WSJ Predicts 'Richcession' Where the Wealthy Suffer Greater Impact Than the Common People
Income Increase for Low-Income Groups Due to Disaster Relief Funds and Labor Shortage
High-Income Groups Inevitably Hit by Asset Plunge and Layoffs
[Asia Economy Reporter Yoon Seul-gi] This year, if a recession materializes in the United States, an unusual forecast suggests that the wealthy will suffer greater economic damage than the common people.
On the 2nd (local time), The Wall Street Journal (WSJ) reported that in this recession, although there are many low-wage jobs, the wealthy will suffer more damage due to a sharp drop in stock prices and a decrease in high-income jobs. It named this phenomenon 'richcession,' a portmanteau of the rich and recession.
Previously, the U.S. government implemented economic stimulus measures such as disaster relief payments for low-income groups whose incomes decreased due to the COVID-19 pandemic, resulting in an increase in total household income. The disaster relief payments actually improved the financial situation of the poor compared to before the COVID-19 pandemic. According to Federal Reserve (Fed) data, as of the third quarter of last year, the net assets of the bottom 20% income households in the U.S. surged 42% compared to the end of 2019 and increased by 17% compared to the end of 2021.
Additionally, with rising wage levels due to labor shortages, low-income groups were relatively less affected by inflation. The 12-month moving average wage growth rate for the bottom 25% of workers, compiled by the Federal Reserve Bank of Atlanta, reached 7.4% as of November last year.
On the other hand, the situation for high-income groups appears to be increasingly difficult. The net assets of the top 20% income households in the third quarter of last year increased by 22% compared to before the COVID-19 pandemic, but due to the stock market decline last year, they decreased by 7.1% compared to the end of 2021. The 12-month moving average wage growth rate for the top 25% of workers was only 4.8%.
The large-scale layoffs by major big tech companies such as Twitter, Meta Platforms (formerly Facebook), and Amazon also heighten concerns about the richcession. The average salary of Twitter employees who were laid off is $232,626 (approximately 295 million KRW). The median salary of Meta Platforms workers was $295,785 (approximately 376 million KRW) as of 2021. Amazon also conducted large-scale layoffs mainly targeting office workers who receive relatively high pay.
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WSJ forecasted that although high-income workers may find new jobs relatively easily, they could be more affected by the recession until they secure new employment.
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