Subscription Economy: impacts on inequality

Abstract

As more companies and services shift from the traditional one-time purchase to subscription-based services or a combination of both. This is primarily due to subscription-based companies growing 3.7 times faster than the companies in the S&P 500. The economy simultaneously undergoes a gradual transformation. Although subscription-based service seems to give consumers more choices about the products they buy, it increases the overall prices they pay for using the same product over a prolonged period. The increase might seem negligible over small periods, but its impact is significant over longer periods and acts as a lump-sum tax. Its properties as a lump-sum tax raises the question of whether it worsens inequality, like other regressive taxes, by disproportionally lowering poor people’s disposable income and increasing the companies’ profits. This study has found a weak correlation between SEI (Subscription Economy IndexTM) and inequality, specifically, the Gini coefficient and the U.S.’s top 0.1% net worth. The SEI is a measurement from Zuora.com’s quarterly report that seeks to analyze the growth and resilience of businesses in the subscription sector and view trends of the subscription economy. The correlation is primarily weak because the SEI grows faster than the Gini coefficient and the top 0.1% net worth by a numerical percentage of about 20% each year. However, whenever the percent change in SEI grows, so does the percent change in the Gini coefficient and top 0.1% net worth, and vice versa.