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Exclusive: Paul Donovan D’UBS notes that many rich Americans Do not perceive themselves as rich, leading to the confusion between reality and the perception of wealth, a distortion fueled by social media. Claudia d’Arpizio de Bain & Co highlights an increase in “luxury shame”, consumers reducing visible status purchases and luxury brands needing to focus from elitism to culture and innovation as social pressures go up.
In times of economic volatility, wealth is often a subject that becomes politicized.
Under Trump 2.0, it means debates on who should be taxed and how much, which constitutes “rich”, And how this private capital must be mobilized to respond to public funding problems.
The “ one, Big and Beautiful Bill ” of the oval divided opinion, after the estimates of the Congressional Budget Office (CBO), policies would cost the poorest Americans about $ 1,600 per year while increasing the Richest household income on average $ 12,000 per year.
This is graceful of political settings such as an increase in exemption for exemptions for areas and gifts to $ 15 million, as well as the modification of the amount of the ceiling on deductions for national and local taxes (salt) from $ 10,000 to $ 40,000.
A problem with current debates on wealth taxes, explains that the UBS chief economist, Paul Donovan, is that often richer voters in America do not realize that they are rich.
Speaking on a round table last week, Donovan explained: “A fairly interesting problem that we are starting to see more and more present in discussions … On things like the taxes on wealth and taxes on inheritance is that there is more and more a gap between the perception of wealth and the reality of wealth.
“So, people will say:” Yes, we have to make a tax on wealth for millionaires, but not me, I do not count like a millionaire “when in fact, you have a two -bedroom apartment in Manhattan. You are by definition, a millionaire.”
Donovan continued that social media also distorts wealth. Even if wealth inequalities have not changed, he said, people feel worse due to the extravagance shared online.
“As a result, people may be more confused again between their perception of their wealth and the realities of their wealth,” added Donovan.
“Many people are rich, but they perceive themselves as being disadvantaged in a way because they do not live the best life of an influencer in social media.”
With wealth becoming an increasingly socially socially socially divisive subject– With even the easy distancing of the reality of their situation – consumers already slow down their purchases and their status symbol experiences.
Bath & Co’s Spring update on the luxury sectorPublished last week, shows that the company of personal products from the industry in particular has shrunk.
Claudia d’Arpizio, one of the authors of the reporttell Fortune The expression “luxury shame” was invented for the first time during the 2008 financial crisis when wealth was perceived as left given the millions of Americans who had lost their homes and their jobs.
D’Arpizio added that more in -depth luxury stores have more in -depth white bags to send consumers with their purchases because individuals did not want to be seen with creators’ transport bags.
“In the United States, it was self-induced; People were correcting their behavior because they were ashamed, “said Arpizio. The trend now, led by Chinese consumers, is governmental.
She explained: “This is a communist regime that has grown luxury consumption in the past 15 years when people have become richer each year. Now this growth slows down, there is unemployment on younger generations, so to prevent tension, they try to tell the rich people,” do not show that you are rich at the moment. “” “” “” “” “” “” “” “” “” “” “” “” “” “” “” “” “” “” “” “” “” “” “” “” “” “” “” “” “” “
This social tension spreads to the west, added Arpizio, which means that luxury brands should focus less on the perception of being elite and more on being a bastion of culture and innovation.
That being said, just because the rich do not want or realize that they are rich, that does not mean that the engines generating their assets move more slowly.
“There are two independent engines that we must consider, which has no impact on the engine of the growth of wealth,” said Donovan in response to a question of Fortune. “The first of them is the boom in economic nationalism.”
Just look at Trump’s initiative in America, but Donovan added that behavior is also widespread in countries like China.
He added “very often, there can be hostility to foreign brands, to foreign companies. This is certainly something that we have seen, for example, with European luxury brands in China. ”
Donovan added that a second factor shaping the approach to the consumption of the rich is that their objective is less on goods and more on pleasure.
“A question that often asks me is: what does an economist mean by having fun?” The answer is something you can publish on InstagramSaid Donovan. To be fair, these are also clothes because obviously, if you are Instagrammé your last meal, you must do it in a new outfit.
“These trends which are independent of all the creation of wealth … We must take into account because they can give the appearance of the shame of wealth when in fact, it simply changes consumption models for other reasons.”
This story was initially presented on Fortune.com
