Rich people spend differently than you and me.

In a recent article I had some fun with Donald Trump making a statement showing that it has not operated commercial flights for a long time:

we say that the terrible airports in the United States make us look like “a third world nation”.

Coincidentally, a few days ago I flew into the new Terminal A at Newark Liberty International Airport, which made me realize a point that is obvious to anyone who has flown commercially over the years:

American airports, in fact, have become much more elegant.

I definitely prefer flying to Newark, New Jersey, rather than the many European airports where you still have to take a bus from the plane to the terminal.

But this got me thinking.

Why do American airports have so many more amenities than before?

(The flying experience can still be miserable due to security lines, but that’s another issue.)

The obvious answer is that they cater to their clientele, but that has certainly always been true.

Well, one of the main reasons is probably that, although flying is not an experience reserved for the elite as it was in the jet set era, people who fly frequently and spend a lot of time in airports are much wealthier than average.

And for the past 40 years, high-income Americans (we’re talking about the top 10% or 20%, not the super elite who don’t fly commercial) have experienced income increases much older than those of the middle class.

So my guess is that airports cater to this wealthier clientele.

That is, the same clientele that is driving its proliferation gourmet supermarkets and the gentrification of some urban neighborhoods, etc., is causing airports to have better food and shopping than before.

I’m not making a value judgment here; Hey, I take that class too, so I benefit from the trend.

What I mean is that airports, like many other institutions, serve a particular income class.

And it follows that the rich buy different things than the less fortunate, which in turn means they worry about different prices.

There have been countless social media posts complaining about food prices at airports or room service at luxury hotels.

But these are not the prices that matter to most Americans.

And because people spend their money differently, the convenient abstraction we think of as “the consumer price level” gives way to the truth that different groups face at least slightly different rates of inflation:

Different earrings for different people.

Different rods

My colleague from The New York TimesPeter Coy, wrote about this the other day, but I thought I’d delve a little deeper into it and ask if the multiplicity of inflation rates it should influence our view of how Americans have behaved in recent years.

Because the truth is, while it’s fun to make fun of wealthy people who complain about the prices of fine dining, there are good reasons to believe that recent inflation has actually been worse for people at the lower end of the income scale. income.

Why?

Mainly due to rising food prices.

I recently debunked widespread claims that the country’s official food price data significantly understates food inflation.

There is every reason to believe that the Bureau of Labor Statistics is more or less right with the numbers.

But what these precise BLS data say is that the prices of food has increased more than general prices, reflecting a variety of factors, from climate change to the war in Ukraine.

And one of the most consolidated regularities in economics is the Engel’s lawthat low-income families spend a higher percentage of their income on food than higher-income families.

Does this mean that the economic events that have occurred in the United States in recent years have harmed the middle and working classes more than the rich ones?

Not necessarily, because something else is going on.

As David Autor, Arindrajit Dube, and Annie McGrew noted in a paper last year, there has been a “unexpected compression” of wage disparities during the Biden recovery, with wages growing much faster at the bottom end than at the top.

Dube’s analysis revealed a surprising equalization process:

the real wages of the top quintile fall while everyone else gains, and the bottom quintile earns more.

But real wages are calculated using the same consumer price index for everyone.

However, as I said, recent inflation has likely been higher for lower-income Americans who spend more on food.

Does taking this into account prejudice the conclusion?

Results

Well, the Bureau of Labor Statistics has an experimental measure of inflation that varies by income distribution.

This measure is not updated every month; It only lasts until June 2023.

But inflation has come down significantly, so it’s still a good indicator of inflation disparities.

Let’s look at the percentage of inflation faced by each of the five income quintiles from December 2019 to June 2023, as measured by the BLS:

— Bottom 20%: 19.5 n

— Next 20%: 19.3

— Middle 20%: 19.1

— Fourth 20%: 18.9

— Top 20%: 18.0

So yes, inflation has been higher for low-income Americans.

But the bottom-up differential, 1.5 percentage points, is much smaller than the differential suggested in Dube’s wage data.

In other words, accounting for differences in relevant inflation slightly attenuates the argument for an “unexpected compression,” but does not change the underlying outcome.

So does it matter that the rich spend differently than you and me, or, for that matter, that those of us in the top quintile spend differently than Americans in the middle quintile?

Yes, in some important ways.

But that doesn’t change the story of a remarkably balanced economic recovery.

c.2024 The New York Times Company