New York Times:  The Hidden Prosperity of the Poor, by Thomas B. Edsall:

A concept promulgated by the right —
the notion of the hidden prosperity of the poor — underpins the
conservative take on the ongoing debate over rising inequality.

The
political right uses this concept to undermine the argument made by
liberals that the increasingly unequal distribution of income poses a
danger to the social fabric as well as to the American economy. …

The conservative counterargument – that life for the poor and the middle
class is better than it seems – goes like this: Even with stagnant or
modestly growing incomes, the poor and middle class benefit from the
fact that a stable or declining share of income is now required for
basic necessities, leaving more money for discretionary spending.
According to this theory, consumption inequality – the disparity between
the amount of money spent on goods and services by the rich, the middle
class and the poor — remains relatively unchanged, even while income
inequality worsens. …

The consumption theory is powerfully attractive to the right for a
number of reasons. It undermines the legitimacy of government action to
ameliorate rising income inequality. And it is based in part on the
premise that existing welfare programs – food stamps, Medicaid,
temporary cash assistance — are doing their job. …

[E]conomists have been raising serious questions for some
time about the consumption thesis and the so-called hidden prosperity of
the poor.

In February 2011, the National Bureau of Economic Research published a paper, “Has Consumption Inequality Mirrored Income Inequality?” by Mark A. Aguiar, of Princeton, and Mark Bils
of the University of Rochester. The authors concluded that “consumption
inequality has closely tracked income inequality over the period 1980 –
2007.” In other words, the growing gap between what rich and poor spend
parallels the growing gap in the money they take in.

Similarly, in “The Evolution of Income, Consumption, and Leisure Inequality in the US, 1980-2010,” Orazio Attanasio of University College London, Erik Hurst of the University of Chicago and Luigi Pistaferri
of Stanford declared that their analysis of the data shows that “the
increase in income inequality was matched by an increase in consumption
inequality of comparable magnitude.” …

(Hat Tip: Mike Talbert.)