I was really young, but that really stuck with me.
Person after person came in, we did their taxes, and then we went over their expenses and each case was a frustrating puzzle that was impossible to solve. There just wasn’t enough money for all of the basic necessities let alone even a bit of savings. And these are folks who worked full time. I was a student at the time and I remember being annoyed that not once had this situation come up in the personal finance classes I’d taken.
It really changed my whole perspective. It was honestly the first time I’d ever even considered the possibility that someone could do everything “right” and still be poor. There’s a myth that you can financial-plan your way out of economic hardship but it’s simply not true.
Below a certain limit there is no way to do that without loosing more money like getting rid of your car.
And it's not only the obvious things. An acquaintance of mine was a single mother (ex-husband in prison) and had to decide whether she could afford to allow her children to take a bath in the bathtub.
People underestimate how much such forced decisions can damage mental health and the ability to work.
Many wealthy-but-broke people still have assets (like significant equity in a house) that give them runway (sometimes years) to sort things out and make life impacting decisions (such as moving far away to reduce expenses or contacting a friend from before to find you job).
Exactly. I grew up poor and my teen employment was bust-your-ass jobs like factory and restaurant work. I was once on a contract for a large company, and throughout the day I'd watch the office employees enjoy quiet, pleasant days with plenty of chatting with coworkers. The most strenuous thing they'd do was occasionally rush from one meeting to another.
They'd all be gone by 5 and I'd stay working. Then I'd see the cleaning contractors come in and zoom through the office, working hard and never taking breaks. It always made me a little mad that most people there never even saw the hardest workers in the building, let alone appreciated them.
It took me a while to understand that work is not paid based on difficulty, but on labor supply and demand.
The reason why many very hard jobs pay so low is because there’s lots of people who will do them.
There’s an axiom about smart work > hard work but I think that oversimplifies too much.
I did manual labor for a few summers and it didn’t pay very well. I just didn’t understand why my work was so hard and paid so little and it frustrated me.
But understanding how wages work at the macro level gave me some mental peace.
There's a hell of a lot more to it than that. From hiring bias, to school bias, to class bias, to name bias, to area bias - from sheer propaganda to straight up coercion. From lobbying, to perverse subsidies, to externalization of costs, etc, etc, ad nauseaum.
"Understanding how wages work at the macro level gave me some mental peace."
Are you quite sure that said mental peace isn't blissful ignorance... Because ignorance is only blisfful to the ignorant. America's wages at the macro level are deeply, catastrophically, even systematically unjust, in horrifically short-sighted ways.
Of course there are micro instances with particulars to a situation, but the main driver for wages is supply and demand.
The reason the janitorial service only gets $12/hour is not a result of all the biases you mentioned, even though it’s hard work- unpleasant, time constrained, shift work hours. The wage is low because many, many people are capable of doing the job.
I’m not sure why you would think America’s wages are unjust. But that can exist at the same time as supply and demand issues. Perhaps it is unjust that people make too little, but the reason isn’t that the universe is an asshole. The reason is that lots of people are capable of doing jobs that are hard, so it’s easy to pay less.
So the injustice is because people need more skills and are only capable of taking jobs that lots of other people can do, and few demand.
But again, wages aren’t set based on difficulty, or value, or the intrinsic need for human dignity of the people performing them. Wages are set by supply and demand.
Tons of these decisions are non-factors for those who have enough to just have their kid take a bath without worrying about it.
Another example are those who can fill up a gas tank when they stop, because they’d rather minimize the number of stops at gas stations and don’t need to worry about whether they will over draw or be able to eat if they fill up their tank).
And if the situation was some people cannot escape this hardship, and there aren't spare resources allocated to other people, then we could say OK, our basic premise must be wrong, it's just inevitable that some people will suffer this hardship.
I think it's plausible this was sometimes true in a middle ages farming community during famine. If we re-allocate food from the "wealthy" with plenty to eat to those with none, some might starve anyway, there just isn't enough food.
But in our society that's not the case, we have tremendously wealthy people and these people in hardship, therefore I argue the fact you discovered is a failure of policy and it is worthwhile to contemplate whether politicians you consider supporting are addressing this failure, or whether they instead believe (or pretend to believe) the myth or perhaps in fact they consider hardship for others a desirable outcome, ie they are despicable people.
each case was a frustrating puzzle
What puzzled you? The necessities should never be a puzzle. If the rent, the food, the utilities, the insurance, and the day care add up to less than the income, then everything else could be saved if you dispense with luxuries. If the necessities are more than the income, you either have to cut back on something important or work a second job. That's not fun, but it's also no puzzle.
And a lot of people literally do not know any better. They've never had someone teach them how to manage money and potentially had bad role models growing up. So its easy for you to say, with the knowledge it seems like you have, this is what you need to do. It's much harder to put into practice.
Especially when you consider there are many folks that do manage their money well, don't splurge on non-essentials, work multiple jobs and still cannot make ends meet.
Where does "psychology of decision making when poor and struggling" stop and personal responsibility begin? Can every suboptimal decision be excused because of "psychology of decision making when poor and struggling"?
What gave you that impression? In my initial comment I acknowledged the concept of excusing suboptimal decision making due to "psychology of decision making when poor and struggling". How is that different than what you're saying?
>3. (transitive) To provide an excuse for; to explain, with the aim of alleviating guilt or negative judgement.
Earlier in the thread there was definitely a tone of negative judgement. ie. "people show up all the time with a litany of complaints and a litany of awful, awful budget mistakes they have no interest in fixing"
(It's actually amazing this is almost a Nobel-prize worthy observation in economics. This is psychology 101.)
If you ask why or what kinds of mistakes they make, now that is where the books go deep. Suffice to say those mistakes are not unpredictable and people can be nudged to make a better (dare I say correct) choice.
Right, but I'm not the person giving the negative judgement. I specifically recognize the possibility of "excusing" them (ie. not negatively judging them) in some cases, and ask whether they should be excused in some cases or all cases. After this long conversation it appears you believe in the latter. Is this correct?
That's why we need a UBI - to give the poor people leverage. We saw it a bit with the unemployment bonuses - companies are having to raise their wages finally and are complaining about it, and we might finally see inflation. Every keeps treating it like a bad thing, but in reality, the late 70s with high inflation were the most "equal" times historically, since inflation with wage indexation is actually more akin to a wealth tax on the rich, which I totally support.
I'm not accusing you of this, but in my experience, the people who preach "personal responsibility" often do not take the time to understand the issues preventing people from making good decisions, and so aren't even working on the right problem in many cases. And in saying that, please be aware that I do feel there is a place for personal responsibility and it's an important factor in anyone improving their situation. Just not the only factor needed.
This. If you don't know how money works, most people who offer advice are just trying to scam you. But not taking any advice is also not helpful.
If I knew how to invest in index funds 20 years ago, who knows, I might have already been halfway to retirement. Before I had kids, I was able to save a large part of my salary. But everything I did with the money -- following the advice of people pretending to be experts -- only made the money disappear.
If someone has a friendly person who spends a day or two helping them set up the system, so that all they need to do later is send extra money to a specific account once in a while, it can change their future dramatically. But many people do not have such friend.
What do they do then? Starve?
https://www.cnbc.com/2020/11/19/walmart-and-mcdonalds-among-...
About 70% of those receiving federal aid were already working full time.
For the most part we have rent (mortgage), food, utilities, insurance, and day care (have you looked into the cost of this?) all locked up and well-budgeted, but sometimes someone leaves the door open or the hose on too long and we have an unexpectedly high utility bill. One time my wife left an entire bag of groceries behind the car and accidentally backed over it. When COVID hit and my dad was simultaneously suffering from a suppressed immune system we had to stop leaving the kids with my parents and up our daycare expenditures quite a bit. These sorts of problems aren't really problems for us, we can just cover the added expense out of our "emergency savings" bucket, but if two emergencies happen back-to-back sometimes that bucket gets depleted and we have to draw from "vacation savings" instead. Fortunately we're able to fill these buckets with hundreds of excess dollars a month, so they are usually adequate. I could see it being problematic if the buckets filled at a much slower rate.
Is it fair to say that low income earners in New York and San Francisco should move somewhere else to have kids? Will we only have McDonald's in Ohio?
Then you come in and argue that their experience can’t be true because you read something on Reddit. What an absurd and rude display of privilege.
If it is a necessity, by definition it cannot be cut back, unless you want to starve to death or live under a bridge.
>McDonald’s was among the top five employers of Medicaid enrollees in five of six states and SNAP recipients in eight of nine states.
>Other notable companies with a large number of employees on federal aid include Amazon, Kroger, Dollar General, and other food service and retail giants.
>About 70% of the 21 million federal aid beneficiaries worked full time, the report found.
" It seems to me to be equally plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country." - FDR
TLDR: Minimum wage was never intended to be less than a living wage. If you're working full time and can't afford food, why should the company get away with forcing taxpayers to make up the difference?
Your oversimplification of the issue glosses (intentionally?) over the real issue.
https://www.cnbc.com/2020/07/14/minimum-wage-workers-cannot-...
>Full-time minimum wage workers cannot afford a two-bedroom rental anywhere in the U.S. and cannot afford a one-bedroom rental in 95% of U.S. counties, according to the National Low Income Housing Coalition’s annual “Out of Reach” report.
>In fact, the average minimum wage worker in the U.S. would need to work almost 97 hours per week to afford a fair market rate two-bedroom and 79 hours per week to afford a one-bedroom, NLIHC calculates. That’s well over two full-time jobs just to be able to afford a two-bedroom rental.
But yes, go on about how thse people need to 'dispense with luxuries' and 'work a second job.'
Actually you don't, of course. I had a 10-speed bike (remember those?) and a minimum wage job at a restaurant. I rented a room for $100/mo. from a young woman (maybe I was helping cover her rent?). I was able to swing tuition at a local community college.
Man, I still remember riding the 10-speed in the midwest snow to the community college in the morning as cars threw up sleet speeding past.
It was a delicate balancing act to "bootstrap". And this was in the 80's. I don't think today's rent or college costs would make it repeatable today.
It is well illustrated by a quote from Terry Pratchett
> The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.
> 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.
People spend 90% of their wage on: rent, food and basic services. Can you be very smart and hack your way into halving your monthly rent? Can you be very smart and buy a really good potato that will last you for years? Can you be very smart and negotiate a better rate for the utilities you pay? Come on, man.
Of course, planning and spending carefully go a long way, but that metaphor is a joke.
But there is a serious problem behind it.
For example, with food, if you have enough money you can afford to buy large quantities and take advantage of discounts.
For rent, it you have money, deposits won't be a problem, and landlord may be more willing to give you interesting offers. Poor people are at risk of not being able to pay the rent, and landlords have to account for it. You may even buy and not pay the rent.
For utilities, if you have money, you can buy more efficient heaters and appliances, better isolation, maybe even solar panels and stuff like that which may be profitable after a few years.
That said, I don't see why we can't have both (A base level of UBI + a federal jobs guarantee)
Yes, by splitting with someone else, or worst case moving.
Can you be very smart and buy a really good potato that will last you for years?
Yes again, by cutting and planting it, or at least part of it.
Can you be very smart and negotiate a better rate for the utilities you pay?
Sometimes, by moving to a lower cost area, or by shedding unnecessary usage and getting cheaper options. Get slow Internet instead of cable TV. Use an older phone on a cheap cell plan instead of the latest flagship on a subsidized plan. Take shorter, colder showers. Turn the lights off.
If you don't have any money right now you are often forced to make decisions that cost you more money later, which sets up a vicious circle.
Metaphors can be tricky.
AirBnB exists, for example. There have been people who sleep in trains and rent out their apartment in their absence - it’s not fun, but it does reduce rent.
Potatoes can be grown, for example.
You can shop around for a place where utilities are included, for example - and many utility companies will give you rebates to do things that lower your bill.
None of these are really a path out of poverty though.
If I can't immediately afford to send something for repair, then I keep using it until it completely wears out, have an ongoing worse experience, and ultimately a larger expense later on.
$800 car < "a damn" << $800 cash
Yet, being poor is expensive, so the poor person forks out $800 for a car that isn't worth a damn.
(Reference to "Being Poor": https://whatever.scalzi.com/2005/09/03/being-poor/)
Houses and land have, traditionally, been great equalisers because even the lowest-end house/land is still an asset. Now the poor are unable to buy houses/land again they are forced to be pretty much 100% consumers. That's how you stay poor.
Some people live in a bubble so far from the real world that almost seems fantasy.
6,000 EUR per month is $7,300 USD per month is tough if you’re a new pharmacist in the US and need to repay $300k of student loans and make up for 4 to 6 years of lost income and catch up retirement savings, as an example.
As soon as you put "saving for retirement" as something that's even possible, you're no longer in the realm of what's genuinely "tough".
"Oh, those people making three times what I do a month have it so tough! After paying way more than the minimum on their student loans and putting aside a large chunk of money for retirement, they might only have a thousand dollars or so of truly disposable income!"
"Tough" is when "disposable income" is a fantasy, and you're regularly having to choose between whether to pay your heating bill or buy enough food for the rest of the week.
The comment I responded to was about a politician complaining about a certain payrate. To which I wanted to show that it is possible to have to have to be stretched thin (mentally), and the politician is not thinking about having to cancel their third overseas vacation. Yes, they’re not on the very last rung of the ladder, but slipping off your rung also causes worry.
The concrete part is that people with that level of income (large, but not so large as to make all problems disappear) know that to be comfortable in the future they need to save a big chunk of their income. The people living with much lower incomes just don't have that luxury at all. Which is kind of the point - it's totally different worlds.
I think we probably agree on the situation but disagree on what terms make sense to describe it.
For example, if you get your bachelors in 3 years instead of 4 and spend $30k on tuition and earn $90k by working, then that would result in an extra $120k in compared to spending 4 years in college.
I class it as an expense, because everything has an opportunity cost, which is defined as your 2nd best option. It is not always useful, for example thinking about spending time with your kids rather earning $15 driving for uber or something. But it could be, if you need that $15 to feed your kids.
I disagree that lost income is purely psychological. There are biological realities to deal with, especially in the US without the social safety net of other countries, that make lost income important. The first two that come to mind are the significant cost of raising children and retirement. Those are ticking clock issues to many people.
I agree they are two different worlds for low and middle income people. But we could play this game with even lower income people elsewhere in the world and reduce the issues of the developed countries poor.
It was nearly three times what I was making and I thought "I can manage with so much less, wtf is this person’s problem?"
If someone years ago making 175k a year coding doesn't have healthcare insurance then it's likely of their own doing either through contract renegotiation or taking a pretty damn bad benefits package for the sake of a fairly high salary for such a position.
It's not that simple, given the health care mess in the US. I have a friend with top-shelf insurance and salary at bay area FAANG company who still has >$50K out of pocket medical costs every year.
In the US, medical insurance out of pocket maximums don't mean it's the most you can pay.
I've had years where according to the insurance company accounting my out of pocket has been less than $1000, but according to bills I actually had to pay my out of pocket was close to $10K.
I think no matter how much you make, higher salaries always seem so much easier.
People can either budget or can’t, I don’t think it matters the actual amount. I’ve met people who were budgeted and running a family on $30k and people paycheck to paycheck on $300k.
This was right after she was first elected, before she took office.
I no longer remember what the meeting was about, but I think it must have been related to why the company couldn't afford a raise people were expecting. Somebody asked him a question that I couldn't hear; he looked a little flush and responded quickly, off the cuff. This guy who was wearing a nice suit, this guy who had clean hands and no burns from the presses, this guy who was easily clearing 10x what his workers made: this guy said, "I live paycheck to paycheck just like you all do!" And implied that he was just helpless in the face of his wife spending to much. Everybody in the room scoffed at him. I'm still scoffing.
I do a lot of 'proceduralised' jobs, but I'm 'lucky' in that I get to define and hone the procedure and then it tends only to be necessary for a few hours or a day or three, before I move onto something else entirely. I get a wee quick out of making things more efficient, then get to move on before my brain calcifies.
The thought of acting a mere part of a machine for 8 hours a day, weeks, months and years on end is ... well, it makes me appreciate my job, even at its worst!
Interestingly, Toyota's factory culture is very different. It's part of company philosophy to seek continuous improvement. They're also big on cross-training and investing in staff. Basically, they respect that hands come with brains, and that it's worth engaging both. I suspect I would have enjoyed that much more. If you're curious, the This American Life show on NUMMI gets at the contrast between the two approaches.
It depends on where you live.
I lived in New York City for years. If you had a family, it would be hard to live there as on 6000€/mo, unless you had been living in the same apartment for decades. The median cost of a 2-bedroom apartment there is 3000€ a month, taxation is high (federal, city and state taxes), food is wildly expensive, etc.
I hear London and Tokyo are even worse.
Someone earning $7/hr makes $280/week. I can’t imagine trying to get by on that even with no dependents.
Yes the instinct is to pay teenagers less because we generally cannot fathom them capable or experienced enough to do “real” work. But does this set the stage for the devaluation of entire classes of work because they’re seen as “for teens?”
No, but their living arrangement does affect whether it's possible to live on that wage, which is what GP was talking about.
The other ones are getting enough money to live from it comfortable enough, but are stupid in managing it, and make themself poor by they own inability. Knowing how to handle your money is an important skill for not being poor. But it's something that in the wasteful societys is not educated at all. Similar being a bit frugal and investing your money longterm is something especially the older generations seems to lack understanding for.
So for the second group of people your relatives comment makes sense.
See Nick Maggiulli's "The Biggest Lie in Personal Finance":
> All the expense tracking and goal setting in the world cannot make up for an insufficient balance.
* https://ofdollarsanddata.com/the-biggest-lie-in-personal-fin...
In the US, per BLS, the bottom 20% of earners spend more than they earn on basic necessities: housing, feed, healthcare, transportation. The next 20% barely managed to cover them, without much left over.
This is why I liked Thomas Piketty's definition of the "middle class" being income earners in the 50th to 90th percentiles: enough to pay for life's necessities, with some left over for niceties (but not so much as get into the situation of having piles of money earning interest on interest).
* https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
But I suspect that this might be more common amongst those that rose from low but not very low income, I could imagine that the group of people who rose from extreme poverty contains a considerable number of people very much able to save. It's certainly not the only reason for poverty to exist. But if the poorest person you know is the high(ish) income/spend it all kind, I can easily see how you'd come to the wrong conclusions.