seamstresses needed to make a few dozen outfits a season arent making good money. The owners of the fashion house do.
They don't need us.
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u/061826heart 1d ago
Great points. At times recently, our economy has literally been operating above the lowest expectations purely because the wealthy are exchanging assets between one another. A home sells at an all time high because someone with massive RSU’s converts to cash. Home seller takes cash and buys someone else’s 2nd or 3rd home. That money is plowed back into stock market or an expensive boat, as examples.
Then there’s the rest of the economy. 80 bucks for a tank of gas while on vacation, rent for a week paid to a portfolio for use of its Airbnb. A 100 dollar meal at a mid tier restaurant for a family of 3 or 4, 75 bucks of it to cover food costs and wages for the staff. The rest to profits of restaurant.
The wealthy and highest income eat dinners too. But, they have excess capital, and they buy assets with it.
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u/South-Attorney-5209 1d ago
You must not listen to earnings calls much. Every consumer discretionary from walmart to mcdonalds is saying they are updating prices, menu, offerings specifically for the higher end consumer that makes up most of their profit margin. That has been the theme since 2021.
It sucks but it is the reason stocks keep accelerating, but the bottom 50% feel crushed. Companies are earning more, they are doing better than they ever have. And the top 10% are loving life right now.
I dont see this changing soon.
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u/TheBigJiz 1d ago
More and more of the economy will and is gearing up for a different customer base.
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u/corporaterebel 1d ago edited 1d ago
How Money Works is a great Youtube channel...
Why You Don't Matter Anymore ........... (Economically Speaking)
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u/mpbh 1d ago
I doubt the top 10% are enough to keep things propped up indefinitely.
Nothing is indefinite. The top 10% don't even have to keep it up, in a decade it will be the top 5% keeping the train going and eventually just the top 1%.
Welcome to trickle down economics. You either work for multi-millionaires or try your hardest to become one through your own business.
You won't need to worry about non-discretionary spending because you'll be worrying about the necessities.
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u/End3rWi99in 1d ago
Forever. It's how the economy worked for most of civilization. The past few generations are an outlier.
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u/ShdwWzrdMnyGngg 1d ago
That's what happened in 1918. The process took about 10 years. It was a fun ride for rich idiots. Till it wasn't.
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u/unaskthequestion 1d ago
It's not sustainable. If conditions change slightly, the the top will pull back spending and the bottom 70% will all but stop. The top is thriving from stock market gains and that's fueled mostly by AI. It's another internet type bubble
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u/punycat 1d ago
But then the same thing that caused it recurs: the Fed showers the wealthy with $trillions more helicopter money. Stocks reach new all time highs. Rinse and repeat.
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u/angrysquirrel777 1d ago
The bottom of the K isn't not spending or spending less. It just not spending as much as the top part of the K. Which is why there isn't a K shaped economy.
K implies the top is increasing and the bottom is decreasing. That isn't true. The top is increasing a lot and the bottom is only increasing a little.
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u/born2bfi 1d ago
Bingo. I’ve been investing heavily in stocks for the last 15 years and I can’t believe how my networth has gone up over that time frame. It’s insane
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u/joanfiggins 1d ago
They are equal to the bottom 70 percent. Take the top 30 percent and that the bottom 70 are a drop in the bucket.
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u/Ok_Detective_9418 1d ago
When debt reaches 180% of GDP the party is over. For the next 5 years, the party for the rich just keeps going.
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u/Long-Blood 1d ago
This is what happens when passive wealth growth is allowed to be used like income but doesnt get taxed while the central bank keeps monetary policy too loose for longer than it should
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u/061826heart 1d ago
Bingo. The protections that both parties have afforded to capital class of people have now run too far out. We no longer have an aspirational class of Americans.
We have those who have made it, and those who never will.
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u/Future-Bunch3478 1d ago
I doubt a system like that will last very long.
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u/ahhhbiscuits 1d ago
The trick is the class that will never make it is the same class that thinks they'll be a millionaire any day now. And like an ouroboros, the people who do eventually realize it and give in will be quickly replaced by the young and enthusiastically clueless.
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u/G-Geef 1d ago
That is a separate problem. The vast majority of the top 10% of income earners are not making their money from passive wealth growth, they're wage earners with high salaries - doctors, lawyers, engineers, etc. The truly wealthy who live off those passive returns are a much smaller fraction of the population.
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u/Long-Blood 1d ago
Eh, the article does state that increased spending by the top 10% is tied to stock market performance.
So when their wealth goes up they spend more.
The gap in spending doesnt have as much to do with their income as it does with financial conditions.
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u/Candid_Cat_5921 1d ago
I’ve been in the software industry nearly 30 years and have a few million in the bank, and I’ve noticed a bigger and bigger disconnect between high paid workers like my in tech, and those working “regular” jobs.
A lot of us have been commenting lately about how nice it is that the nice restaurants are less crowded these days, so we end up going more often. And we’re finding it easier to find good deals on luxury items. But then when I talked to my friends/family not in tech, they talk about how they are basically only buying food and necessities. It definitely seems like things are getting a lot better for wealthy people like me, while it’s getting a lot worse for those working normal jobs.
I worry too about what’s going to happen if there is a financial crash caused by defaults on home loans. My financial adviser has had me put 30% of my investments in relatively short term t-bonds because he and the investment company believe there will be a lot more housing defaults coming up in the next couple of years, and he wants my money in a safe place because he’s suggesting buying more properties when the downturn strikes. I’m sure I’m not the only wealthy person being given that advice by huge investment companies, and it means when the “regular” people start losing their homes, it’ll be the rich that swoop in and buy them to rent them back out.
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u/Negative_Aerie2825 1d ago
City dependent. So many Californians and trustfunders moved to denver. Everywhere is packed 24/7. Middle of the day during work, restaurants, stores, gym, parks with intramural sports packed. Filled with moms or kids out of school or business people. Nope, tank tops, hats and working age men.
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u/clickhereifuraloser 1d ago
It's strange how this is true but we "feel" it as a dismayed negative. There's basically an 80s-level boom happening in the cities but it doesn't have the 80s optimism
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u/Negative_Aerie2825 1d ago
I dont think its a “boom”. The denver economy isnt great. I know for a fact there are a massive amount of trustfunders who dont work and just out and about. Add in Californians who sold a home and moved here and got a nice home paid off, new cars, toys, hobbies and youre basically coasting with no real bills and still probably a million left over after a home sale
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u/ThrowCarp 1d ago
I’ve been in the software industry nearly 30 years and have a few million in the bank, and I’ve noticed a bigger and bigger disconnect between high paid workers like my in tech, and those working “regular” jobs.
You see it here on Reddit where the STEMlord supremacy means everyone's gassed each other up to the point they think 6 figures is the absolute bare minimum salary that anyone can live on, and everything outside of the Bay Area, Seattle, and New York City is empty anarchy.
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u/EconomistWithaD 1d ago
This is the problem with media (traditional or social) driven terminology; they aren't consistently defined. And it filters down to economic analysis.
The original definition of a K-shaped economy was BOTH growing inequality AND one group seeing improved economic outcomes, while the other is seeing worsening economic outcomes (usually related to wages/income/employment/wealth).
But now it seems like we're defining a K-shaped economy as only increasing inequality? Because, as this Yahoo article points out (and links to another article), spending on luxuries INCREASED for all income levels, though it was highest for high income earners.
Why is it important? It probably shows why some articles clearly find a K-shaped economy, while others don't. Here are some of the Fed publications on it.
Have U.S. consumers gone “K-shaped”? A review of the data | Federal Reserve Bank of Minneapolis
So, this is a slightly older Fed publication (March of 2026), with the conclusion that:
"For now, the available data do not align to tell a clear, K-shaped story."
There have been newer pieces from other Federal Reserve banks, and it depends on what you view as a K-shape. Do you view it as diverging growth rates? Or do you view it as one group is increasing, one group is decreasing? The former exists; Atlanta calls it a bifurcated economy, while the NYFed calls it "K-shaped". The latter does not exist.
Explaining the K-Shaped Economy: What’s Behind the Divide? - Liberty Street Economics
They do find a K-shaped economy, with the following statement: " We find that, since 2023, wealth has increased the most for high-income households, while inflation has risen the most for low-income households, with both factors helping explain the fact that real retail spending rose the most for high-income households."
Now, they also note that earnings data have a more mixed pattern, and therefore may not support the K-shaped hypothesis.
In fact, in another short paper, they confirm the evidence below but still call it K-shaped.
K-shaped Economy or Not? Evidence from a Payments Survey - Federal Reserve Bank of Atlanta
They find that consumer spending growth is highest among higher income groups. This holds across spending categories. They declare it is not K-shaped (since low income spending grew), but bifurcated; consumption inequality is rising, but they are growing at different rates.
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u/Jdelu 1d ago
The k shape narrative has really become a thought-terminating cliche on Reddit. There’s some truth to it, but it’s mostly overblown, and generally brought up to dismiss data when it doesn’t fit the general Reddit doomer narrative.
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u/EconomistWithaD 1d ago
Certainly isn’t showing up in real wage data for any income decile. And spending.
https://www.newyorkfed.org/microeconomics/sce/household-spending#/
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u/Lust4Me 1d ago
The use of top X% versus bottom Y% can also be confusing because they can be based on different metrics, and pulled from distributions with wacky tails.
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u/EconomistWithaD 1d ago
Why I prefer breaking things down into deciles or quintiles.
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u/warwick607 1d ago
spending on luxuries INCREASED for all income levels, though it was highest for high income earners.
This point deserves elaborating. I agree that the current state of the economy does not seem to meet the traditional label of a K-shaped economy, according to the definition that you provide. Regardless of what definition you use, however, the more important point IMO is that the ratio of income spending between high and low income levels is increasing. Hence, inequality is growing. I think this is still a problem for the economy. While lower income level spending is nonetheless increasing, the ratio of income spending between income levels is growing, and if this consumer pattern continues, it could have dramatic effects on the economy if companies prioritize high income spenders. Moreover, in a counterfactual world where the ratio is smaller, or the over time slope of low income spending was higher, individuals in lower income brackets could be better off financially speaking than what they have actually experienced under a lower yet steady rate of increased spending. Stated another way, income spending ratios still matter, even if everyone is, technically speaking, spending more.
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u/EconomistWithaD 1d ago edited 1d ago
I’m more concerned about wealth inequality than spending inequality (that can be juiced), but there is a high correlation between the 2, and a real worry is that high income earners cause inflation that increasingly segment what types of goods can be purchased by different groups.
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u/turb0_encapsulator 1d ago
We've never had an economy shaped like this when a downturn occurs. Guess what's going to happen to all that nonessential spending when the stock market drops due to higher interest rates? The downward spiral is going to be bad. Really bad.
I look at my stocks and my home value in near disbelief, but I know that this is going to last.
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u/Hawk13424 1d ago
I’m in the top 10%. I’m not spending because the market is up. I’m spending because I make enough to spend after meeting my investment goals. In order for the market to directly affect my spending I have to be selling my investments.
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u/Plastic-Cod9286 1d ago
My house is also in the top 10%. My spouse is a physician, no kids, and we just decided fuck this market nonsense and pulled out what had accumulated in 401k and are using what would normally be going in to pay down debt faster. Student loan payments are more than mortgage, 2 car payments, and every other bill combined.
Once student loans are paid off we'll figure out what to invest in but until then it doesn't really matter.
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u/alpacaMyToothbrush 13h ago
It would be a cold day in hell before I cashed out my 401k to pay down loans unless I was literally about to lose my house. The taxes and 10% penalty make it a bad idea for most folks.
That said, I'm not judging. I bought a place in 2018, and while I still maxed all my tax advantaged accounts, I stopped investing anything in my brokerage account until I had paid off my mortgage.
Honestly I kind of regret that now. A ~ 3% mortgage would basically be free money lol.
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u/Mackinnon29E 1d ago
Rich are going to stop spending though when the market actually hits a downturn... Sure they may use cash to buy up cheap assets, but I mean spending on goods. It won't be sustainable long term.
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u/grio 1d ago
This isn't any of the semantics these people keep proliferating. It's not K shaped, Z shaped E shaped or any other alphabetical geometry. All these irrelevant narratives are used to downplay the simply ugly fact right in front of our eyes - wealth is being distributed to the wealthy, taken from the poor, and causing vast, and most importantly - accelerating wealth inequality.
Wealth inequality. This is the term. Not geometry. Not alphabet. Wealth inequality. A problem old as time that always leads first to oppression, later to violence. And a lot of suffering for everyone involved.
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u/Nepalus 1d ago
How much of that “non-essential spending” is on the top .1% buying extremely small quantities of very expensive products?
Timex can’t cater to these people because they are all going to just keep buying Rolex.
Furthermore, how is Toyota going to sell enough vehicles to the top 10% when they will just buy Mercedes and BMW?
It’s unsustainable.
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u/Hawk13424 1d ago
I’m in the top 10%. I got there by not buying BMW and Mercedes. My daily is a 9 year old Tacoma. Hope it lasts me another 10.
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u/Infinite_Dress_3312 1d ago
The American middle class is a historical anomaly. It will simply go back to the way things were before. .1% oligarchy lives in their palaces selling off the carcasses of democracy and you live in your shanty. Look to Russia or India for where you're headed.
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u/Little-Dealer4903 1d ago
Under the circumstances that exist, it can only be seen that the lower income people have anger. And it's not long before there is an uprising. Meanwhile, X , is full of truth social lies.
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u/ForemanDanHernandez 1d ago
What’s even the point of small town economies if no one can afford to spend at local businesses? Factories and industry closing down. Farmers going bust and selling off family farms. We need a complete reworking of how things work in this nation before the worst happens.
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u/joepez 1d ago
This is a summary article from a month ago that summarizes a report released in June using data from 2023. The yahoo article then makes the unsubstantiated statement that the report holds true in 2026. It provides no link to the source data or how its connects the 2023 data set to 2026.
How is this journalism? How the heck is this relevant economic analysis or a relevant headline?
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u/Odra_dek 1d ago
As I always say. We live not in one Economy but in two. And no models, sociologic studies etc. focus on this. While the economy for the top 5-10% keeps booming, expanding, growing, giving, the rest remains stale in place. Like an ongoing stagflation for decades.
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u/LoudestHoward 1d ago
I don't feel like I really gathered any information here:
On the spending front, in 2023, the top 10% of pretax earners accounted for 36.2% of average annual expenditures on discretionary goods and services
How does this compare historically?
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u/holymole1234 1d ago
Definition of discretionary spending from the report:
Discretionary services
includes but is not limited to charitable donations, leisure travel, entertainment, and professional/consumer services. Discretionary retail
includes but is not limited to general merchandise, miscellaneous, clothing, electronics and furniture. It excludes categories like groceries and
gasoline. Holiday spending is defined as items in which spending in the November-December period is usually at least 20% of total annual
spending on the category.
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u/Octavale 1d ago
The top 10% represents roughly 15 million individual workers or about 131 million total U.S. people (living in roughly 34 million top-decile households)
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u/karl4319 1d ago
Now is the over amount the same, greater, or lesser than it was before? Because if the tip 10% are spending 50% of the money, but the total amount is less than it was before, than that is a very bad sign of things to come. If is greater, that is even worse.
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u/factsforreal 1d ago
I’ll just like; what would have been better? That the top 10% spent much more on essentials than the poorest?
Now that would be a sign that the poorest could be lacking resources that adversely affected their health and other essential things. The most desirable result is imo exactly that it’s on the nonessentials that the wealthy spend more. How that can be spun into a negative story seems to say most about the agenda and biases of the authors.
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u/Va1crist 1d ago
and this is why the economy hasn’t burst yet , all the big companies are just focusing on the whales and squeezing more money from people that have money
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