As inequality grows, the wealthy account for a greater share of income and spending. But a new paper suggests that there is an upside to inequality for companies and workers that can best cater to the newly rich.
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.
"The disproportionate growth of high-income consumers means that the U.S. economy caters increasingly to the preferences of elite spenders," Wilmers wrote.