We’ve all been hearing a lot about the possibility of a recession in the United States. But so far, buoyed by consistently robust job reports, the country has skirted a sustained economic downturn. Yet, there’s another r-word that may already be in effect: richcession.
The word describes a time of economic uncertainty in which the well-to-do feel the brunt of the impact, and we’re in this precise circumstance right now, according to the Wall Street Journal. As such, people of means are changing their consumption habits and spending priorities, in a way they don’t amid more conventional downturns.
Typically, lower-earners and the middle class are hit hardest during a recession. That’s because they experience greater job losses, and have less money in the bank to create a financial buffer when work dries up. But now, thanks to government relief early in the pandemic and increased wages in traditionally lower-paying jobs, many people aren’t experiencing the usual outcomes. In fact, some lower-wage workers have seen their earnings outstrip inflation, while many white-collar workers haven’t.
That trend might even continue, with many recent layoffs occurring in the tech sector, which tends to offer employees high salaries. For example, Google’s parent company, Alphabet, has a median annual salary of $296,000—and it announced in January that it would be laying off 12,000 employees. Meanwhile, lower-paid workers are often in industries with high demand. The leisure and hospitality sector, for example, has about one million more open jobs than before the pandemic. And these jobs are now offering higher wages, even if those salaries might not be on a par with those in industries like tech.
In response to these trends, the highest-earners are changing the way they live their lives. In terms of real estate, home sales were down 25 percent last year for the top third of the market, while the bottom third saw a decline of only 11 percent. Entry-level luxury-goods companies are seeing their sales fall, and up-scale supermarkets like Whole Foods are seeing a similar decline in traffic. An October survey even found that 35 percent of American adults making $150,000 or more said they were significantly impacted by inflation.
Of course, most wealthy will come through the economic downturn with the bulk of their resrouces intact, and their quality of life will likely not be nearly as impacted as a lower-wage earner’s. Still, it’s a flip of the script that few expected.