Consumption inequality is rising

In the last thirty years, consumption inequality has risen as fast as income inequality.

It has been a common belief that, while income inequality has risen rapidly in the west generally, and the United States specifically, inequality of consumption has travelled a much milder trajectory. Many reasons have been given for this effect, which was seen in a number of studies and generally assumed to be true.

Some argued that the divergence between the two was due to the unsustainable bubble of consumer credit; while the rich were getting richer faster than the poor were getting less poor, both ended up with mobile phones and flatscreen TVs, but the latter bought them with borrowed money. This, of course, leads those like Edwina Currie to argue that poor people aren't really poor because they have nice things.

Another interesting point raised off the back of the figures was the claim that it was entirely understandable, since the marginal utility of money declines pretty quickly. Thus, the explanation goes, income growth at the top end doesn't increase consumption all that much, since there isn't much to spend that money on. If this is true, then consumption inequality would indeed rise slower than income inequality in countries where absolute poverty is rare.

Now, though, it seems that both these arguments may come from faulty premises. A new paper from the American National Bureau of Economic Research argues that actually, consumption inequality has been rising at much the same rate as income inequality.

The authors write (£):

There is now mounting evidence that the [consumer expenditure survey, the source of many of the claims of divergence] is plagued by serious non-classical measurement error, which hinders the extent to which definitive conclusions can be made about the extent to which consumption inequality has evolved over the last three decades. . . 

Consumption inequality within the U.S. between 1980 and 2010 has increased by nearly the same amount as income inequality

And conclude:

Across every other measure of consumption we analyzed, consumption inequality increased substantially.

Of course, the same questions apply to consumption inequality as do to income inequality: why does it actually matter? So long as everyone can consume the essentials, does the difference between them and the rich have any effect?

The answer is one that Adam Smith hit upon over two centuries ago (although you are unlikely to find the libertarian Adam Smith Institute quoting it): what the rich can afford has a material effect on what is essential.

In The Wealth of Nations, published 1776, Smith wrote:

A linen shirt, for example, is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably, though they had no linen. But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty, which, it is presumed, nobody can well fall into without extreme bad conduct.

Custom, in the same manner, has rendered leather shoes a necessary of life in England. The poorest creditable person, of either sex, would be ashamed to appear in public without them. In Scotland, custom has rendered them a necessary of life to the lowest order of men; but not to the same order of women, who may, without any discredit, walk about barefooted.

In France, they are necessaries neither to men nor to women; the lowest rank of both sexes appearing there publicly, without any discredit, sometimes in wooden shoes, and sometimes barefooted. Under necessaries, therefore, I comprehend, not only those things which nature, but those things which the established rules of decency have rendered necessary to the lowest rank of people.

Cartoonist Ruben Bolling sums the argument up in eight panels.

To Smith's list we can reasonably add mobile phones (required for much shift work), computers (essential for jobseeking) and, in much of the country, cars. Consumption inequality adds to this list from the top end even as the bottom end remains unable to afford it.

Hat tip to Matt Yglesias for the paper.

A Tajik migrant texts in Moscow. Mobiles are an essential tool worldwide (Getty)

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Jeremy Corbyn sat down on train he claimed was full, Virgin says

The train company has pushed back against a viral video starring the Labour leader, in which he sat on the floor.

Seats were available on the train where Jeremy Corbyn was filmed sitting on the floor, Virgin Trains has said.

On 16 August, a freelance film-maker who has been following the Labour leader released a video which showed Corbyn talking about the problems of overcrowded trains.

“This is a problem that many passengers face every day, commuters and long-distance travellers. Today this train is completely ram-packed,” he said. Is it fair that I should upgrade my ticket whilst others who might not be able to afford such a luxury should have to sit on the floor? It’s their money I would be spending after all.”

Commentators quickly pointed out that he would not have been able to claim for a first-class upgrade, as expenses rules only permit standard-class travel. Also, campaign expenses cannot be claimed back from the taxpayer. 

Today, Virgin Trains released footage of the Labour leader walking past empty unreserved seats to film his video, which took half an hour, before walking back to take another unreserved seat.

"CCTV footage taken from the train on August 11 shows Mr Corbyn and his team walked past empty, unreserved seats in coach H before walking through the rest of the train to the far end, where his team sat on the floor and started filming.

"The same footage then shows Mr Corbyn returning to coach H and taking a seat there, with the help of the onboard crew, around 45 minutes into the journey and over two hours before the train reached Newcastle.

"Mr Corbyn’s team carried out their filming around 30 minutes into the journey. There were also additional empty seats on the train (the 11am departure from King’s Cross) which appear from CCTV to have been reserved but not taken, so they were also available for other passengers to sit on."

A Virgin spokesperson commented: “We have to take issue with the idea that Mr Corbyn wasn’t able to be seated on the service, as this clearly wasn’t the case.

A spokesman for the Corbyn campaign told BuzzFeed News that the footage was a “lie”, and that Corbyn had given up his seat for a woman to take his place, and that “other people” had also sat in the aisles.

Owen Smith, Corbyn's leadership rival, tried a joke:

But a passenger on the train supported Corbyn's version of events.

Both Virgin Trains and the Corbyn campaign have been contacted for further comment.

UPDATE 17:07

A spokesperson for the Jeremy for Labour campaign commented:

“When Jeremy boarded the train he was unable to find unreserved seats, so he sat with other passengers in the corridor who were also unable to find a seat. 

"Later in the journey, seats became available after a family were upgraded to first class, and Jeremy and the team he was travelling with were offered the seats by a very helpful member of staff.

"Passengers across Britain will have been in similar situations on overcrowded, expensive trains. That is why our policy to bring the trains back into public ownership, as part of a plan to rebuild and transform Britain, is so popular with passengers and rail workers.”

A few testimonies from passengers who had their photos taken with Corbyn on the floor can be found here