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This difference suggests that households reacted to the new economic and demographic environment by increasing their saving rate.
She said both of the government departments had failed to measure if the reliefs provided value for money, or had led to taxpayers changing their behaviour in the way intended, such as by increasing their saving or investing.
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In annual terms, this equates to a shortfall of 19% of GDP.Even if this figure substantially overstates the problem, a decision by workers to narrow the gap by increasing their savings rate by, say, ten percentage points would have a huge impact on corporate profits, government tax revenues and GDP growth.So beating up savers can be represented as a kind of Keynesian demand management.
And now they're looking to right size their balance sheets by increasing their savings, cutting their discretionary spending, and that's had ripple effects throughout the economy.
The only way Americans are going to catch up on funding their retirements is by increasing their savings rates, and doing so in the wake of a pay raise is one of the least painful ways to achieve this.
But as employed workers see the cost of job loss rise, they, too, will decrease their consumption in an attempt to create a financial cushion by increasing their savings.
Consumers in a rationed economy are usually exhorted to save by purchasing government bonds or by increasing their deposits in savings banks so that unspent money will not be used for increased purchases of unrationed items or for purchases on the black market.
Prize-linked savings induced individuals who reported little or no savings to increase their saving rate by an additional four percentage points compared with the average respondent.However, the popularity of the prize-linked savings is somewhat of a puzzle, as participants could re-create their pay-off using a combination of traditional-saving and the conventional-lottery options.
It has also enabled households led by women to increase their savings by more than a fifth; allowed 185,000 women to leave farming and develop business or retail activities.
Even retired Medicare beneficiaries are feeling the effects, as they would need to increase their savings by 9% if they want to cover their out-of-pocket healthcare costs, according to recently released data from the Employee Benefit Research Institute.
Some of this funding shortfall has been made up by other partners increasing their contributions, and some by efficiency savings and cutbacks.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com