Even if you’re not a Swiftie, it’s nearly impossible to escape the hype surrounding Taylor Swift’s new album, tour, and movie. In fact, some would argue that she is the economic story of 2023. On the opening night of The Eras Tour at State Farm Stadium, the concert brought in more revenue for local businesses than Superbowl LVII held a month earlier in the same stadium. Even the Federal Reserve Bank of Philadelphia weighed in, reporting that the pop star boosted travel and tourism in the region due to an influx of guests for her concerts, a claim made by several other U.S. cities.
More broadly, market research firm QuestionPro this summer projected that the tour could generate close to $5 billion in consumer spending in the U.S. alone. Fans are spending big money not only on concert tickets, but also on travel, lodging, food and beverage, clothing, and concert swag. And the U.S. economic impact likely will grow as the concert film releases this weekend. AMC already has reported blockbuster presales exceeding $100 million, and the film is widely expected to surpass that amount in its opening weekend and beyond.
There’s no arguing that Swift’s economic footprint is big and will only grow as her international tour continues and she releases re-records of her previous albums.
But there’s an economic juggernaut bigger than Swiftonomics that occurs every single day. It’s called Pensionomics, or the economic ripple effect of retirees spending their pension income. It’s not as glamorous, fun, and attention-grabbing as Swiftonomics, but pension spending has a reliable economic impact that supports economic growth and jobs in virtually every community across America.
Pension Spending Created A $1.3 Trillion Economic Footprint In 2020
Often times when we think of retirement income generated by defined benefit pensions, we think about money going into the pockets of retirees. Today, nearly 25 million retired Americans and their beneficiaries in the public and private sectors receive a pension. But what happens after retirees receive their retirement income often is overlooked, even though it has a substantial impact on the U.S. economy.
Retirees spend that pension income on their daily needs – on goods and services like housing, medicine, utilities, transportation, food, clothing, and entertainment. And the numbers are large.
More specifically, retiree spending of public and private sector pension benefits in 2020 generated $1.3 trillion in total economic output, supporting nearly 6.8 million jobs across the nation. Also important is the tax revenue generated from pension spending. This tax revenue comes from two major sources: taxes paid by beneficiaries directly on their pension benefits and taxes from expenditures in the local economy, like sales tax on retail purchases. In 2020, pension spending added nearly $157.7 billion to government coffers at the federal, state, and local levels.
Pensions Help Stabilize The Economy
Conducted on a biennial basis, the Pensionomics analysis released in 2023 was particularly insightful given that it calculated the economic impact of pension spending at the start of the global pandemic. Both the U.S. and global economies suffered unprecedented, abrupt, and devastating impacts from the COVID-19 outbreak, and pension income was crucial for millions of Americans.
Retirees with pensions knew that their retirement income was stable and secure, despite severe economic instability. Pensioners could continue spending at normal rates, which supported millions of jobs across the nation during a time of massive layoffs. In contrast, many retirees relying on individual savings in 401(k) accounts during the height of the pandemic were fearful to spend their savings as markets plummeted, which adds volatility to the economy. And throughout the crisis, pensions remained a stable source of revenue for governments, which were starved for revenue in the early days of the pandemic.
Pension funds also continued investing for the long-term throughout the market crash. In contrast, individual investors with 401(k) accounts often panic-sell during a market crash and are late to get back in, which locks in their losses.
Pensionomics Is Important for Rural Communities
Today, national economic trends coupled with population declines have had a devastating impact on many small towns and rural areas across America. Often, the largest employer in smaller towns is a public entity like a school system or municipality that employs teachers, nurses, firefighters, and public safety officials. These public workers spend their career serving their local communities at a time when a growing number of young workers are leaving their hometowns for job opportunities in urban areas.
Eventually public employees in rural and smaller communities retire, and they often stay put in their hometown. These retirees then spend their pension income in their towns, serving as a stable source of economic activity in smaller communities. In 2018, the Fortifying Main Street study calculated that public pension benefit dollars represented between one and three percent of gross domestic product (GDP) on average in the 2,922 counties in the 43 states studied.
For all counties in the study, pension benefit dollars represent an average of 1.25 percent of total personal income, while some counties experience more than six percent of total personal income derived from pension dollars. The analysis also found that less populated counties with smaller economies experience a greater relative economic benefit from the flow of public pension benefit dollars into the county as compared to more populated, urban counties.
In short, the analysis clearly indicates that pension spending provides a substantial economic impact on struggling small towns and rural communities across the nation. In contrast, much of the economic impact of concerts like The Eras Tour is concentrated in large urban areas with stadiums and bustling economies.
Will Swiftonomics And Pensionomics Exceed Our Wildest Dreams?
A few weeks ago the U.S. Travel Association upped the economic impact predictions, forecasting that the total economic impact of The Eras Tour likely will exceed $10 billion. This total economic impact includes indirect spending as well as spending by those who joined activities during concerts but didn’t attend a show. So, Swiftonomics very well could exceed economists’ wildest dreams.
As for Pensionomics, more and more older Americans are retiring every day. As such, the economic impact of pensions likely will continue to grow. The next iteration of the analysis is due out in January 2025, so stay tuned.
In her song Wildest Dreams, Swift sings, “Nothing lasts forever.” Certainly, The Eras Tour and its economic impact won’t last forever. But the substantial impact of pension spending will last as long as we continue to preserve these important retirement plans.