Move over baseball. Keeping up with the Joneses is apparently the real national pastime.
When the rich boost their spending by 10 percent, non-rich households spend about 2.5 percent more, according to a new study from researchers at the University of Chicago’s Booth School of Business (h/t The Wall Street Journal and The Economist). The study goes on to say that up to 25 percent of the decline in the savings rate over the past 30 years could be attributed to this so called "trickle-down consumption."
But the desire to spend like the stars on My Super Sweet 16 can translate into financial problems. Americans that are exposed to rich household’s spending habits are more likely to say they’re experiencing "financial duress," the study found.
The findings come as the gap between the haves and have-nots grows increasingly apparent. The top one percent of Americans saw their incomes grow by 275 percent between 1979 and 2007, according to the Congressional Budget Office, while the bottom fifth of households only saw a 20 percent boost in income over the same period. Though the one percent saw their incomes squeezed during the recession, they were still worth close to 200 times as much as the median household in 2009, according to the Economic Policy Institute.
This constant game of economic catchup is made easier in areas where that gap between the rich and the poor is largest. There legislators tend to vote for policies that increase the availability of credit, making it easier for those with less cash to spend, according to the Booth study.
But even with access to easy money, ordinary Americans are spending differently than their super-wealthy counterparts. Malls geared towards luxury shoppers are still thriving, while more than 100 Kmart and Sears stores -- discount retailers that sometimes anchor malls for the masses -- are slated to close. And on Black Friday, the biggest shopping day of the year, much of the record turnout was due to shoppers rushing for basic necessities like towels and baby clothes that were on sale for super cheap.
In addition, the rich also became more comfortable going back to splurging pre-recession style earlier than their less-wealthy counterparts. In February of last year, wealthy households went back to buying luxury items like $500,000 watches and $80,000, USA Today reported at the time. During the same period, the "nearly-rich" or those making $100,000 to $250,000 per year cut back on spending due to rising unemployment and concerns about dipping into savings, according to Bloomberg.