A Sympathetic And Science-Driven View On Why Poor People "Waste" Money On Luxury Goods
There's something to this -- to the notion that dressing classy, looking good, will get you perks and even just decency from other people, who might not otherwise treat you with it.
In fact, I remember reading a book about the Holocaust, in which some woman talked about how she felt wearing lipstick kept her alive -- and how she knew she had to wear lipstick to do that. If I remember correctly, she smuggled one tube of it into the camp.
Well, there's an interesting piece on Talking Points Memo, "Why Do Poor People 'Waste' Money On Luxury Goods?" by Tressie Mcmillan Cottom:
My family is a classic black American migration family. We have rural Southern roots, moved north and almost all have returned. I grew up watching my great-grandmother, and later my grandmother and mother, use our minimal resources to help other people make ends meet. We were those good poors, the kind who live mostly within our means. We had a little luck when a male relative got extra military pay when they came home a paraplegic or used the VA to buy a Jim Walter house (pdf). If you were really blessed when a relative died with a paid up insurance policy you might be gifted a lump sum to buy the land that Jim Walters used as collateral to secure your home lease. That's how generational wealth happens where I'm from: lose a leg, a part of your spine, die right and maybe you can lease-to-own a modular home.We had a little of that kind of rural black wealth so we were often in a position to help folks less fortunate. But perhaps the greatest resource we had was a bit more education. We were big readers and we encouraged the girl children, especially, to go to some kind of college. Consequently, my grandmother and mother had a particular set of social resources that helped us navigate mostly white bureaucracies to our benefit. We could, as my grandfather would say, talk like white folks. We loaned that privilege out to folks a lot.
I remember my mother taking a next door neighbor down to the social service agency. The elderly woman had been denied benefits to care for the granddaughter she was raising. The woman had been denied in the genteel bureaucratic way -- lots of waiting, forms, and deadlines she could not quite navigate. I watched my mother put on her best Diana Ross "Mahogany" outfit: a camel colored cape with matching slacks and knee high boots. I was miffed, as only an only child could be, about sharing my mother's time with the neighbor girl. I must have said something about why we had to do this. Vivian fixed me with a stare as she was slipping on her pearl earrings and told me that people who can do, must do. It took half a day but something about my mother's performance of respectable black person -- her Queen's English, her Mahogany outfit, her straight bob and pearl earrings -- got done what the elderly lady next door had not been able to get done in over a year. I learned, watching my mother, that there was a price we had to pay to signal to gatekeepers that we were worthy of engaging.
I sympathize, but I think there's a stretch being made here -- from what this woman's mother did at a different time and the purchase of pricey designer goods now.
The thing is, it's possible now, in a time of discount stores, eBay, and heavily discounted designer goods, to dress elegantly for very little money.
The buying of overpriced designer goods by poor people is most likely about something else -- what anthropologists call a fast life history strategy. It seems to be triggered by instability (including, for example violence, an unpredictable family structure, and not enough food to eat) in a childhood environment. This, in turn, triggers those in such an environment to put all their effort into mating right now, right away.
This psychology tends to lead to promiscuity, violence, and an inability to delay gratification. We see these things as maladaptive -- and they are, in stable environments. In fact, this strategy is adaptive in this environment.
If, on the other hand, you grow up in a stable environment, it pays to wait -- to have sex, for example -- and to delay gratification in various areas of your life. This is what's called a slow life history strategy
So, it's easy and tempting for those of us with a slow life history strategy -- who grew up in more stable neighborhoods and families -- to sneer at those with a "fast strategy." However, it's kinder and more scientifically well-founded to understand it...to understand why somebody who is psychologically adapted in this way might be prone to blow all their money on a designer handbag they really can't come close to affording, and screw tomorrow.
Another example of fast strategy in action is the buying of flashy luxury vehicle mods by people who live in ramshackle homes, from a study by Jessica S. Kruger and Daniel Kruger that I posted at the Applied Evolutionary Psychology site.
Can people change their life-history strategy? It's currently unclear. However, there's increasing evidence that personality -- which was thought to be relatively stable throughout a person's lifespan -- can be shifted through action. I write about this -- dramatic change through action -- in my new "science-help" book, "Unf*ckology: A Field Guide to Living with Guts and Confidence."
I suspect that by acting conscientiously repeatedly, while living in a stable environment, it may be possible to shift from a fast life history strategy to a slower one.
I learned, watching my mother, that there was a price we had to pay to signal to gatekeepers that we were worthy of engaging.
Cause we all know no white person ever got bounced by the bureaucracy
lujlp at September 24, 2018 11:07 PM
Luxury random crap is cheaper than major life purchases.
Education and real estate cost a f@#$load.
A Hermes scarf is what, $400? Someone who doesn't have tens of thousands to spend on an education might well have $400. That $400 is not going to buy them an education, but it will buy them a luxury silk scarf.
Now, someone who has just barely enough to spend on an education is not going to blow $400 on a silk scarf. The $400 would make a difference in whether or not they can pay their tuition, or their mortgage, or whatever it is they are spending on.
Which is why wealthier people are sometimes confused and all "How the hell can they afford one when I can't?"
It's because wealthier people are spending money on other more expensive but more beneficial in the long run things.
NicoleK at September 25, 2018 12:30 AM
Absolutely Nichole.
Yes, generations can change their life strategy. Ours has.
My grandparents were the first ones to attend school - at all (at least on my grandfather’s side.) They were deaf mutes.
My mother moved out at 15 and become self-supporting as a live-in maid. There she learned all about how to walk, talk, and dress. She spent every penny she had to buy a designer dress for her first date with my dad, a young self-supporting college student.
My parents were on an uphill climb, moving every year climbing the ladder of success. For us kds, it meant instability. They thought a college education was a luxury because my father dropped out yet was wildly successful.
I learned that you never knew when you would have to I root. My education and extracurricular activities were adversely effected by the moves.
I didn’t go to college until I had achieved stability. We were the first generation to go to college. My younger sister was the only traditional student. Yet all of our children are going straight to college and naturally think ahead in ways that we never imagined.
They also have some type of security network due to the stability of our lives. They have people that they have known for years that they could turn to if they ever needed to do so.
Jen at September 25, 2018 5:01 AM
Jen, I think people can change their life history strategy, but as far as I can recall, there is yet to be a body of research supporting it.
Great on your mom and how you and your children are approaching life.
Amy Alkon at September 25, 2018 5:51 AM
Keep in mind that a significant portion of adults in America can't scratch up $400 for an emergency, like a trip to the ER or replacing the CV joints on their car.
So slap it on a credit card @ 18% or more interest. A pity no one teach financial math any more.
I R A Darth Aggie at September 25, 2018 7:43 AM
Generations will only change their live strategies if there is an incentive to do so. If continuing the same course offers a reasonably acceptable payoff, that course will be continued.
One of the things that welfare has done is to decrease the incentive to strive. The risks of striving are high, but the rewards can be as well. However, when welfare offers a reasonably acceptable lifestyle without striving, then many will forego striving.
Of course, it could, and will, be counter-argued that welfare offers a landing spot for strivers who fail. And it does. However, it also diminishes the incentive to strive in the first place.
College and trade schools are expensive and a lot of work with no guarantees of success, or even mediocrity, afterward. For someone with a lifetime of poor schools, a chaotic home life, and non-existent role models, that's a pretty high mountain to climb. That daunting climb reduces the incentive to pursue an advanced education.
Conan the Grammarian at September 25, 2018 8:18 AM
The other reason poor people "waste" money on luxuries is that they may never have another chance at that luxury. If a poor person gets a windfall and puts it in the bank, normal life expenses (flat tires, appliance repairs, etc.) will eat it up eventually, leaving the poor person nothing to show for having had that windfall.
By spending the windfall on something tangible, the poor person has evidence of having had at least one windfall in his or her life, having had something more than poverty and a dead-end job.
And, as NicoleK points out, to the middle class an extra $400 is a semester at community college. The middle class is confident that there will be another $400 to pay for the next semester. The poor are not. There is no payoff for one semester of community college. There is, however, a payoff to having a nice scarf, even if it's nothing more than simply having a nice scarf.
Conan the Grammarian at September 25, 2018 8:26 AM
"Cause we all know no white person ever got bounced by the bureaucracy"
His mother didn't suddenly change skin color Lujlp. He was noting that bureaucratic people treat people differently based on the clothes they wear (appearance of wealth). And that is true. Try talking to a lawyer while wearing jeans and a t-shirt. Then try talking to a lawyer while dressed in a suit. You will get a different response. Same goes with judges and even the social security people.
Mind, the people at McDonald's don't care. They'll treat you the same either way. Especially now they've all been replaced with robots.
As for the poor people wasting money thing, I think everyone has it backwards. People who waste their money end up poor. They may have been born poor as well. After all we inherit a lot of our habits. But being poor doesn't make you waste money. Instead wasting a lot of money means you end up being poor.
Ben at September 25, 2018 9:28 AM
Conan Says:
"to the middle class an extra $400 is a semester at community college."
Where are you getting this number from?
Average annual tuition and fees for students attending public two-year community college is over $3000 annually.
You seem to be off by a factor of 4 in terms of the per semester cost.
Artemis at September 25, 2018 10:18 AM
This is a good thread. I'd like to add one additional tid bit:
I believe it is an axiom that poor folks KNOW that they are poor. And they are frequently treated badly as a result. A windfall spent on a luxury item, will, at least for a moment, help them to feel rich.
So does blowing $100 on drinks for the table (or room) when you don't know how you are going to make rent that month.
Worrying about money results in feeling poor, and all the baggage that entails. Blowing all the cash in a fat wallet makes you feel rich, if only for a moment.
railmeat at September 25, 2018 11:37 AM
That would explain why on the furry population -because it's been years since it stopped being a community- you'll ofter hear about a segment of said demographic putting a gofundme for rent and food money while at the same time blowing hundred of dollars on commissioned artwork.
Sixclaws at September 25, 2018 12:00 PM
My wife grew up in white lower, lower class. She usually stayed with a grandma because mom was "out", didn't know her dad, and never went to high school. Like most girls from that type of environment, she first had sex at around 11
in a situation now considered rape (she didn't think of it as rape, because he was nicer than most other guys and didn't actually hit her). Definitely the type of environment that produces a live fast way of thinking.
She was always very careful about money and I have never seen her buy flashy goods like overpriced tennis shoes or an expensive car. On the other hand, she invested heavily on herself and carefully worked to fit in with the upper classes.
She worked graveyard at a truckstop and spend every dime on clothes for job interviews. Then she got a job as an office girl at a law firm and learned to type reports for the court by copying what was written before. She spent money at a thrift store copying what the other girls wore (and was lucky enough to have a great boss that pointed out privately when she got it wrong). She carefully imitated how everyone else talked and their mannerisms like holding their wine glasses differently. (to all of the "they didn't hire me because of my black accent" people, a mountain accent is even worse, watch any TV show or movie, if they want to show a person is a complete moron, they give him a southern or mountain accent)
Did she ever splurge and spend money just to "feel rich for a moment"? Kind of, she bought fancy shoes and a handbag, but not ones that made her stand out, she ones that made her look like just another young 20's city girl. She loved to go out dancing where she usually got in for free and never had to pay for a drink.
By the time I met her, she was a well put together sophisticated girl working full time and going to college part time. She was intelligent, socially adept, and knew most of the judges by their first names. Only her unusual politics betrayed her origins.
Now she's married to a doctor, has three kids and two step kids and runs the local high school booster club. She dresses classy but understated. You would never know she didn't grow up in a typical professional class family, unless you noticed that she refuses to go into any debt of any kind and always pays cash.
She got here by deliberately copying the people from the upper classes. You used to hear similar stories about people in the great depression days. Now we're in a strange situation where the rich kids dress and act like homeless people.
Joe Miller at September 25, 2018 12:40 PM
Kinda nitpicking a minor point and losing the forest for the trees there, Artie.
I'll admit, it's been a while since I took classes at a junior college. I'm not exactly up on the current semester tuition costs ($4,500 at the local community college with in-state tuition). I'll concede that point to you.
My overall point, however, still stands. For poor people, getting one semester in at the local JC is not going to result in higher pay, better job prospects, or a skill certification. And getting the next semester's tuition is kinda dicey for them.
So, spending any windfall they may get one semester at the local junior college has little immediate (or even long-term) payoff for them and, thus, little appeal.
The middle class folks, on the other hand, are generally more certain they can rustle up next semester's tuition and complete a program. So, the deferred gratification of spending a windfall on their education has a payoff for them.
Conan the Grammarian at September 25, 2018 12:49 PM
We are no longer an aspirational society.
Conan the Grammarian at September 25, 2018 12:53 PM
Artemis: Where are you getting this number from?
Probably from the same place I R A Darth Aggie got the idea that you can pay for a trip to the ER with four hundred dollars.
Patrick at September 25, 2018 2:00 PM
I have three problems with this theory. The first is the definition of “poor”. The second is a definition of “waste” and the third is some agreed upon definition of “luxury good”
Other than that, I am on board with Ben’s analysis. People are notoriously bad with money. People above a certain income threshold can afford to be because the waste doesn't impact their standard of living or restrict their opportunities.
The poor that make it out of poverty into wealth and the middle class are those who learn to defer gratification, more often than not, and pinch a penny until it screams.
Government reinforces short term thinking by providing housing and food stamps with few if any strings. Many wealthy individuals do the same thing with their kids. Those who have their necessities provided for them, learn to think of cash money above and beyond that as fun money to spent on whatever. This goes for both those on welfare, and people raised in wealthy families.
The wealthy can keep bailing out their offspring. The poor dont have any reserves to fall back on.
Isab at September 25, 2018 3:38 PM
I will say that inflation is a beast. When Conan was looking at schools community was $400/semester. Now it's $4,000. By the time my kids are ready for that it will probably be $40,000 or more. The fed's goal of 2%/year is a crock.
Ben at September 25, 2018 4:17 PM
Joe,
I think you are on to something. Charles Murray in Coming Apart talks a lot about how the lower and middle classes often adopted the mannerisms of the upper classes. Now we have a large cultural divide and the direction is down, not up culturally.
Sheep mom at September 25, 2018 4:32 PM
Interesting post, Amy.
Feebie at September 25, 2018 5:50 PM
Not looking at schools. I had to take one semester at a JC due to transferring schools as an undergraduate. As a result, I actually have an Associate of Arts degree, along with a Bachelor's and a Master's.
Conan the Grammarian at September 25, 2018 5:52 PM
Conan Says:
"Kinda nitpicking a minor point and losing the forest for the trees there, Artie.
I'll admit, it's been a while since I took classes at a junior college. I'm not exactly up on the current semester tuition costs ($4,500 at the local community college with in-state tuition). I'll concede that point to you."
Thank you for conceding the point. That being said, I don't actually believe it is nitpicking in the context of your overarching point.
The reason I say this is because if the current per semester cost for community college is in the neighborhood of ~$1500, it becomes relevant to look at who actually has that kind of money available.
Please review the following report and you will see that ~60% of Americans have less than $1000 in their savings:
https://www.cnbc.com/2017/09/13/how-much-americans-at-have-in-their-savings-accounts.html
As a result we are left to ask ourselves who exactly is in the middle class if more than half of Americans cannot afford a single semester at community college.
My point is that by and large you aren't discussing the middle class... you are talking about the upper middle class when you discuss folks who can easily dispense with $1000 here and there without difficulty.
Artemis at September 25, 2018 10:23 PM
That isn't how this works Artemis. Many people don't pay out of savings for school. Perhaps most actually. Instead they either change current spending or take out loans.
Ben at September 26, 2018 5:01 AM
Another reason for this spending pattern was pointed out to me when I did charitable work - and noticed all the wide-screen TVs in tiny apartments:
Tangible goods are beyond the reach of creditors. Nobody is going to force a poor person to liquidate their wide screen TV or Hermes scarf.
Ben David at September 26, 2018 6:58 AM
I did not "discuss folks who can easily dispense with $1,000 here and there without difficulty." My point was about deferred gratification. When you know you can't get the next semester's tuition by hook or crook, spending your entire windfall on one semester of education makes little sense.
Notice, I did not say the middle class students knew they could tap into their savings, but that they "are generally more certain they can rustle up next semester's tuition and complete a program." Rustle up. Not already have in the bank.
Middle class students are more confident in their ability to get a loan, to borrow from relatives, to get a lead on a decent job from relatives or friends, or to get a fellowship or some sort of scholarship.
The article I recommended to Lenona in another thread talks about this, Social Capital. The woman writing the article is poor. She writes about her teenaged son not knowing people who have jobs, so he doesn't know how to get one and has no one he can ask. Same with getting an apartment, since his mother's experience is with begging government agencies for housing, not qualifying for an apartment on her own.
Of course, all this comes from a woman who knew enough about jobs to get an article published, but her point remains valid. Middle class people know a guy. Poor people don't.
I don't necessarily agree with everything she writes, but it's still an interesting point of view and an informative look into that point of view.
I'm working with a client now who does not understand why his low credit score is keeping him from getting an apartment. No one taught him what a credit score is and why it's important to maintain a good one, or how to.
The article you linked talked specifically about savings accounts, not investment accounts. How about 401K plans, ESOP plans, IRAs, and CDs? Bank savings accounts today pay less than 1% (0.03% at BofA); people keep their money elsewhere.
Of course, those other savings vehicles are not always liquid, so your point does have some validity; but college tuition today is not always kept in savings accounts - parents are using 529 Plans and, as Ben pointed out, adjusting spending in other areas (not buying a new car, not buying new furniture, not taking that Jamaican vacation, etc.) to put Junior through college.
Still, low levels of savings is one of the problems we have in this country. That problem could be alleviated somewhat if we'd stop taxing savings and investment (capital gains, interest income, etc.) and start encouraging people to save and invest. But that's another topic for another day.
Conan the Grammarian at September 26, 2018 7:01 AM
Funny you should mention that.
I used to work with the charge card collections director of the bank at which I worked. I was not in collections there (I've worked skip tracing elsewhere), but did help him build a staffing model. He told me that most debtors count on creditors not trying to collect on purchased items. So, he did just that. Using the debtor's credit card history, he'd demand in court to know where the purchased item was and that it be turned over to his department. He said he won that argument more often than not. According to him, that success got the bank left off many a bankruptcy filing.
Conan the Grammarian at September 26, 2018 7:26 AM
As opposed to going back and forth here, let me just ask you directly to define your terms.
When you talk about the middle class, how much are the earning per year and how much do they have in savings/accumulated wealth?
Artemis at September 26, 2018 7:27 AM
Ben David Says:
"That isn't how this works Artemis. Many people don't pay out of savings for school. Perhaps most actually. Instead they either change current spending or take out loans."
If a ~$1500 expense for education impacts you so seriously that you need to completely adjust your budget or take out a loan then I am not comfortable saying that person is in the middle class.
Such an individual is poor.
We aren't talking about thousands and thousands of dollars here.
Artemis at September 26, 2018 7:31 AM
Conan Says:
"The article you linked talked specifically about savings accounts, not investment accounts. How about 401K plans, ESOP plans, IRAs, and CDs? Bank savings accounts today pay less than 1% (0.03% at BofA); people keep their money elsewhere."
Good grief Conan.
If someone has 200k sitting in a retirement account they don't also tend to have less than $1000 in savings.
People don't go around locking up nearly 100% of their money in accounts that they cannot easily access in an emergency.
Out of curiosity, is this how you manage your personal finances?
You are being obtuse because you don't want to concede the additional point that most of the middle class can't easily afford what you are claiming.
Your entire thesis fails because it relies upon the middle class being in the financial position to easily afford defering gratification... but the data shows that in the majority of cases they can't either.
Artemis at September 26, 2018 7:40 AM
Since we are now talking about retirement savings:
https://www.cnbc.com/2018/05/15/how-much-americans-have-saved-for-retirement.html
This article shows that ~30% of adults have less than $5000 saved... and ~60% have less than 125k saved.
Are none of those individuals in the middle class?
Here are the stats for median household income:
https://www.cnbc.com/2017/08/24/how-much-americans-earn-at-every-age.html
I think some folks here are dramatically overestimating the financial standing of most of the American public.
Artemis at September 26, 2018 7:54 AM
One, that was Ben, not Ben David you quoted. And who said anything about "completely adjust your budget". You can minorly adjust your budget too. I just said education is not typically paid for by savings. And that is savings of any kind. If your parents are paying they hold off on that next car or cut back on the cable bill. And yes, a lot of education is paid for by loan. Typically a government based loan. ITT Tech died the day the Obama administration refused to approve loans for their school. And that extends all the way from poor to rich schools. I don't know about all the top ivy schools (Harvard is fully funded from their own investments), but pretty much anything below that is majority paid for by loans. Government backed loans at that.
As for income and savings, I don't dispute any of the articles you've presented Artemis. But it's been that way for a very long time. You just have a funny idea of what constitutes rich, poor, and middle class. In the US these three terms are most practically defined like this:
Rich - makes a majority of their income from investments. Either doesn't have a job or the majority of their income doesn't come from their job.
Middle Class - trades their labor for cash. I.e. has a job.
Poor - make a majority of their income from welfare.
How much money you make doesn't matter. There are people pulling in millions of dollars a year who call themselves 'middle class' and there are people pulling in $20k/year who do the same.
Another issue you seem to have mixed up is there is little correlation between income and wealth. In the US at least the two aren't that significantly related. At the extremes they link up but for the vast majority there really isn't a relationship between the two.
I will say Conan is out of date with the CDs. They pay like a savings account and haven't offered significant interest in roughly a decade. But retirement accounts aren't the only other options. Brokerage accounts are fairly normal. You can have $50k in a non-retirement brokerage account and it doesn't get counted as a savings account. Just as significant is those IRA dollars aren't as locked up as you might think. A lot of people take loans out against their retirement accounts for school or to buy a house. Not a good idea but a lot of people do that these days.
Ben at September 26, 2018 8:38 AM
Really? Ya think so?
The 401K is a pre-tax income instrument. That means the money is deposited before the person receives his/her paycheck. It's passive savings.
And, as an anecdote, I've had $200,000+ in my 401K with under $1,000 in my savings account before. My post-tax take home pay was enough to pay rent and other expenses leaving only a little for active saving.
Since the employer match was exceedingly generous (7%) and vesting was immediate, I was not so foolish as to pass up the free money. And I'm glad I didn't. My retirement savings are well above average (according the chart in your next post).
With interest rates ridiculously low then, I kept most of my liquidity in checking and I knew that with an adjustment to spending (forego a vacation or home improvement project, cancel the cable, etc.) and outstanding credit, I could take care of most emergencies. Not to mention that, with a penalty (10%) + taxes, I could always tap that $200,000. Besides, my house had increased in value three fold over the seven years since purchase, so I had that equity in the asset column of my balance sheet as well.
Your article discussed amounts in savings accounts, not overall wealth or access to money. While I agree that Americans don't save enough, to say the the middle class cannot get $400 in an emergency is a stretch.
I never said the middle class could easily afford to pay for college tuition outright with no adjustment in spending. I said middle class folks generally have the confidence and connections to feel they'll be able to find a way to pay next semester's tuition, including adjusting current spending habits, so paying this semester's tuition is not, to them, a waste of a scarce resource; it will pay off.
Deferred gratification only works if you have the confidence to know that the delay will pay off. Most middle class folks have that confidence. Too many poor people don't - even if they can pay today's tuition, they've no confidence they can pay tomorrow's or make the years-long effort pay off.
Artie, you're arguing just to argue. That's a real issue with you. Your points about low savings rates in the middle class are well-taken and clearly understood. But that's not what we're discussing.
The main point, the one you seem to be deliberately missing, is that poor people do not generally delay gratification - their immediate needs are too high and their regular income too low.
They'll spend a windfall on an ordinarily-unobtainable luxury rather than see that windfall get eaten up by daily expenses, leaving them nothing to show for it. Middle class people (with savings or without) generally do delay gratification and will hold a windfall for, or spend it on, things with a longer-term payout, for instance an education.
Poor people aren't stupid. They know a college education will pay off. They also know it's expensive and, even if they can pay this semester's tuition, they have no confidence they can pay for the number of semesters it will take to get the payoff - they can't get a student loan due to bad credit and having attended bad secondary schools pretty much eliminated their hope of a fellowship. Better to get something today rather than nothing tomorrow.
Poverty makes it difficult for poor people to delay gratification. They're short on time and money. One reason they're short on time is that poor people pay with time. They have to wait everywhere they go.
Go to an emergency room and take a look. The welfare hospital's emergency room is packed with people waiting hours for care. The middle class (insurance) hospital is not. I experienced that myself when I had to visit a local emergency room. It was the county hospital and took welfare cases. There were hundreds of them in the waiting room that day; the wait time was over 4 hours. The triage nurse took one look at my insurance card and advised me to go to the Kaiser hospital nearby. I did and was ushered in immediately since I was the only patient. I was out of there before most of the people in the county hospital had even been called.
Go to a high-end department store (Needless Markup, Bloomies, etc.) and see how long you wait before someone comes over to assist you. Then go to a Walmart and see if you can find an employee.
Compare grocery shopping at high-end chain versus the discount chain. Multiple checkout aisles open versus one or two; a wait of several minutes to check out at the discount chain versus little-to-no wait at the high-end chain. The willingness of the customer base to wait at checkout is very different.
Poor people pay with time because they have no money. And, because of that, they have no time. Being poor alters your mentality.
I think you, like many people, even economists, are conflating working class and middle class.
Met a guy from East Africa at a party once. We talked about what it was like coming to America. He said the oddest thing was that everyone he met claimed to be middle class, no matter their job or education level. No one copped to being part of the proletariat.
Conan the Grammarian at September 26, 2018 9:56 AM
I don't know that the question can be answered solely in terms of income or monetary assets. It's socio-economic class.
If I go along with Paul Fussell's breakdown in Class an engineering degree or nursing degree puts one solidly in the proletariat. Yet, those are high-income jobs. The same with football fandom - to wit, the smaller the ball, the higher class the sport. Fussell tends to be a bit of a curmudgeon, so take his work with a grain of salt, but he's on point here that social class is not always correlated with income.
Economic class, however, is tightly correlated with income. "Poor" is an economic description. In this example we seem to be using "middle class" to indicate people with reasonably good income-producing capability (i.e., college educated, professionally trained, licensed, etc.). In other words, people holding jobs that require some advanced level of skills and training.
The median income in the US is $59,039 a year. The Census Bureau classifies anyone making at least two times that, $118,080 a year, as "rich" The poverty line has been set by HHS at $24,600 a year for a family of four. This, even though anyone making $1180,080 in some areas of the country will be struggling (e.g., San Francisco Bay Area or New York City). Not to mention that in some areas $24,600 a year will supply a modest, but decent living.
Investopedia tried to answer that question in 2017. "The Urban Institute defined the middle class as adults with size-adjusted household incomes of between $30,000 and $100,000 for families of three. The Pew Research Center defines the middle-income category as including adults with family-of-three equivalent incomes between two-thirds and double the national median. This brings the range from $37,666 to $113,000 according to current levels"
The idea of social class has changed in this country. The old WASP ideal seems to be dead, if the changes from the Official Preppy Handbook to its sequel are any indication.
Conan the Grammarian at September 26, 2018 12:28 PM
"The main point, the one you seem to be deliberately missing, is that poor people do not generally delay gratification"
To jump into this discussion.
I fully agree that not delaying gratification is the main point. The question is why. It's not simply that their income is too low. It's their decision making.
Taking a payday loan to buy $200 shoes results in less $200 shoes in the future. If $200 shoes are very important for your self worth, then the predatory loan is a horrible idea. So why do it?
Yes some high-income people do this also, but in bigger amounts. I have neighbors with a $400,000 house and a $80,000 boat parked in front. My dentist, an old high school friend, said that they are making payments on $500 of dental work. They are fine now, but any minor dip in their income and everything will come crashing down.
My guess is that in both cases, they have never been hungry, desperately out of money. They both know that if they are completely out of cash either family (the rich guy) or the government (the poor guy) will see they don't starve.
My wife acts more like people from the great depression generation. She reuses plastic bags and tinfoil. Your only safety net is what you have saved up yourself. Everything is saved, money is never borrowed and cash is not spent unless absolutely necessary.
In modern America, people may be hungry, but they almost never starve. We have safety nets, and that moral hazard makes more people walk the tightrope of stupid spending habits.
Joe Miller at September 26, 2018 7:28 PM
The reasons are most likely various Joe. I've known people who don't delay gratification and in fact fear getting a large sum of money. They have security issues. Getting money and especially having anyone know they got money is like painting a target on their back begging to be assaulted and robbed. So the instant they have money they spend it as fast as possible. It is just safer to be poor.
I've known others who have a culture of poverty. Mainly due to government incentives. If you are looking at getting any money from the government it is usually best to look as poor as possible. So hide your assets and spend what you can't hide as quickly as possible. It is the rational way to maximize income.
I've known some who appear to be physically incapable of long range planning. One of my aunts is one of them. On the surface she appears to be fully mentally capable. In small tests nothing odd shows up. But her life is riddled with a failure to plan. Once consequences take more than a month or two to happen she quite literally can't conceptualize them. Those future problems aren't real to her so she doesn't react to them. It is quite odd to experience this. At least for me.
And then there are drugs.
A cure for poverty is similar to a cure for cancer. There are so many different cancers and they require different treatments to fix them. There are also many different forms of poverty.
Ben at September 27, 2018 6:50 AM
Actually that's a pretty good analogy. The reason one person is poor is probably not the reason the next person is poor. And what cures one person's poverty may not work for the next one.
Even my "poor people do not generally delay gratification" declaration was close to a one-size-fits-all blanket statement that should be revisited.
It's also why government anti-poverty programs don't work. Government programs do not handle outliers well.
Conan the Grammarian at September 27, 2018 9:17 AM
No Conan, I would say your delayed gratification idea is fairly universal. But the reasons why people don't delay gratification varies.
Ben at September 27, 2018 9:26 AM
Mainly due to government incentives.
Outstanding point.
My wife mentioned that as she got raises at work, government benefits such as subsidized child care went down. Unfortunately, the benefits went down faster than the salary went up. She'd asked her employer to stop giving her raises, but by that time she was already having a much harder time making a go of it as a full time paralegal than she did when she was unemployed.
Joe Miller at September 27, 2018 12:56 PM
"The reason one person is poor is probably not the reason the next person is poor. "
All happy families are alike; each unhappy family is unhappy in its own way.
-Anna Karenina
Tolstoy
Joe Miller at September 27, 2018 1:00 PM
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