Why Do People Stay Poor? [pdf]
sticerd.lse.ac.uk
sticerd.lse.ac.uk
Edit: there is the thought of living within your means, personally with a roommate I could live on $10-$20K a year which you can make doing labor jobs but not a lot saving. I'm lucky being single/having no direct responsibility eg. children.
It is my opinion though that if you want to/have internet/time then you can alter your life for the better, but yeah can't just say "learn to code". But other options available. I see the point about opportunity because I had a friend to crash on his couch when I was technically homeless that is helpful/bare min opportunity.
My jump was not fast, it took at least 2 years not including the 3 years before that of self-study/personal interest. I freelanced on the side while working as a dishwasher before first in office/full time job.
(I noticed this: ReactJS/Node-Express/MySQL/Python in your profile, but I'm not sure if that's what you started with)
Closest thing for "native" is using the wrappers for JS which for my needs works. I did have to force myself to figure out how to get a basic Android widget (Java) to work that was tough.
I wasn't learning specifically to get hired. My first stuff was trying to build high traffic websites/make money through ads but my ideas were dumb. But I still learned in the process how to build websites.
Full answer https://i.imgur.com/uAGMHkQ.png
First full time in-office job 2018
Dang that sounds nuts, I haven't made anything nearly that complex haha. There is something about architecting something and seeing it work "on its own". It's a cool feeling.
Uber was like $60/day so yeah... although I only made it 4 days straight, never 5 days of bike riding so I would eat the Uber cost one day. I was lucky that friend loaned me $3K to get a car(opportunity). But I bought a bad car/sunk money into it(had to fix).
I would bike home from the factory pitch black road at night(dumb) listening to Changelog haha good times.
My first car was $800 and I bought a few motorcycles over the years for around $400 each.
It blew me away when I got that Scion. It was a steal of a deal. I was looking at used, late 90s model Civics at the time, because I needed a commuter that could do 50 miles one way with decent MPG and with something I knew that I could keep on the road, and those cars held their value so well into the late 2000s that it blew me away. People were asking $3,000-$4,000 for them with 150k-200k miles.
Today, I make something crazy like about 15x what I made in 1996, but I still have that Scion. I plan to keep it on the road for another 11 years. After all, it's a Toyota and it's given me no trouble at 150k miles. It goes to the shop for tires, everything else I handle in my garage. It's a commuter for my wife that goes about 5 miles one way these days.
My neighbors comment on it all of the time. They think it's an unsightly beater sitting in front of our ludicrously expensive homes. I thought about selling it for a while but their shitty attitudes have convinced me to keep it around.
There are many examples of people overcoming crazy challenges, makes for a nice story but also having a regular/"painless" life is also nice. I did not enjoy riding the Walmart bike that far/many hours. It was nice though the nature aspect.
I still think I am being lazy, not trying hard enough, about being an entrepreneur like did I really try... not drop shipping but building some service. I keep thinking is what I do worth it if it doesn't make money since that's my primary concern right now is getting out. (not be worried if I lose my job) I gotta stop responding haha, wish I could condense my previous posts.
edit: clarification, the car was a bad buy(not a car guy) it was just under $2K so I had a buffer but it was partially broken... so I had to drop money on it.
If you are one missed paycheque from going hungry, you can't afford any risks. No going back to school, no going freelance, no interviewing, no investing in anything. You can't afford the means to make money, whether it's a car, a computer or nice clothes. You can't afford them breaking down, but you also can't afford maintaining them.
The missed opportunities add up over time.
Grapes of Wrath is an excellent book that drives this point home really well. It hurts to read at times.
Not sure I can entirely agree, when I was broke I had a fair amount of free time and I spent a lot of it learning to repair motor vehicles. Parts are not free, but labor & markup is most of the cost anyway.
How did you manage this? I was working my ass off just to keep the bills paid and doing chores to avoid costly services like dining out and maintenance.
A college student can be broke, but a poor person can not afford to be a college student.
If you don't have a job where you can simply take on more hours, but it's also not predictable enough that you can get a second job, you just end up with a lot of useless free time on short notice.
Can't afford hobbies, trips, no significant other (being poor doesn't help your dating life), what else is there to do?
It took money for me to actually run out of free time. I honestly really enjoy tinkering and fixing stuff, but it's usually no longer worth my time (to my own dismay).
Before money learning to fix something meant the difference between keeping the car going, or having your car break down without money for the shop bills. I've fixed lots of stuff by flashlight so I could get to work the next day.
Nowadays being put in that sort of back-against-the-wall scenario isn't likely to happen, unless I sign up for some sort of game show or reality TV where it's purposely planned.
If things are tight enough, you spend all that useless "free time" hunting for more work. You feel you can't afford to just enjoy the time.
More gigs. More waiting for an Uber request. More time polishing your resume, or your profile on Fiverr. Or improving your "Github is the new resume" look.
Then it's not really free time. It's a job, but you're not paid every hour you're working on it.
It can even resemble socialising, because in some lines of work you have to keep socialising for people to think of you when they have a gig.
Presuming there's an Uber and you have a driver's license(they're not free you know) and a car.
>More gigs.
You are aware that gig economy is just about 5 years old, right? And you have to be in a high demand area to do it.
There were coders for hire sites for a long time, but that paid complete crap.
Uber is just to illustrate. It's just an example. If you're in the wrong area, or the wrong time for that matter, then it's something else.
Either way you're (and were) spending that "free" time looking for jobs, quick jobs, whatever jobs. They used to call it pounding the streets or getting on your bike. Even going door to door.
When I was young I did it myself, literally going from door to door asking if they had any work.
> There were coders for hire sites for a long time, but that paid complete crap
That's why I mentioned Fiverr, as an example, which is a version of the coders-for-low-pay thing generalised to other kinds of work.
This depends very much on the location and the community around you.
Looking for odd jobs around you yields no results in a poverty depressed area.
How dare we assume we would be who we are (good or bad / rich or poor) without the life events that exist outside of our own domain (who our parents were, education, income levels etc) of control!
PRESIDENT BARACK OBAMA – Cause you didn’t know what was happening...
FIRST LADY MICHELLE OBAMA – You didn’t know what happened to them. You know, we weren't special. And as a result, you know if something good happens to you, if you have an advantage, you don't hoard it. You share it. You reach out. You give back. And I can say that my family, my neighborhood, my notion of community growing up shaped that view and shaped the choices that I made in life as I felt your experiences shaped yours.
Maybe government can help, depending (likely the underlying motive of the quote. i.e. promotion of social programs over "pull yourself up by your bootstraps" rhetoric). Or maybe government can not help but will try anyway at great expense and possibly make things worse.
We have seen both scenarios. Thus I'm always personally suspicious of any ideology that regards government as a universal and infallible solution to all problems, and any ideology that regards government as perpetual failure at effectively and efficiently solving anything.
The only way to be sure not to make any mistake is to do nothing, which itself makes things worse.
Whilst drunk uncle won’t be saved by the bare minimum a state can provide, he certainly will be worse off if he ends up on the streets. And sometimes all out of work cousin needs is a bit of money to pay rent and food for a couple of months until he finds some work. So yeah, a welfare program is not a panacea but it is useful, and also cheaper overall.
Come on, U-Haul is like $50, including some mileage.
> cost of living is pinned to these minimum wages
That is true. That's also reason #3245 why UBI is a stupid idea.
>That is true. That's also reason #3245 why UBI is a stupid idea.
I actually don't think that is entirely true. For certain things, those most affected by modern supply chains, we generally aren't seeing a corresponding increase in costs to wages.
For other things driven more by scarcity such as housing, healthcare and education we are seeing a dramatic rise in costs.
Our economy is in a strange place and I don't think the obvious one-to-one rules of thumb hold currently.
https://www.thisamericanlife.org/102/road-trip/act-one-0
https://www.thisamericanlife.org/115/first-day/act-one-0
https://www.npr.org/templates/story/story.php?storyId=109915...
https://en.wikipedia.org/wiki/Dishwasher_Pete
NOTE: This American Life audio didn't seem to work in Chrome, even after disabling uBlock Origin.
I was also lucky, because my sister left to work in Italy. That would make all of the difference...
If I didn't have: - free education secondary and higher - low cost local transport - a suit given by my sister - 4 tickets to another city to interview(paid by my sister) - low cost internet - rent paid by my sister
I would have been just another bum, because that 10y period included being kicked out onto the street... because some nice "rich people" used my schizophrenic mother in a tax avoidance scheme... and got away with it.
There's a lot of luck that is involved in getting out of poverty, that most arrogant middle class individuals completely ignore.
Wow... how is that possible, I guess depends where/maybe what year.
Glad to hear you got to a better situation
Think of never having new clothes, only donated clothes.
Instead of buying a home, the lower class rent their whole life. Instead of their daddy giving them a home, the middle class pay interest on a mortgage most of their life.
Instead of buying a 20-pack of $necessary_product that costs $20 and will last for months, the lower class buy a 2-pack that costs $5 and lasts a couple weeks because they need the $15 to pay rent. And then they have to spend more money on gas (or bus fare, or a taxi, or time and energy walking, or ...) to get to the store again sooner.
Instead of the employer providing any supplies that are needed, the lower class have to buy their own uniforms or tools.
Instead of a 5% interest rate on their loan, they have a 25% interest rate.
Because they don't make enough money to set some aside as savings, they have to pay late fees or NSF fees or overdraft fees.
Meanwhile, the rich have gotten exponentially richer, as public policies have shifted ever more in their favor. For much the 1900s the top income tax bracket in the US was over 80%, peaking at 95%. Now its 37%. The estate tax for much of the 1900s was 80%. Now it's practically 0% for all intents and purposes.
The poor have gotten slightly better off, the wealthy have gotten dramatically better off, and the gap between the two has widened. Systems designed to keep the two groups together have been chipped away at, and are buckling. This is a result of social policy.
That's a fairly common perception. Most often summarized in "the rich get richer, the poor poorer" (at least on a relative basis).
I was born in a Communist country, and I have another perception. Poverty has different levels. The most abject poverty is when you go hungry. My family didn't experience that, but we experienced the next step: severe food rationing. War-style rationing in peace times. 90% of the population in my city being subjected to that (the elite party members were not, obviously). My parents driving to a neighboring city to be able to buy potatoes and onions. My kids nowadays spend too much time on iPads and Xbox, I was spending too much time waiting in line to buy bread.
And I can only guess that there were hundreds of millions like me in all the Communist world (China included). For the most part this type of poverty has been eradicated.
I for one celebrate that.
On the whole, decentralized distribution is always better than when centrally controlled
What's the difference? Millions of people in the US have to line up at soup kitchens and food banks in order to avoid starvation.
>On the whole, decentralized distribution is always better than when centrally controlled
That's a strong claim; I'd be interested to look at evidence for it if you have any.
One major counterpoint would be the enormous reductions in poverty that China has achieved over the last decades. Quoting from Wikipedia here:
>The dramatic progress in reducing poverty over the past three decades in China is well known. According to the World Bank, more than 850 million Chinese people have been lifted out of extreme poverty; China's poverty rate fell from 88 percent in 1981 to 0.7 percent in 2015, as measured by the percentage of people living on the equivalent of US$1.90 or less per day in 2011 purchasing price parity terms.
In case you don't know, in addition to the portions of the Chinese economy directly owned by state-owned enterprises, the Chinese government exercises a large amount of control over the private enterprises in the country. You might find this article helpful: https://www.theguardian.com/world/2019/jul/25/china-business...
All of this is distracting from my point earlier which is what exactly do you see as the difference between hunger experienced by people in communist countries in the past and the 37 million people in the US who experience food insecurity each year today? You mentioned that people don't have to "line up" for food in the US, but thousands of people do, every day.
I'm aware of the market reforms in China over the last half century. They've moved the country closer to something like capitalism, but it's still incredibly far from anything in the West.
You seem to be unaware that ~30% of the Chinese economy is owned by state owned enterprises, and China in general, or you wouldn't say something as incorrect as "Compared to other countries, China is around the median in terms of how much control the government has over their economy."
But again, you're dodging the question of why you believe, in the US, widespread hunger is an unfortunate necessity, but in communist countries, it was the result of the economic structure. I'd encourage you to consider why you believe that, and whether it's reasonable.
I remember going to another country to get pasta and rice by the bag - so that we had something to eat... just 25 years ago. That has little to do with poor growth distribution in US.
Having lived in a post-communist country and gaining wealth, I can see now in US that it's drastically harder to be better off here. It's a case of "everyone starts as poor" comparing to "poor have a lot of obstacles in holding onto wealth". You need at least $1mil in generational benefits to be well off in US.(either cash, quality education or other means)
The worst part for US - even moving to a rich place like NYC will not give you the necessary boost anymore(median NYC income is below national median)
Top tax is not the same as effective tax rate. For example, when Reagan lowered the top brack from 50% to 37% while also closing taxable shelters,the amount the rich paid actually went up.
The CBO has all this type of data.
>This is a result of social policy.
It's more the result of changes in the world economy. Computers have made skilled jobs vastly more productive, while unskilled like making burgers or painting exteriors have not seen anywhere near the gains.
And as the rest of the world is catching up quickly to first world quality of life, the advantage the poor in the US had on the world labor supply is much less.
>while on average wages have tracked inflation
Only for white men in the US (and most first world countries). Poor women and minorities have seen vast gains in income over the past 40 years in the first world. The rest of the world has seen a massive gain for the poor.
Remember, the poverty line in the US is about the top 15% of incomes worldwide. Our poor are quite rich by world or historical standards. You used to be able to check this at globalrichlist.com, but it's now down. I suspect you can find this info elsewhere.
As some easy evidence to check, poverty line for a household of three in the US is $21k (and that pre-tax transfer. Post transfer is about 40k). Here's per country median incomes.
https://worldpopulationreview.com/country-rankings/median-in...
This is something a lot of folks miss. The US has the most progressive tax system in the western world. The top brackets pay a much larger percentage than anywhere else.
Estate tax being practically zero means huge quantities of un-earned wealth are transmitted from generation to generation. This isn't true in most first-world countries.
The top tax rate in the US isn't nearly as high as many European countries.
The specific quantity of money that is collected as tax revenue has much more to do with just how successful the higher classes are in the US as compared to other countries. This is a function of (wealth inequality multiplied by the top tax rate) not of how progressive the system is -- certainly not at the federal level.
If you have citations, they are much welcome.
The post you're replying to missed many critical factors, such as the fact that the average salary in constant-dollar terms has remained the exact same since 1964 in the US. [1]
[1] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
And the bottom tax rate is much much lower than in other countries. The top 3% of earners pay 50% of income taxes in the US. Nowhere in Europe will you find this.
Remember, in addition to their flatter income tax rates, Europe also has 20% VATs which is extremely regressive.
Think of an abstract poor family from New York State (outside New York City): two adults working for minimum wage (roughly $11), two kids.
Assuming 48 weeks in a year (allowing four weeks for vacations, seek days and such) total family salary will be about $41 000.
From that they will pay:
- $1700 of federal tax
- $1000 of state tax
- $4000 of sales and excise tax (assuming the rate for both is about 10%)
... while receiving back (all numbers are approximate)
- $5000 of federal earned income tax credit
- $4000 of federal child credit
- $1600 of state earned income credit
- $1300 of state child credit
Which gives a net credit of $5300.
That's not counting food stamps, free school meals and medical insurance subsidies.
If this is not a progressive tax system, then I don't know what is.
Then of course since we’re comparing the rest of the world to the US, you need to add a couple hundred dollars per person per month - easily $10K for a family per year - for health insurance that gives them a $5K out of pocket maximum per year they can’t afford so they don’t die of cancer (but can’t afford an early diagnosis) and can’t afford their insulin. All of which is included in the tax burden and covered in Europe and Canada and Australia and New Zealand and Taiwan, to name a few. This amounts to a regressive 25% tax if you’re comparing directly (as good health insurance costs rich and poor the same, but represents a disproportionately higher amount of take-home pay for the poor).
I never understood the “freeloader” narrative, payroll taxes easily cancel it all out.
* https://www.theguardian.com/us-news/2017/sep/05/hookworm-low...
https://www.thelancet.com/journals/lancet/article/PIIS0140-6...
https://ourworldindata.org/a-history-of-global-living-condit...
Not to mention if they ever get un-poor they don't have the knowledge to 'build wealth' until they start slowly learning it or from a mentor.
We would better off teaching 'home finances, interest and banking' classes instead of Algebra 3 or geometry 2 (for 99% of people)
It is crazy that for a standard "Savings" account: - interest earned is less than inflation. - I pay tax on that interest earned. "Saving" money in a common savings bank account pisses away value.
Many people are not capable of more financial management capability.
The middle class is often locked into a mortgage - I am too! - and is barely one step up. But it is one step up.
Ultimately, poor people don't own things that make money. They are not "rent seekers". They don't own stocks or real estate or anything else where the simple act of ownership makes money.
Isn't the bank meant to be using your money in a "managed fund" like manner? IE leverage it to make profits.
Here in Australia the banks make quite decent profits, and yet a savings account can't break even, before tax?!?
I haven't done the sums but I am curious if it is better to own shares in the bank than put money in the bank.
I am also inclined to ensure my son does get financial knowledge. It is hard to play a game you know only limited rules of.
It's not risk free, there is nothing that stops government from creating inflation so they can pay off the debt for in inflated dollars.
Today, central bank alone doesn't have power to make create money out of thin air. Government guaranteeing loans from banks to corporate players and projects is creating inflation. It's good for politicians as they can pay off their expensive mistakes in cheap money.
Savings. Generally advertised as helping your money grow. It isn't advertised as a "Slow draining of value" account.
Interestingly, the current administration proposed to index capital gains taxes to inflation to address that very paradox. Unsurprisingly, their proposal would have just been a giveaway to the wealthy.[0]
[0] https://itep.org/why-trump-administrations-plan-to-index-cap...
US tax system is MUCH more complicated, than UK's... and UK's system is fairly complex.
I began my career in private wealth management (minimum $5M investable assets).
I ditched that to try to help real people...joined a brokerage where I discovered sales targets still required $250K, at the very least, in investable assets (this excludes include home and any assets that cannot be held by the brokerage, so the net worth of these people was usually $500K+).
I finally gave up and attempted to run a business on a different fee model to educate lower/lower-middle class people on their finances. The Great Recession and my youthful idealism & naivete destroyed that.
It's probably not possible because there are factors other than what you described.
>Instead of buying a 20-pack of $necessary_product that costs $20 and will last for months, the lower class buy a 2-pack that costs $5 and lasts a couple weeks because they need the $15 to pay rent.
That directly implies that if they could be lent the $15, they could get the long term cheaper option and save money, even if they had to pay it back plus a high APR.
If you don’t own a car in the US and don’t live in a place like NyC you will be destitute. You will have no way to get food and no way to get to work (and therefore pay rent.) Most people in the US could afford to actually save money if they didn’t have to pay (including interest!) on the loans they have to take out to buy a (crappy and used often!) car.
It worked pretty well.
Under those conditions, getting a down payment on a mortage was huge problem.
Have you tried applying for a mortgage and renting?
UBI does not solve the problem outlined by jfrunyon that
> expenses are higher for poor people.
There are fair criticisms of UBI but it would not be acting in a vacuum. There could be policy and actions to support the goals of UBI. Everything is more complicated than it seems.
Prices increase in this case - that is how markets work.
Its been found that what most have called charity is actually predatory lending by another name. I’m sure there are some legit players but like most things in life you may need to read the fine print and get a lawyer.
Source: https://mathbabe.org/2015/10/13/microfinance-is-mostly-a-sca...
Try doing that in US....
At best, you just invented credit cards. But poor people often either can't get credit cards, or the interest rates are astronomical, or they require a cash deposit (that they can't afford) to secure them.
The point of my comment was to suggest that you be the lender and get these easy returns, if you’re so confident in the theory. Why did you think it would be relevant whether current credit cards would lend to them?
Don’t forget that local government also taxes the poor with predatory fees and fines for minor infractions.
- parking tickets - car insurance fines - cash bail
Sources: https://www.latimes.com/archives/la-xpm-1996-04-20-me-60640-... https://theappeal.org/fines-and-fees-explained-bf4e05d188bf/
It's a small quibble, but it helps explain the different behavior of the wealthy and the poor. More importantly, it explains the mindset that changes with wealth.
Bret Devereaux of the acoup blog had a good piece on this in reference to medieval farming estates of lesser nobles and the abject poor [0]:
"I led in with all of that risk and vulnerability because without it just about nothing these farmers do makes a lot of sense; once you understand that they are managing risk, everything falls into place.
Most modern folks think in terms of profit maximization; we take for granted that we will still be alive tomorrow and instead ask how we can maximize how much money we have then (this is, admittedly, a lot less true for the least fortunate among us). We thus tend to favor efficient systems, even if they are vulnerable. From this perspective, ancient farmers – as we’ll see – look very silly, but this is a trap, albeit one that even some very august ancient scholars have fallen into. These are not irrational, unthinking people; they are poor, not stupid – those are not the same things.
But because these households wobble on the edge of disaster continually, that changes the calculus. These small subsistence farmers generally seek to minimize risk, rather than maximize profits. After all, improving yields by 5% doesn’t mean much if everyone starves to death in the third year because of a tail-risk that wasn’t mitigated. Moreover, for most of these farmers, working harder and farming more generally doesn’t offer a route out of the small farming class – these societies typically lack that kind of mobility (and also generally lack the massive wealth-creation potential of industrial power which powers that kind of mobility). Consequently, there is little gain to taking risks and much to lose. So as we’ll see, these farmers generally sacrifice efficiency for greater margins of safety, every time."
[0] https://acoup.blog/2020/07/24/collections-bread-how-did-they...
For instance: does your local city council respond to rising rents with the same urgency as they respond to falling real estate values? What did America put more money into during the coronavirus crisis, keeping people from being evicted or propping up the stock market?
Rich people don’t worry about tail risks because they don’t have to.
As a person who mentors poor people, it's not always this..
Don't get me wrong, there are some poor people who are poor by choice. They usually don't feel like victim and aren't stressed about them being poor. They are pleasant to deal with as they understand the trade off they are making. They are very small % of poor people.
Here is the difference I see:
1. Reasonable well off people (many of HN crowds are this) are usually willing to listen and discuss the ways some project or work can be done better.
2. I've gone to offer same suggestions to poor people, a lot of them listen to me absent minded. They complain "I am too tired", "I am losing hope" while a few of them go back to doing drugs and drinking.
3. Poor people don't want to lose their "immediate" freedom. While well off people understand it's a temporary scarifice they are making, later situation will change.
4. Optimism, all the guys who came up with ideas and plans are now doing well.
6. Ability to form relationships and acquire new friends. I consistently saw the poor people who I was mentoring would abuse their friends (without realising), they'd call them "dumb, stupid" while having all evidence like "success, wealth, education qualification" which clearly showed the person giving them advise they are asking for is just trying to help them.
7. Coming from poor household, I used to think rich people are evil and all but I really figured out that a high proportion of rich people were just more attentive and good are forging connections which often continued life long and the benefits compound when you are connected to so many good people for so long this is what most poor people do not realize.
It's not the reason why people are poor, it's the result of being poor and being treated as such.
Get together with your neighbors and buy a 20-pack?
> the lower class have to buy their own uniforms or tools.
Workers owning their own tools. Isn't it what Karl Marx dreamt of?
> Instead of a 5% interest rate on their loan, they have a 25% interest rate.
Don't use loans. Seriously. You either can afford something, or you can't. Buying a house is probably the only exception. I know in US culture it sounds almost as crazy as "don't own a car" or "don't watch TV", but that's entirely possible.
Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and _would still have wet feet_."
This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.
Poor people are in Section 8 housing or various other housing vouchers.
Right. People who lived beyond their means and ended up poor.
Or are you saying if you once had money for these things, it's impossible to ever be poor again?
I think we have to establish what it means to "end up poor" in this context.
I'm barely living within my means. I have a decent house, a very nice car, a respectable gaming PC with VR, and recently got into hobby RC cars. I take at least one 1-2 week vacation a year out of state.
But...I have $0 in my savings account, and less than $50K in my 401(k). I'm 38 and only started contributing to a 401(k) 6 years ago after I finished my CS degree and started working jobs that pay decently.
But I also have $0 in credit card debt. I tend to spend all my extra money, but no further. I'm not taking on extra debt (Beyond my mortgage and car loan) to fund my activities.
Would you consider me poor? I am after all, barely living within my means. Because of my spending habits, I'm almost living paycheck-to-paycheck.
I know people who make more than $100,000 per year and have a net negative net worth and take on more debt every month. I would define them as “cash poor”.
Point being, these people end up poor when something unexpected happens, despite having made very good money for many years prior. They could have managed their finances better and weathered the storm.
I’m saying actual poor people never had that stuff to begin with. What you consider ‘poor’ is nowhere near actual poverty.
When things are simplified it's often easier to draw conclusions, but the method of simplification and how far you go will induce bias. Maybe someone's car was hit and totalled. They couldn't afford to insure it while working 2 jobs with no healthcare/benefits and trying to support a kid they can't afford (or legally abort). They now have a medical bill for $2000 due to injuries sustained, no car to commute to work, no job if they can't commute, and no way to afford an incoming baby regardless. They jump to a dealership the next morning and have a car loan signed by 10am, then back to work having missed hours (that they won't get paid for). Then they had to decide between food and the car loan before even considering the medical debt. Maybe they had medical debt from a prior issue that tanked their credit score and left them with a 20%+ loan they just signed. Maybe they have a concussion or the pregnant woman needs time off work to heal (Paid? Unpaid? will there be a job to return to?) Regardless, they didn't have the resources, time, money or energy to respond to the crash and it sunk them into thousands of debt before they got their test results back from the medical appointment.
Sucks, but is a very real issue for many Americans. With proper regulations (with teeth) for:
benefits/sick leave or PTO/wiggle room to deal with emergencies outside of work,
laws to cut down interest rates or free people from bad/old debt that has them spiralling including higher education or Community College coursework in personal finance or budgeting (and better career/job prospects),
proper funding for universal healthcare to stop medical debts and increase use of basci services to prevent major cases and long term costly health issues,
support for families (including family planning) and greater access to (and no loss of pride from using) SNAP/food stamps,
a plan for childcare
education from a young age on personal finance and other useful practices
We could see improvements in many Americans daily lives. Often, edge case or minority groups feel the system has left them behind, forgotten them, or even betrayed them. In America, that's true. The system will help those who help themselves but life does not discriminate when dealing out misfortunes and it can be very expensive to be poor for reasons mentioned in other comments like the boots story. Citizens will continue fighting even if they are fighting for the right to die from lack of support, can't reason with it.
1. The normal lenders discontinue lending, either by choice or by bankruptcy.
2. The blackmarket lenders fill the gap. Mafia loans are not good for society. The nature of the blackmarket, without access to legal remedy, is that there will be violence.
On page 64 (65 as the PDF numbers it), chart (b) "Distribution of savings rate" has an awkward little peak on the left hand side of the chart. It is very difficult to tell from inspection whether that is a real feature of the underlying data or if it is an artefact naive kernel density estimation.
If you ever see that pattern in your graphs, do consider trying logKDE [0] rather than ordinary Kernel Density Estimation a la geom_density() in ggplot. It also isn't perfect but the result is usually a bit better for things that approximate an exponential distribution.
[0] https://cran.r-project.org/web/packages/logKDE/vignettes/log...
Intuitively I would imagine a lot more people save 0% (or close to 0%) of their income than save 50% of their income, I would also expect a lot more people to save or overspend 3% of their income than overspend or save 25% of their income.
Engineers, Lawyers, and other similar professions tend to earn 2x-3x of what the absolute minimum wage jobs earn. That's quite the difference compared to other countries, where Engineers can earn 5x-20x.
People here are still motivated to seek higher education and better paid jobs, even though they could live normal lives off those lowest paid jobs that don't require any education.
Even most people in Sweden think there is a legal minimum wage and are surprised to hear it's 0 and that you can legally pay someone 0.01 an hour.
In USD, that around $16.5 +/- $1.5. $30k - $39k year.
The vast majority of professional jobs which require a BS or MS start between 450k-600k / $50k-$67k, and will by end of career be around 600k - 1MM / $50k - $110k.
But keep in mind, there are several factors at play:
- private pays more that public jobs - industry salaries differs wildly - location plays a big role - lots of outlier jobs pay much more than the above - The numbers above are based on current USD/NOK rates, which is very weak for us Norwegians. It's right now around 9, but has been down around 5 during the good years. So one needs to look at salaries as a relative thing.
Edit: But we DO have union wages, which effectively work as minimum wages for many professions. But alas, there are lots of jobs with no unions.
How many unhappy people do you know do end up stuck doing work they hate because of money? There are many, and uneven compensation is a prime cause of their misery.
But the hours sucked and the pay was weak. IT/Network Engineering pays me literally 4x what BI/PI did. There may be a happy medium there in cyber forensics or incident mgmt (or other security roles).
But if the pay was closer... I'd consider going back, for sure.
You obviously can be a high performer with good life prospects there. You won't accumulate as much wealth as somewhere else, but the culture where you grew up also gives much less value to financial status. Good life, quite enough money, and good standing in the society means little reason to emigrate.
This [article](https://www.forbes.com/sites/timworstall/2014/08/27/by-globa...) describes what american poverty levels would be if we used the same measure as we do in developing countries and makes the point that by those measures there are no poor people in the US, just “lower middle class”. That doesn’t mean we shouldn’t try and improve the lives of people at the lower end of the income distribution, but we should at least understand that when we use the term poverty in developing and developed economies, we’re talking about something qualitatively and quantitatively different - so the optimal solutions are likely different too.
That doesn't feel like a meaningful metric when there are as many as 17% of mothers with young children experiencing food insecurity [1]. Perhaps that's due to COVID, but 11% of households were food insecure as recently as 2018 [2]. Around half a million Americans are homeless, and 35% of them are shelterless [3].
Are all of these people "not poor" and are they "middle class"? This all to say that how we think about poverty should focus more on the outcomes that people actually experience (access to food, shelter, healthcare, etc) than key economic indicators. Claims like "the War on Poverty is over" and "there are no poor people in the US" don't seem to match up with the lived experiences of many Americans.
[1] https://www.brookings.edu/blog/up-front/2020/05/06/the-covid...
[2] https://www.ers.usda.gov/topics/food-nutrition-assistance/fo...
[3] https://endhomelessness.org/homelessness-in-america/homeless...
But that doesn't give a fair view for all nations. Food insecurity is a metric that would quickly show poor improvement over decades, at least compared to current metrics. Maybe access to affordable housing, water, power, and other items on the first 2 level of Maslow's Hierarchy would work better.
In the end, we may learn a lot about 'first world' economies like the US and the areas failed by capitalism. I think many of the metrics pulled out could be used to argue either way Numbers on food insecurity could be spun as "We need to fund and support our citizens and make this better" or "Look how far ahead we are so do nothing or cut programs to save money!"
I grew up well below the poverty line in the USA and it was pretty self evident that I was not leading the same kind of lifestyle as someone in poverty in a developing country.
I think your point is mostly true but I'm also just not sure how useful it is.
They didn't connect it at all to what this might then imply for America. It's a strange injection to the subject. America would likely need its own study and that's probably the most that can be said.
Maybe most can read and write at the most basic level, but there are enough who cannot do so at a high enough level to function as a productive adult.
Why don't we study all of the people who have definitely risen from the ranks of the poor to a higher class and see what they have in common?
Sure, it's not the norm. But it happens all the time. There is enough data to form an opinion.
I'm guessing the way people rise from the poverty is much the same as people who are average becoming wealthy. They are willing to take risks (i.e., leave your neighborhood, buck the trends in your family tree) and they work on being prepared and available for opportunities that may present themselves.
We also know there are certain behaviors that absolutely correlate to and probably perpetuate generational poverty (children out of wedlock, crime, quitting school). The people I know who have risen out of inner city poverty in the U.S. (not the same as Bangladesh I know) distanced themselves from these behaviors and from the people who considered them okay.
Some people are poor because of their situation and some situations are more difficult to escape than others.
Some people are poor because of their habits and inclinations and they just don't change those habits (for one reason or another), so they stay poor.
That's true. But often the reason they have those bad habits is they were taught them by the environment that, through no choice of their own, they were born in.
I was taught how to budget, how compound interest works, and so on by family members.
I used to do rental property maintenance in places where people didn’t know to use a dish strainer to prevent sink clogs, nobody ever taught them. Now, spread that out over hundreds or thousands of other things they’re not aware of. There’s tons of useful knowledge that middle/upper class people pass down t their kids that poor people have no clue about.
This is very different than having your father die while you're young and promising to be the woman of the house and take care of your sick mom and baby sister.
The very next day he called me up. It was payday and with excitement told me he'd just bought another TV tuner card for his PC.
Another...
He already had one he barely used. But now he could watch two channels at the same time without turning the TV on! The TV that was incidentally in the same room...
And so he ate ramen noodles for another month...
2 times, including the principle.
Looking here: https://finance.icalculator.info/mortgage-calculator.html
I enter, Mortgage Amount: 100000 Annual Interest Rate: 5% Term of Mortgage: 30years
The interest paid is 93255.20
And also leaves out that the rate of inflation over 30 years means your monthly cost decreases; hopefully you're getting inflation adjustments to your salary...
It's hard to beat the SP500's >8% average return [2].
[1] (paywalled) https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...
[2] https://www.investopedia.com/ask/answers/042415/what-average...
Then, I live in Germany.
There is a 28% tax on stock market returns, but selling your home is tax free
Also capital gains tax is around 26% (incl. solidarity surcharge), if it hasn't changed.
However there are other scary things about house ownership in Germany. For example being liable for street work in front of your house for the first few decades. The city can decide to repave the street and stick residents with the bill.
Where I live, when I was too young to buy, mortgage was cheaper.
When I was old enough to buy, rent was cheaper and prices had already risen enormously, so I stuck with rent, and hoped prices would stabilise or fall. In retrospect this was a mistake, as prices continued to rise.
Now mortgages are cheaper than rent again.
The answer is still likely: Debt. When we take out sovereign debt it increases cost of living, and usually the way that sovereigns typically use that debt is via payouts to contractors, which does not go to the bottom 50%, except perversely via trickle-down effects. If you look at the "socialist" countries that have low poverty rates, typically they also have low rates of sovereign borrowing (think Norway, Sweden, and Denmark).
It has a simple stochastic model and some statistics for verifying if the real world agrees with it. You are deluding yourself if you think one can study economics without advanced statistics.
No idea. I like this study, it doesn't have as many degrees of freedom as is usual, the theory is kept to a minimum, and the data is kept to the maximum available. But you are right, there is still a lot to go wrong.
Anyway, I haven't seen many empiric studies of poverty traps. The real test is, given many of those if they will agree with the theory, not what any single one says.
Being poor is table stakes for being a human animal. The miracle of modern society is that billions of people aren't poor (as high as 90% according to Hans Rosling[1]). How did we make that happen? How do we make it happen for everyone?
[1]https://ourworldindata.org/grapher/distribution-of-populatio...
the poverty line is defined generously at ~$2 / day by most oecd countries, but making above the poverty line does not make you not poor.
all of that said, the field of development economics has been very rich in research these days, particular from the likes of duflo and banerjee
Am I understanding PPP correctly--this is a value equivalent to what $500 buys in the US?
That's surprising because the paper states this is above the amount available for conventional microfinance; I didn't realize it was indeed that "micro".
>this is a value equivalent to what $500 buys in the US?
Balboni, C, Bandiera, O, Burgess, R, Ghatak, M and Heil, A. 2020. 'Why do people stay poor?'. London, Centre for Economic Policy Research.
https://cepr.org/active/publications/discussion_papers/dp.ph...
"We have shown that poverty traps exist. People are poor because of a lack of opportunity. It is not their intrinsic characteristics that trap people in poverty but rather their circumstances. Poverty is not an innate condition. This has implications for how we think of development policy and for the value of eliminating global poverty."
> The question is whether the bimodality is symptomatic of a poverty trap, namely whether poor people do casual jobs and hold nearly no productive assets because they do not have the talent to do anything else or whether the fact that they are poor prevents them from acquiring the assets needed to climb the occupational ladder.
The cause/effect inversion, of talent/ability => asset acquisition, is always worrying. We might benefit, as a society, if we confront the IQ problem honestly and head-on, in order to have a more complete/accurate policy picture especially because it seems reasonable that wealth transfers should be optimised to enable higher productivity.
Consider: "The Bell Curve Review:IQ Best Indicates Poverty"(Benjamin, 2018), in which:
> I find that IQ is more correlated with poverty than socio-economic-status in every regression, regardless of what is included in the regression, by a factor of 3.
Also: Hsu(2015) https://infoproc.blogspot.com/2015/04/income-weath-and-iq.ht...
> Income mobility is strongly affected by IQ. In fact, IQ is a much stronger predictor variable than race for escaping the bottom quintile of income.
https://www.nyu.edu/gsas/dept/philo/faculty/block/papers/Her...
> In fact IQ is a great example of a trait that is highly heritable but not genetically determined [...]
However, "On the genetic architecture of intelligence and other quantitative traits" (Hsu, 2014, https://arxiv.org/abs/1408.3421) which cites a substantial amount of supporting research, notes:
"The largest component of genetic variance for both height and intelligence is additive(linear), leading to important simplifications in predictive modeling and statistical estimation. Due mainly to the rapidly decreasing cost of genotyping, it is possible that within the coming decade researchers will identify loci which account for a significant fraction of total g variation."
Block(1996) also incorrectly asserts that:
> IQ is enormously affected by normal environmental variation, and in ways that are not well understood. [...] IQ is very reactive to changes in environments in the normal range.
From Hsu(2014): "[W]ithin a range of favourable environments (i.e., providing good nutrition, hygiene, and access to education) evidence strongly supports the claim that individual differences in cognitive ability are largely associated with genetic differences.
It's pretty clear where you're at and what argument you actually wanna make so I'm out.
I don't know what that statement means, but in good faith, I'll assume you can substantiate it. Instead, consider "Upward Intergenerational Mobility in the United States"(Mazumder, Pew Trust, 2012) https://www.pewtrusts.org/~/media/legacy/uploadedfiles/pcs_a...
" Individuals, both black and white, with higher academic test scores are more likely to move up and out of the bottom quintile. Both black and white children born in the bottom quintile with median academic test scores are twice as likely to move up and out of the bottom quintile than if they had scores in the lowest percentile of the test score distribution. "
> It's pretty clear where you're at and what argument you actually wanna make [...]
I'm glad I was clear that we need a complete picture of the source of differential outcomes (that is, one that takes into account the tremendous amount that we know about human genetic evolution). A social welfare or wealth transfer system might have poor results depending on the correspondence between expectations and reality. It would be terrible, for instance, if wealth was transferred, yet recipients ended up eventually impoverished anyway.
fwiw My preference would be if more human effort was expended in developing therapies, protocols, medications that enhance general human intelligence. But as long as we can't discuss it openly, perhaps no progress will be made and wealth gaps will be exacerbated.
It certainly does make sense that intelligence has an effect on social-economic status, since intelligence is valuable.
How do you suppose we confront "the IQ problem"?
- A "Manhattan project" to discover protocols, tools, medications, cybernetics, new modes of education, anything really, that can enhance general human intelligence.[0]
- A rethinking of social welfare policies to take into account what we're learning about evolutionary biology and genetics. If certain heritable/genetic factors have a disproportionate impact on outcomes, we need to consider the hypothesis that certain well-meaning policies might not have a significant impact on permanently liberating people from poverty, given game theoretic constraints. We would need to find a way to make our economies positive sum, rather than zero sum games.
[0]: https://www.gwern.net/Embryo-selection
[1]: Converting Moloch from Sith to Jedi https://youtu.be/hKvVdGNzCQk
https://moneymaven.io/blackwealthchannel/community-building/...
That why people do stay poor - because of corrupt puppet governments owned by these 'elites'... The humanity should have much bigger, much better, beautiful achievements so far! But that's impossible in this system, which makes the people focusing mainly on bullshit, instead of things, that really matters! What people can do? Well, nothing special, just WAKE UP and start to think! The more the better. This is what the system fears: awake, thinking people. People who have the potential to be free... The system needs slaves! That's why the world looks what it looks like, that's why people suffer - needlessly! Thank you & good luck (we all need it).
Rising income inequality is breeding more inequality in educational opportunity, which results in greater inequality in educational attainment. That, in turn, undermines the intergenerational mobility upon which Americans have always prided themselves and perpetuates income inequality from generation to generation. This dynamic all but guarantees a permanent underclass.
For a fraction of the cost of universal healthcare, we could endow each child born in the US with a $250,000 trust fund at birth. That would be game changing.
If you took the same amount of money you could, just as an example, permanently endow a professional educator for every 20 births, which begins paying off right away, instead of decades later.
[1] https://en.wikipedia.org/wiki/Student_debt#United_States
Your persistent use of modifiers is misrepresenting my argument.
But they'd still need to buy health care, only they'd now have to do with while also funding an extra $900bn (per year!) trust fund program, wouldn't they?
Who do you think would be more likely, and more in need, to raid their children's trust funds? This would be yet another program where the poor don't get what was promised to them and the rich do just fine. Rich kids would get their $250k, and poor kids would find out exactly how their parents were able to pay the rent the whole time they were growing up.
If you want to help poor kids you need to make sure nobody else can take the money you give them, even though everyone around them has a very strong incentive to take that money. Otherwise you aren’t actually helping who you intend to help.
But I’d caution against the idea that lower-income parents are so predisposed to both gaming the system and stealing money from their children, which seems like an unintentional undertone of your comment.
To be clear, you are talking about children's trust funds being raided as a good outcome.
How would you feel if that violation of your rights happened to you, and it didn't happen to other children, and then some adult told you that it was ok that it happened?
This is actually a pretty good example of how bad it would be if parents raided their children’s trust funds, which is something that would definitely happen. Kids who had their money stolen wouldn’t be able to go to college.
But I directly addressed the impact of both the hypothetical trust fund and the hypothetical theft: if my hypothetical parents stole my shiny trust fund money to pay rent, I’d not need to spend my own part time earnings on it, and all of us would be way more likely to be able to set aside money for college, what with us not having to use our incomes for rent.
Savings from a child's part-time job would not come anywhere close to the hypothetical $250k proposed for the trust fund. This is a completely unconvincing argument. And you are still defending theft rather than condemning it!
Do you honestly believe it is acceptable for parents to steal money from their children? If not, why are you arguing that children should work to make up for the stolen money?
Or to workaround regulations designed to prevent that emptying, find they are indebted, or will shortly be, to an amount equal to their trust fund.
Redefining basic necessities as human rights and placing them outside the market will do so much to reduce poverty it will blow peoples' minds. However, this will of course come at the expense of the privileges of the powerful so such things are opposed.
It's helpful to think of this as a design question. Do we design a UI that many users fail at or is the problem the system design?
And since the natural state of humanity is poverty (after all we all started as hunter-gatherers), breaking out of it on your own is extraordinary. I wouldn't be surprised that the first communities to break out of poverty had 1 extraordinary individual that lifted their entire family/clan/tribe. Then through social osmosis more people in their vicinity were lifted, provided they cooperated/were open enough to the new thing that made their neighbors rich/were not discriminated for a million reasons/...).
Look at the Industrial Revolution. It basically spread geographically from the UK and is also spread socially to UK off-shoots, first.
Why would I be special? Why would you be special? We all tend to think we're amazing (and our families/clans/tribes/cities/countries), in many cases with very flimsy reasoning.
I'll rephrase my comment.
The natural state was sharing resources and taking care of a small group of people. Not working for a boss.
If you think we're more violent now, in the age of plenty...
Don't strawman me, I didn't say that, or anything about violence. All I was talking about was distribution of income.
Keep in mind all people back in the Stone Age lived... like people in the Stone Age :-)
Hobbes thought that man in the state of nature had a life that was "continual fear, and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short".
Watching nature documentaries about the lives of lions (and other critters) have me leaning towards the latter.
"Reports that say that something hasn't happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don't know we don't know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones."[2]
[1] https://en.wikipedia.org/wiki/The_German_Ideology [2] https://en.wikipedia.org/wiki/There_are_known_knowns