From fast food to beverage giants, brands see rising income inequality among customers – NBC News

Economic Divergence in the U.S. and its Implications for Sustainable Development Goals

Introduction: A Bifurcated Economy

Recent corporate earnings reports indicate a significant economic divergence within the United States, creating a “two-tier” consumer market. This trend, characterized by a widening gap between high-income consumers and the rest of the population, presents substantial challenges to the achievement of several key Sustainable Development Goals (SDGs), particularly SDG 1 (No Poverty), SDG 8 (Decent Work and Economic Growth), and SDG 10 (Reduced Inequalities).

The Widening Gap: A Direct Challenge to SDG 10 (Reduced Inequalities)

Long-Term Trends in Wealth Concentration

The current economic bifurcation is an acceleration of a decades-long trend toward greater inequality, directly contravening the core objective of SDG 10 to reduce inequality within countries. Analysis of historical data reveals a persistent concentration of wealth:

• In 1989, the top 10% of U.S. wealth holders controlled approximately 61% of the nation’s total wealth.
• Today, that figure has risen to approximately 67%, according to Federal Reserve data.

This “K-shaped” economic structure, where the fortunes of the wealthy improve while others stagnate or decline, undermines the principle of shared prosperity essential for sustainable development.

Economic Pressures Exacerbating Inequality

Several contemporary economic factors are hardening this divide, impacting progress towards both SDG 8 and SDG 10.

1. Wage Growth vs. Inflation: Average worker pay is barely outpacing inflation, eroding the purchasing power of households that rely on wages rather than asset-based wealth. This stagnation hinders efforts to achieve decent work and economic security for all.
2. Employment Instability: An uncertain employment outlook, marked by mass layoffs and technological disruption, disproportionately affects lower-income individuals who lack financial cushions, increasing their vulnerability and working against the goals of SDG 1.
3. Disparities in Pay Growth: Data from the Atlanta Federal Reserve indicates that wage growth for salaried workers is outpacing that of hourly workers, further widening the income gap.

Corporate Observations on Divergent Consumer Behavior

Impact on Consumer-Facing Industries

The economic split is having a direct and measurable impact on corporate performance, forcing companies to adapt to two distinct consumer bases. This divergence in consumption patterns reflects the underlying economic inequalities that SDG 10 seeks to address.

• McDonald’s: The company revived its “Extra Value Meal” in response to a double-digit decline in traffic from lower-income consumers, a direct corporate acknowledgment of the financial pressures on this demographic.
• Coca-Cola: The company’s leadership noted persistent “divergency in spending between the income groups,” highlighting the ongoing financial strain on middle- and low-income households.
• Chipotle: The restaurant chain has observed a widening gap in visit frequency, with low- to middle-income guests, particularly young adults, reducing their visits due to headwinds like unemployment and student loan repayments.
• Mondelez: The snack company reported weakness as “value-seeking consumers” shifted to discounters, while higher-income consumers simultaneously moved towards premium products, illustrating the two-tiered market.

Robust Spending at the Higher End

In contrast, spending by affluent consumers remains strong, propping up certain sectors of the economy. However, this form of economic growth is not inclusive, a key tenet of SDG 8.

• The top 10% of earners now account for approximately half of all consumer spending.
• American Express reported an 8% acceleration in spending by its typically higher-income cardholders.
• Delta Air Lines expects sales of premium seats to exceed main cabin sales for the first time, indicating strong demand for luxury travel.
• Ford and GM have reported booming sales for their largest and most expensive SUVs, driven by wealthier households with access to capital.

Systemic Implications for Sustainable and Inclusive Growth

The Primacy of Wealth Over Income

The analysis suggests that wealth, in the form of assets like stocks and real estate, is a more significant determinant of financial stability than annual income. This distinction is crucial for understanding the deep-rooted nature of economic inequality and its resistance to simple income-based solutions.

• While some data indicates an increase in stock market participation among lower-income households, this is overshadowed by the vast disparity in overall asset ownership.
• Credit delinquencies have notably doubled since 2023 for individuals earning $150,000 or more, suggesting that even high incomes do not guarantee financial security in a labor market where the creation of high-paying jobs has slowed.

Conclusion: Realigning Economic Trajectories with SDG Principles

The growing economic bifurcation in the U.S. consumer market is a clear indicator of rising inequality, posing a significant threat to sustainable development. The trend runs counter to the foundational goals of reducing poverty (SDG 1), promoting inclusive and sustainable economic growth (SDG 8), and reducing inequality (SDG 10). The evidence from corporate reports and economic data underscores the urgent need for economic models and policies that foster shared prosperity and ensure that the benefits of growth are distributed equitably across all segments of society.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

The article primarily addresses issues related to economic inequality, poverty, and the nature of economic growth and employment. Based on this, the following Sustainable Development Goals (SDGs) are relevant:

• SDG 1: No Poverty: The article highlights the financial struggles of lower-income households, describing how they are “tighten[ing] their belts amid rising costs” and how their wages are “only barely outpac[ing] inflation.” This points to the challenges of preventing poverty and ensuring a basic standard of living for all.
• SDG 8: Decent Work and Economic Growth: The discussion on the “weakening job market,” “mass layoffs,” the disparity in wage growth between salaried and hourly workers, and the impact of AI on jobs directly relates to the goal of achieving full, productive, and decent work for all. The article questions the quality and inclusivity of current economic growth.
• SDG 10: Reduced Inequalities: This is the central theme of the article. It explicitly discusses the “widening K” or “two-tier economy,” where the wealthy prosper while others fall behind. The article provides data on the growing concentration of wealth and the divergent spending patterns between high- and low-income consumers, which are core issues under SDG 10.

2. What specific targets under those SDGs can be identified based on the article’s content?

Several specific targets can be linked to the information presented in the article:

1. Under SDG 1 (No Poverty):
   • Target 1.2: By 2030, reduce at least by half the proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions. The article’s focus on lower-income consumers struggling to afford basic goods and services (“Traffic for lower-income consumers is down double digits” at McDonald’s) and “running in place” financially speaks to the challenge of reducing relative poverty and economic vulnerability within the U.S.
2. Under SDG 8 (Decent Work and Economic Growth):
   • Target 8.5: By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value. The article’s mention that “Average worker pay only barely outpaces inflation” and that wage growth is higher for salaried workers than for hourly ones directly contradicts the principle of achieving decent work and fair pay. The uncertain employment outlook due to layoffs and AI also relates to this target.
3. Under SDG 10 (Reduced Inequalities):
   • Target 10.1: By 2030, progressively achieve and sustain income growth of the bottom 40 per cent of the population at a rate higher than the national average. The article suggests this target is not being met, stating that for lower-income individuals, “wages are only keeping up” at best, and they are falling “further down the economic ladder.”
   • Target 10.2: By 2030, empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status. The “two-tier economy” described in the article is a clear example of economic exclusion, where lower-income groups are unable to participate fully in the consumer market and are disproportionately affected by rising costs.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

Yes, the article mentions several explicit and implicit indicators that can be used to measure progress:

• Wealth Concentration: The article provides a direct indicator of wealth inequality by citing Federal Reserve data: “In 1989, the top 10% of U.S. wealth holders already controlled about 61% of the total wealth in the economy… Today, it’s about 67%.” This directly measures the share of wealth held by the top decile, a key indicator for SDG 10.
• Real Wage Growth: The statement that “Average worker pay only barely outpaces inflation” is an indicator of real wage growth. Comparing wage growth rates to the inflation rate is a standard method for measuring whether workers’ purchasing power is increasing, which is relevant to SDG 8.
• Disparity in Consumer Spending: The article provides numerous examples of divergent consumer behavior, such as lower-income consumers reducing visits to restaurants while spending by higher-income individuals on premium products (like American Express Platinum cards and luxury SUVs) accelerates. This “split-screen spending pattern” serves as a qualitative and quantitative indicator of economic inequality.
• Credit Delinquency Rates by Income: The article cites specific data from VantageScore on credit delinquencies: “Credit delinquencies among individuals making $150,000 or more have doubled since 2023,” while rising 58% for middle-income earners and 17% for the lowest-income group. These statistics are direct indicators of financial distress and economic vulnerability across different income strata, relevant to both SDG 1 and SDG 10.
• Share of High-Income Job Creation: The article notes that “the share of jobs being created that are considered high-income has fallen to its lowest level since at least 2015.” This is an indicator of the changing structure of the labor market and its ability to provide stable, high-paying employment, which is relevant to SDG 8.

SDGs, Targets, and Indicators Analysis

Source: nbcnews.com