Increased consumption for most families despite growth in income inequality

Income inequality has been increasing but so has consumption according to a working paper by Bruce Sacerdote of Dartmouth College. 


Extract:
Despite  the  large  increase  in  U.S.  income  inequality,  consumption  for  families  at  the  25th  and  50th percentiles  of  income  has  grown  steadily  over  the  time  period  1960-2015.  The  number  of  cars  per household  with  below  median  income  has  doubled  since  1980  and  the  number  of  bedrooms  per  household has  grown  10  percent  despite  decreases  in  household  size.  The  finding  of zero growth in American real wages since the 1970s is driven in part by the choice of the CPI-U as the price deflator (Broda and Weinstein 2008). Small biases in any price deflator compound  over  long  periods  of  time.  Using a  different  deflator  such  as  the  Personal  Consumption Expenditures index (PCE) yields modest growth in real wages and in median household incomes throughout  the  time  period.  Accounting  for  the  Hamilton (1998)  and  Costa  (2001)  estimates  of  CPI  bias  yields  estimated  wage  growth  of  1  percent  per  year during  1975-2015.  Meaningful growth  in  consumption  for  below  median  income  families  has  occurred even  in  a  prolonged period of increasing income inequality, increasing consumption inequality and a decreasing share of national income accruing to labor.


Link: Fifty Years Of Growth In American Consumption, Income, And Wages - 61497-w23292.pdf