Super Rich Luxury Spending Creates Over 5,000,000 Jobs….

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Ronald Reagan may have been wrong when his Budget Director espoused the ‘trickle down’ theory of economics. The theory was money kept by the rich through lower taxes “trickled down” to the less rich stimulating the economy. When it comes to jobs created by the Super Rich from buying luxury goods and services, it may actually be more like a waterfall than a drip.

Spending by the Super Rich on luxury items last year created over five million jobs worldwide, according to some back of the envelope math I’ve done.

As a comparison General Motors employs 212,000, General Electric 287,000, Microsoft 127,000, British Petroleum 80,000, FedEx 300,000, Starbucks 182,000, Boeing 169,000, Apple 50,000, Google 55,000, Facebook 8,300, Verizon 176,000, Nestle 339,000, Ford 164,000 and Samsung 222,000. Not shabby I’d say.

This has nothing to do with private or public companies the Super Rich started or own, charitable donations, foundations and grants and the like. It also excludes a multitude of service jobs such as real estate agents, home builders, architects, housekeepers, nannies, gardeners, drivers, accountants, teachers, tutors, doctors, lawyers, financial advisors and such that serve Ultra High Net Worth (UHNW) families.

My numbers are limited to spending totals released last month by Wealth-X that found 211,275 UHNW (Ultra High Net Worth) households worldwide spent $234 billion on travel, automobiles, art, jewelry, watches, fashion, accessories, home furnishings, wines, spirits, food, beauty, private jets and yachts. Wealth-X defines UHNW as individuals with assets of more than $30 million.

To arrive at my numbers, I used the Wealth-X spending numbers for each category. Wealth-X provided the percentage of luxury spending in each category they found UHNWs were responsible for.

For example, Wealth-X reported the Super Rich spent $45 billion on luxury travel in 2013, and that amount represented 22.5 percent of the total luxury travel market. This means, according to Wealth-X, luxury travel is a $200 billion portion of the travel industry. The World Travel & Tourism Council (WTTC) calculates the global travel industry is a $7 trillion business, creating directly 100.8 million jobs. If total luxury revenue ($200 billion) is 2.9 percent of total travel sales ($7 trillion), there are about 2.9 million jobs created by the luxury segment. UHNWs generated 22.5 percent of luxury travel revenue, meaning if there is a direct correlation between amount spent on all those suites, villas, safaris, ski trips and employment they created 658,333 jobs. I suppose one could argue serving the wealthy is more manpower intensive so the Super Rich could be responsible for a higher percentage of jobs than the percentage of revenue they produce. As I said, this is purely back of the envelope and provides an interesting starting point for discussion next time politicians or pundits attempt to shame the wealthy about what they buy.

I worked the math similarly with the auto category and came out that the $40 billion in luxury vehicles purchased by UHNWs generated 189,036 jobs out of the industry’s nine million. In the art world where the Super Rich spent $25 billion their spending accounts for 758,000 of two million worldwide jobs.

Private aviation was a bit trickier. The U.S. industry accounts for 52 percent of worldwide activity. Wealth-X has it that UHNWs spent $23 billion worldwide and account for 82 percent of activity. To get to the 1.88 million global jobs I credit to the Super Rich in the private jet segment I assumed that job creation was consistent on a worldwide basis meaning 2.29 million total jobs. I then multiplied by .82.

Wealth-X divided fashion and accessories into three different categories, but to get my numbers I combined the three. I then referenced figures from Fashion United that the total market from those bins at Wal-Mart to the eighth floor at Saks Fifth Avenue where designer shoes have their own zip code employs 75 million globally in a $1.7 trillion industry. T he luxury segment represents $172 billion, according to Wealth-X, and UHNW spending represented $28 billion, or 16.3 percent of the total. Throw that into a few columns in an excel spreadsheet, add appropriate formulas, stir and the Super Rich can take credit for 1.23 million jobs in global fashion.

There are 10 million people employed in the worldwide diamond industry, however only 30 percent of all diamonds are used for jewelry with the remainder having industrial uses, so I only attributed three million jewelry related jobs to the diamond industry. I couldn’t find any workable numbers for other types of precious stones. According to watch industry statistics some 50,000 people are employed making watches in Switzerland. Again, the worldwide watch industry is bigger so in using 3,050,000 as my global employment number for watches and jewelry I am probably understating things. When I crunched down the numbers to the share of jobs attributable to Super Rich spending it came to nearly a quarter million (246,371).

For the super yacht segment, a report by MYBA, the worldwide yachting association, attributes 30,000 jobs to building yachts in just five European countries which using the Wealth-X data that UHNWs account for 88 percent of superyacht revenue would mean 26,400 more jobs. But again, I am not taking into account building of superyachts in the U.S., Turkey and other places. A Financial Times report indicated superyacht crews earn about $2.1 billion per year. At an average of $50,000 per year that equates for 42,000 crew jobs, meaning all together UHNWs at least 63,360 direct jobs in the superyacht industry if not more.

I couldn’t get numbers I felt comfortable working through for Interior/Home, Wine/Spirits, Beauty and Food which account for $27 billion of the $234 billion Super Rich spending Wealth-X tracked. And obviously defining global revenue and employment in categories as diverse as travel or fashion is far from scientific for this exercise. That said, whether my figurers are a bit high or low (and remember the myriad of job categories I didn’t include), 5,029,317 jobs is significant.

To echo a point that Wealth-X President David Friedman makes the Super Rich with some $30 trillion in assets (some studies believe it is as high as $50 trillion) have the financial power to spend even more, something politicians perhaps should encourage through policy and luxury marketers should spend more time focused on.

Or put another way, luxury goods and services spending by the Super Rich contributes annually about the same number of jobs of 25 companies the size of General Motors.

Category UHNW Job Creation
Private Aviation 1,880,153
Fashion 1,234,064
Art 758,000
Travel 658,333
Jewelry/Watch 246,371
Auto 189,036
Yachting 63,360
Luxury UHNW Job Creation 5,029,317

About Doug Gollan

Media Executive focused on marketing and sales to Ultra High Net Worth (UHNW) consumers
This entry was posted in Auto, Fashion, Home Furnishings/Shelter, Hotels, Jewelry, Marketing, Media, private jet, Research, Touristm, Watches, Wines/Spirits, Yachts and tagged , , , , , . Bookmark the permalink.

4 Responses to Super Rich Luxury Spending Creates Over 5,000,000 Jobs….

  1. Ron Kurtz says:

    Very creative and interesting analysis.

    Like

  2. Pingback: How Do You Tap Into The Next Generation of Super Rich Collectors? | Doug Gollan

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