No trace of young people and the working class: high incomes and those over 60 monopolize savings in the pandemic

Updated Saturday, January 15, 2022 –

The Bank of Spain and CaixaBank Research certify that those under 29 years of age and those with the lowest incomes could not accumulate funds even in a context of restrictions on consumption

A group of retirees rests on the Benidorm promenade.CONCHA FERNNDEZ

The Government had great hopes that the savings stored by families during the hardest moments of the pandemic would collaborate, in a very active way, in the rebound that the economy must experience after the historic collapse. But reality has shown that this positive impact has been significantly lower than expected. First, because households do not yet have the necessary security to disburse those funds; and second, because these savings are concentrated in a very specific level of society that has a lower propensity to consume: those over 60 years of age and those with high incomes. And what the latter supposes, in addition to this lower impulse to consumption, is that young people and the lowest incomes were not in a position to save even in a context of restrictions and spending limitations. A clear example of the limited economic capacity of these groups.

The Bank of Spain Y CaixaBank Research This is how they confirm it, offering concrete figures and warnings. In the case of the body headed by Pablo Hernndez de Cos, both the governor himself and the Director General of Economy and Statistics and next head of the European Central Bank (ECB), Scar Arce, have pointed out that this situation will have a negative impact, or at least least not so positive, on consumption.

The use that households are going to make of the savings accumulated during the pandemic, which exceeds 6% of GDP, is uncertain, which will condition the evolution of private consumption in the coming years. Households are expected to allocate only part of this savings to consumption, given that has been largely concentrated in relatively high-income families [con menor propensin marginal a consumir], pointed out this week Hernndez de Cos. And he added: A majority of unrealized spending is not easily deferred [en servicios como la restauracin y el ocio]. However, it cannot be ruled out that this proportion is higher than estimated.

Sources from the Bank of Spain specify that, according to the Family Budget Survey, a high proportion of households with lower incomes did not increase their savings at all. The calculations made with this same source of information show that the increase in savings observed in 2020 occurred largely in the households that are in the upper half of incomes.

CaixaBank Research, for its part, recently published a document that was totally in line with the Bank of Spain’s conclusions and, in fact, went deeper into some of the data. According to their estimates, in 2020 alone the savings accumulated by the pandemic reached 46.6 billion. This increase, he adds, was especially pronounced among people with higher incomes: High and medium-high incomes accounted for practically two thirds of the pool of additional savings.

Savings dammed up in the pandemic

Specifically, high incomes add up to almost 30,000 million of those 46,600 million euros. However, low incomes accumulate less than 4% of total savings. And if low-middle incomes are also taken into account, the figure barely rises to 13%. What does this mean? The entity’s own document points this out: The restrictions were general for the entire population and entailed an involuntary reduction in consumption, especially with regard to services and durable goods, which made people with higher incomes save a larger fraction of their income.

By age, the work of CaixaBank Research shows that people over 60 years of age, a group in which the weight of retirees and pensioners is notable, accounted for slightly more than half of the savings bag. In fact it was almost 60%, with just over 27,000 million. Those between 30 and 59 years old accounted for around a third of the total figure, and young people were barely able to save 5%. The conclusion, also in this case, is offered by the document from the studies service of the entity with the largest presence in Spain: Older people were subject to the same restrictions as the rest of the demographic groups, but the impact on their purchasing power was less .

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