While the general observation has been made by financial 'talking heads', this is the first time that I have seen any actually numbers attached regarding who has 'discretionary' income left to spend on non-essential items like lap dances and paid webcam, versus who does not !!!

from Eric Sprott at

(snip)"The first panel of Figure 3 shows after tax income for the bottom 40% of households in 2005 and 2012, along with a breakdown of some of its components. All figures are in current dollars (i.e. not adjusted for inflation). Not too surprisingly, average after-tax annual household income increased by a meagre 8%, from $17,463 to $18,844. Wages and salaries, which represent about half of income, increased only 4%. Most of the increase has been in the form of government transfers; social security increased 14%, unemployment and veteran benefits 102% and other forms of public assistance 40%. In fact, of the $1,380 increase in average after-tax income, 93% comes from increases in government transfers.





(snip)"The second and third panels of Figure 3 show average annual expenses in dollars as well as in percent of after tax income. We also show a breakdown of spending for categories that we consider “non-discretionary”, in the sense that they are unavoidable expenses such as food, shelter, utilities, health care and transportation. Perhaps the most striking (but not that surprising) finding from that table is the fact that 40% of U.S. households spend about 40% more than they make (138% and 145% in 2005 and 2012, respectively)! In case you wonder how a household can spend more than it earns, there are many ways such as: borrowing, selling assets, assistance from family, etc. While incomes increased only 8%, total expenses increased 14%, driven by very large increases in shelter (22%) and health care (18%) spending.

Additionally, an ever increasing proportion of people’s after tax income goes towards what we call “non-discretionary spending”. As shown at the bottom of Figure 3, in 2005 those households used to spend 97% of their income for basic necessities, while in 2012 this has increased to 104%.

Five years into this so-called economic recovery, on average 40% of the poorest U.S. households still spend more than they earn (including government transfers) for basic necessities!

We believe that there are two main reasons for this. The first one has to do with income inequality; as we have shown, incomes have been almost constant since 2005, with most of the increase driven by unsustainable governmental assistance. Furthermore, prices for basic necessities, which constitute the entirety of these households’ budgets, have been increasing at a steady pace. Figure 4 shows the reported price over the past 7 years for energy, food commodities and rents against the “Official” Headline Consumer Price Index (CPI).

Over that period, overall price levels, as measured by the CPI, went up 22% (versus 8% for after tax incomes). However, for the same period, rent, energy and food prices increased 26%, 54% and 115%, respectively. No wonder those same households spend 33% of their income on shelter, 21% on food and 14% on utilities and fuels!(snip)





(snip)How can we have an economic recovery when there is barely any discretionary disposable income for 40% of the population? As we have shown above, those that have seen their incomes grow and not the ones most likely to spend, while the bottom 40% of households still rely heavily on government assistance, have had stagnant incomes and have been faced with increasing inflation for “non-discretionary” goods that constitute a very large share of their incomes.(snip)


The major take-aways from this analysis seem to be as follows ...

- there is no way that 40% of American guys can actually afford to spend a single dollar on non-essential items like lap dances and paid webcam. Doing so essentially requires them to make a decision NOT to pay for some 'essential' item like rent, food, utility bills, or gasoline.

- While not elaborated on by Mr. Sprott, his allusion is to the fact that only the top earning 20% of American guys now have the same or more money available for 'discretionary' spending than they did in 2005, after paying higher prices for 'essential' items.

- Mr. Sprott's charts also point out that the so-called 'middle class' guys i.e. those in the 41% to 79% earnings ballpark, have experienced 'stagnant' levels of 'discretionary' spending dollars at best, and may now be experiencing a decline in remainng 'discretionary' dollars as the costs of 'essential' items like rent, food, utilities, gasoline etc. are increasing notably.





The major conclusion is that dancers and camgirls need to find ways to appeal to those top 20% earners in the $150,000 per year ballpark, because only they are able to continue / increase spending on the 'services' that dancers and camgirls are offering.