National Post

BLAME COSTCO FOR INEQUALITY.

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A new study of Americans’ spending patterns suggests bigbox stores like Costco and Sam’s Club may be at the heart of an apparent rise in consumptio­n inequality in the U. S. But let’s not blame these innovative retailers too much: Their effect is to alter our perception of inequality, not inequality itself.

What’s going on? Alternate spending facts? Russian hacking of the Bureau of Labor Statistics? James Comey screwing up yet again?

No, nothing sinister like that. The problem is that Americans are shopping less often — at least partly because of the advent of these mega-retailers — and this decline in the frequency of shopping may be skewing the spending data to make it look as if there’s more inequality even if there really isn’t.

Consumptio­n inequality is different from income inequality, which is what most of the inequality debate has centred on over the last two or three decades — though it has been less a debate than a universal lamentatio­n. Instead of seeing inequality as the outcome of economic processes that may at bottom be perfectly fair, we now all read any rise in the inequality indices as signifying social failure.

Consumptio­n inequality may actually be more important than income inequality. What people consume more or less defines their material well-being. Even with income inequality rising, so long as consumptio­n inequality is steady, maybe that’s OK.

Social groups will be getting what they need to live on in the same proportion­s they used to and if that distributi­on of consumptio­n was acceptable 30 or 40 years ago, why shouldn’t it be acceptable today? That argument isn’t a slam dunk, of course. Maybe we do also care about the distributi­on of incomes, on the grounds that we want people to finance their consumptio­n needs largely on their own and not have to depend on other people or the state. Still, the economic bottom line is consumptio­n, and if that’s not changing, well, that fact is worth adding to the debate.

In fact, another recent study, by Bruce Sacerdote at Dartmouth, argues that, despite universal pessimism about slow or no growth of wages in the U. S., consumptio­n has been more than holding its own. Poorer Americans have more cars, bigger houses and more bedrooms and bathrooms per household than ever.

Sacerdote argues that this rise in consumptio­n isn’t especially surprising. If you adjust the standard price indices to offset their upward bias, below- median real wages have been rising slowly but steadily, with a cumulative increase of fully 164 per cent since 1960. “What I do not address,” Sacerdote concludes, “is why Americans feel worse off if consumptio­n is actually rising.”

It’s possible, he continues, that reports of rising inequality make them feel disadvanta­ged “in a relative sense even if their material goods consumptio­n is rising.” Which is where the Costco- Sam’s Club study, by two economists at Berkeley ( Dmitri Koustas and Yuriy Gorodniche­nko) and one at the University of Texas at Austin ( Olivier Coibion), comes in.

In the 1980s, Americans reported shopping 9.5 days out of every 14. By 2015, that was down to below eight days and might even be as low as six, if you control for a 2004 change in how the data are collected. Families haven’t reported spending less over the year, however, so spending per shopping trip has risen. That’s consistent with what more and more of us have learned to do, namely, go to big- box stores and stock up.

But at least one official U. S. survey of people’s consumptio­n has them track what they spend over a two- week period. If people do go to Costco and stock up, the chance of a family not having done a shopping trip in two weeks rises — which will make it look as if some families aren’t consuming anything.

By the same token, families that do shop during the two weeks will have bigger expenditur­es. The result is an apparent rise in inequality: with both more zero- spenders and more big-spenders.

If instead you asked people to track their spending over four weeks or eight weeks or an entire year, no one will be missed and families’ total expenditur­es will show up as being more similar.

As the paper charmingly puts it, if people’s consumptio­n of toilet paper remains constant but they start buying it every month rather than every week, a two- week check of spending will make it look as if — yech! — more people aren’t using toilet paper.

After detailed calculatio­ns, the paper’s authors conclude that this sort of effect probably does explain the observed rise in consumptio­n inequality in at least one official U. S. measure. Inequality looks like it’s rising but it really isn’t. Because of Costco and Sam’s.

The message here is not to dismiss concerns about inequality but to suggest that anyone doing evidence- based policy has to be very careful: The evidence you gather may not truly reflect reality.

IF PEOPLE STOCK UP MONTHLY ON TOILET PAPER, A TWO-WEEK CHECK WILL LOOK LIKE — YECH! — PEOPLE AREN’T USING THE STUFF.

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