Money Matters: Consumption Volatility Across the Income Distribution

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.