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As the U.S. economy has struggled to bounce back from the financial crisis, economists have pointed the finger at consumer demand as one of the key drivers that has failed to pull its weight in the recovery. The reason for the lacklustre performance of America's consumers, they contend, is a growing concentration of wealth among the rich that has gutted the ability of shoppers to play the role they once did in powering the U.S. economy.

There is no denying income inequality is real. Economists knew that long before Thomas Piketty appeared on the scene. There was a narrow gap between mean and median inflation-adjusted incomes in the United States at the end of the 1960s. The median income hasn't changed much since, while the mean income has climbed to levels in excess of $70,000 (U.S.) from about $50,000 in 1987, according to Ethan Harris and Lisa Berlin, economists at Bank of America Merrill Lynch. Since the median hasn't moved in five decades, the richer half of America's population is getting richer while the poorer half has made no gains. That's just one indicator. There are many, many others.

We're told to care about this phenomenon because too much money is ending up in the hands of people who don't spend it. Poorer people spend less because they earn less than enough to pay for what they need or desire, while richer people end up hoarding the share of society's wealth they accrue because they have all they need or want. This is a pillar of the "secular stagnation" theory that contends the U.S. economy no longer is capable of growing at a fast pace: the spenders don't have enough to spend.

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Mr. Harris and Ms. Berlin don't buy it. The richest have been taking a greater and greater share of the wealth since the 1970s. The savings rate didn't track wealth concentration, peaking at 13.1 per cent in 1971 and plunging to 2.5 per cent in 2005. "If this income shift was an important driver of aggregate saving rates, then the savings rate should have rising steadily over this period," Mr. Harris and Ms. Berlin write in a research note published on Friday.

The Bank of America economists agree the richest have a greater propensity to save. But that assertion appears to strengthen their argument that the rise in income inequality isn't necessarily robbing the economy of demand. Mr. Harris's and Ms. Berlin's calculations show an increase in the savings rate of the richest Americans pulls the overall savings rate higher. But still, the overall savings rate plunged as income inequality surged. Mr. Harris and Ms. Berlin speculate that the wealthiest were tempted by strong asset prices during the boom. Cheap credit also played a role. Both factors "swamped" the impact of income distribution on the savings rates, they wrote.

But does a greater concentration of wealth that mean consumption will suffer? Not necessarily. Avery Shenfeld, chief economist at CIBC, wrote in a letter to clients last week about his impressions from an investing conference he attended in Montreal. "A few themes stood out," Mr. Shenfeld said. "One is that with the rich getting richer, a growing number of businesses are seeking growth from those with money to spend and money to invest."

That's why Canadian and U.S. banks are expanding their wealth management operations. It's also why, Mr. Shenfeld said, movie theatres are offering luxury options at higher prices and wireless companies are trying to tempt clients with more expensive data packages so they can watch sports on the move.

Mr. Harris and Ms. Berlin made the same point: consumption isn't shrinking; its composition is changing. And while that conclusion raises important socio-economic issues, the two economists predict consumption will be a "net neutral" over the next few years; higher equity and home prices should boost spending, yet those wealth effects will be weaker as Baby Boomers save for retirement.

But worries of a structural slump in consumer demand are unlikely to be realized. "Shifting income shares should remain a very small factor in the overall consumption outlook," they wrote.

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