The Rich Cut Their Spending. That Has Hurt All the Workers Who Count on It by Emily Badger and Alicia Parlapiano published by NYTimes (6/2020).
“The steepest declines in spending during the coronavirus recession have come from the highest-income places.
In the Manhattan restaurants around Lincoln Center, the tips often rose and fell with the changing playbill. A popular classic musical could mean more preshow diners, and more income. A more famous actress as Eliza Doolittle could do the same. The end of a big run, like “My Fair Lady,” meant the opposite: Tips would be down for a while.
“We were dependent on how well shows were doing at Lincoln Center, and we really did pay attention,” said Emma Craig, who was a server at the Atlantic Grill a block away before the coronavirus crisis. She has not returned to that job yet, or to another singing at a private supper club downtown. In both jobs, she said, “I am dependent on the trickle down.”
The recession has crushed this kind of work in particular: service jobs that depend directly on the spending — and the whims — of the well-off.
Economists at the Harvard-based research group Opportunity Insights estimate that the highest-earning quarter of Americans has been responsible for about half of the decline in consumption during this recession. And that has wreaked havoc on the lower-wage service workers on the other end of many of their transactions, the researchers say.
“One of the things this crisis has made salient is how interdependent our health was,” said Michael Stepner, an economist at the University of Toronto. “We’re seeing the mirror of that on the economic side.”
As income inequality has grown in America, so has inequality in consumption. That means that when the rich spend money, they drive more of the economy than they did 50 years ago. And more workers depend on them.
Put another way, this particular economic shock — one that has halted much in-person spending, even by rich people who never lost their jobs — has been devastating for an economy in which many low-wage workers count on high-income people spending money.
Mr. Stepner and the economists Raj Chetty, Nathaniel Hendren and John Friedman have collected data from credit card processors, payroll firms and other private companies tracking how and where people spend their money, and how businesses and their workers have been affected as a result. By tying debit and credit card spending back to the home ZIP codes of millions of anonymized cardholders, they estimate that households in the bottom quarter of ZIP codes by income cut their spending by about 30 percent from pre-coronavirus levels at the lowest point in late March. Now, with the help of government stimulus, low-income spending is down only about 5 percent…”
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