Money Matters: Consumption Volatility Across the Income Distribution
020322-WP-Money Matters-Fisher and Hardy
Jonathan Fisher, Washington Center for Equitable Growth
Bradley L. Hardy, Georgetown University
Using the Consumer Expenditure Survey, we document the level and volatility of quarterly consumption across the socioeconomic distribution. While the measurement of well-being is focused on income, the secular and policy discourse prioritizes income-adequacy to meet family needs. This concern over income-adequacy centers on the capacity of families to predictably consume minimally acceptable levels of basic needs, and the social and economic mobility consequences of low consumption. Our results show a clear socioeconomic and demographic gradient of lower consumption amid higher consumption volatility for disadvantaged groups. Food and clothing exhibit relatively high levels of consumption volatility among low-income households.