Consumer Spending
A country’s economy represents a key component of its development, mainly measured by natural resources, human resources, capital information, and natural resources, and technology. Indeed these factors highly contribute to a nation’s overall Gross Domestic Product (GDP), including stabilizing its output. Apparently, demand and efficiency are other factors that play an integral role in maintaining the stability of an economy. Under this category, consumers act as the main driving force of economic development. Looking at the U.S. economy, consumers contribute up to 70 percent of the entire economy, representing a fundamental value that highly determines the nations’ overall strength. Expenditure is an integral part of all consumers. The existence of free markets relies on consumer demand to ensure appropriate resource allocation and distribution is done to all its economic sectors. Consumer expenditure is what families or individuals spend or give away to acquire goods and services to fulfill their needs and desires. Consumers’ consumption of goods and services is what provides revenues for the business, thereby being able to continue with their operations. Companies’ profits from consumer’s expenditures enable them to hire new workers with the required skills as it will allow them to pay their wages. A large volume of consumer spending is often diverted to the real estate sector and healthcare. Also, insurance, banking, and investment sector attract consumer spending in specific proportions. A substantial volume of consumer spending is also channeled towards non-profit businesses and internet and cable services. Further to this, personal expenditure on various goods such as clothing, groceries, washing machines, furniture, and automobile. Like other nations, since the onset of the covid-19 pandemic, the U.S. economy has suffered economic shock that has caused detrimental consequences.
How are/will business change in the U.S.? Worldwide?
Covid-19 has altered virtually all facets of our everyday lives, and consumer expenditure is no exception. In the U.S., Consumer consumption has already and will continue reducing (Ghosh, 2020). A large percentage of the US GDP is accounted for by the service sector, non-inventory components that have to be sold once they have been produced. Such services cannot be kept for future use. As such, the hospitality industry, entertainment, travel, and other service sectors are expected to register reduced sales. Conventionally, businesses will continue recording low revenues due to small purchases, and this might lead to the closure of companies. When revenue streams are damaged, stores incur a lot of expenses than profits, hence preventing them from running their operations. This is due to failure to pay workers’ wages, and other business expenses such as taxes and rental fees will definitely lead to the closure of businesses.
Further to this, companies in the U.S. and the world at large will be persuaded to adopt flexibility in their activities. Businesses will implement remote working to enable employees to perform their duties while at home and reduce exposure to Covid-19 effects, which can be transmitted easily when people group together. Thus businesses will adopt safety measures to ensure they protect its workers while conducting its operations remotely. Also, companies will streamline their salary scales to enable them to offer wages that will not strain their finances and affect their functioning. Reduced consumer spending will make negatively affected businesses to lower their workers’ salaries to avoid running into bankruptcy. Companies will also decrease their production levels due to condensed demand for their goods and services and minimal access to and supply raw materials due to affected supply chain systems.
How will employment and wages change in the U.S.? Worldwide?
The global and national economies rely on company output and consumer consumption to provide necessary resources that will offer an ideal economic balance. The public employment sector is expected to continue experiencing negative impacts due to the Covid-19 contagion. With the unprecedented adverse effects of the pandemic, the global supply chain system will continue to be affected, hence reducing access to resources. This will, in turn, affect the manufacturing of goods and services, therefore, making companies to declare some employees redundant. Consequently, unemployment rates will continue rising with the U.S. and globally as businesses will not continue operations while incurring losses (Parvathamma, 2020). Developing countries that depend on raw materials from other nations will also have reduced job opportunities as companies will be unable to access the required raw materials hence lowering their productivity.
Furthermore, employment opportunities will decline further. Companies will also impose more taxes or lower their worker’s wages due to the inability to cater to their salaries with reduced income revenues. On the contrary, online businesses and employment will also increase. Online activities have tremendous benefits, such as convenient shopping to buyers and enhanced business operations. Hence, an increase in online businesses will increase employment in this sector.
What about the aging population in the U.S.? Worldwide?
Regarding the aging group, most of them are going to be declared redundant and lose their employments. With their experience, it is evident that such people are not going to agree to get pay cuts. As such, most companies will terminate their employment to ensure they avoid high expenses resulting from high wage amounts. Moreover, early retirements are also going to occur. But, the projected early retirements are going to impact the economy as a result of shifts in consumer consumption. Spending behaviors are going to change across aged consumers. Aging consumers are going to spend less on consumable goods and other services to enhance their savings. Apparently, high saving can result in recession (Masarrat & Jha, 2015). Since consumers’ consumption accounts for over 60 percent of the overall global GDP, business operations are going to be halted. This will further lead to inflation that will fluctuate the prices of commodities and services. High savings also restricts investment. A restriction in public outlay would lead to damaging effects on the aggregate demand.
Conversely, aging people are going to spend more on healthcare products are services as they are more susceptible to covid-19. They will spend more on acquiring better medical services that will ensure they stay healthy and safe.
What do you think the creators of this video will say?
The makers of this video will assert that the adverse effects of covid-19 will result in economic decline. This is because decline in consumer expenditure due to high unemployment rates and wage cuts will force people to engage in high saving practices. Such practices will lower the consumption of produced goods and services, resulting in reduced GDP.
References
Ghosh, R. (2020, August 3). 4 Essential Goods Stocks to Tap the Rise in Consumer Spending. (Newstex) Retrieved August 18, 2020, from Zacks Investment Research [BLOG]; Chicago: https://search.proquest.com/docview/2429657697?accountid=151051
Masarrat, G., & Jha, S. (2015, July). ASSESSING THE IMPACT OF RECESSION ON CONSUMER’S BEHAVIOUR: AN EMPIRICAL STUDY IN DUBAI. Researchers World; , 6(3), 119-131. Retrieved August 18, 2020, from https://search.proquest.com/docview/1704498693?accountid=151051
Parvathamma, G. L. (2020, July). Unemployment dimensions of COVID-19 and Government response in India –An analytical study. International Journal of Health and Economic Development; , 6(2), 28-35. Retrieved August 18, 2020, from https://search.proquest.com/docview/2428113094?accountid=151051