The Rich Get Richer

[snafu]

The poor spend nearly their entire income to cover basic needs, rent, utilities, food, clothes, auto/transportation, entertainment. There is no money left for savings, ER fund, investment.

[disneysteve]

Originally Posted by snafu

The poor spend nearly their entire income to cover basic needs, rent, utilities, food, clothes, auto/transportation, entertainment. There is no money left for savings, ER fund, investment.

That is true to an extent, however the poor also have a much higher rate of cigarette smoking, alcohol use, lottery ticket purchasing, etc.

The poor tend to blow a higher percentage of income on frivolous stuff. Their priorities tend to be out of whack. I once did a house call to a home of a very poor family. The living room had a beautiful big flat screen TV on a decent stand and nothing else in the room. This was a number of years ago when TVs like that were a few thousand dollars. The poor, in my experience, are often much more attached to material items for appearances and status - the latest cell phone, manicured nails, fancy earrings, etc., even though they can't really afford any of that stuff.

[arthurb999]

I was serious with my comment.

There is ZERO reason to be poor... barring extreme reasons like disability, breadwinner death (but should have life ins), etc. A layoff is temporary and should not automaticly make you poor.

I grew up pretty poor for american standards. dad worked as a welder, mom stayed home with kids, we lived with grandmother, no cable, a/c, etc. I had a paper route to pay for the stuff i wanted.

What happened. I took out student loans and went to college. After that I got a decent job and went to grad school at night for my MBA. fast forward, I'm not poor anymore. there is no reason anyone couldn't do this. I'm not super smart, gifted or lucky. All it takes is desire and a plan.

No one told you to drop out of high school, become a janitor, smoke a pack a day and have 5 kids before the age of 25...

People need to take responsibility for their own lives... most of the time... you are where you are beacuse of your own choices.

[disneysteve]

Originally Posted by arthurb999

There is ZERO reason to be poor... barring extreme reasons like disability, breadwinner death (but should have life ins), etc. A layoff is temporary and should not automaticly make you poor.

So breadwinner should have life insurance. Who is going to pay the premiums for they family struggling to pay the normal bills? When a patient has to choose between filling a prescription medicine and buying food, do you really think they are going to keep sending money to some insurance company?

As for a layoff, it may or may not be temporary. If you've been living paycheck to paycheck, you've got no savings or reserve or EF to fall back on when the job disappears. Sure, you collect unemployment, but that isn't as much as you earned on the job and it doesn't last forever. I have many patients who have been out of work for a year or more at this point. They are barely surviving. It isn't so simple to overcome stuff like that.

[Broken Arrow]

Hmm, I have to be careful here.

Back in Sociology class, we've read several academic papers that studied and even measured being poor, and what causes it.

Of course, this was many many years ago, and that was on hard copies, so I don't have any links handy. But I do recall some of the thesis was that the economic environment is the cause, or is at least a major contributor, to being poor.

Consider a typical case example of "poor". Let's say you're born to a mother who is an alcoholic, or worse drug user. You have no idea who your father is because he's obviously gone. Household income is low, you struggle with school, some of your childhood friends have already been jailed or got shot, and you are both intimidated and tempted by gang recruiting.

Could someone, who is born into this sort of environment, rise above all that and become wealthy and successful? Of course. Is that what generally happens? No. In fact, these studies suggest that only a small percentage of the population ever rise above the economic condition they are born into.

But I did say I have to be careful, because true or not, it's all too easy for us to point our fingers and blame it on anything and everything else except ourselves. I do agree that, in the end, it is indeed up to us to rise above our environment and create our own success.

That said, I also believe that it is harder for some than it is for others, and to simply say that people are poor because they are lazy is rather unfair....

[arthurb999]

"So breadwinner should have life insurance."
Hell Yes.

"Who is going to pay the premiums for they family struggling to pay the normal bills? When a patient has to choose between filling a prescription medicine and buying food, do you really think they are going to keep sending money to some insurance company?"

They should not be in this sutiation if they made good decisions in life. If they made bad decisions, tough crap. If they can't afford where they live, move. If you can't afford food, get a better job... 2nd job... buy cheaper food, get food stamps.

"As for a layoff, it may or may not be temporary. If you've been living paycheck to paycheck, you've got no savings or reserve or EF to fall back on when the job disappears." [/quote]

Living paycheck to paycheck is 100% their own fault. Live below your means and save. This means spend less or make more... pick one and go for it.

People make it seem like being poor is just the hand you were dealt and you have to be poor forever. That's not the way it has to be...

[GREENBACK]

Enviorment certainly plays a critical role in whether people succeed in life. It would have been very easy for me to have dealt drugs and to have ran with the wrong crowd. What kept me away from that lifestyle was (TWO)
loving parents and athletics. I saw many kids go down the wrong path and end up in jail, dead, drug addicted, or some combination of the 3. When you see this stuff everyday as an impressionable youth you assume everyone behaves this way and before you know it you're trapped in this cycle. I don't know if many grasp this if they haven't lived it.

Poverty is a mindset in many ways and yes it's possible to break out of it but it can be hard for many to even dream that they can better their situation because they've been around the wrong people for the majority of their lives.

I worked part time at a battery factory and part time in a lumberyard many years ago. These were both potentially hazardous jobs. I had no health benefits from either job. I had no health insurance period. I shutter to think what my life my be like today if I had experienced an accident at that time. This type of situation can make you legitimately "poor".

[disneysteve]

arthur, I don't think any of us are suggesting that poverty can't be overcome but rather that it is exceedingly difficult to overcome. When you have no education, no money, no transportation, no family support, no health insurance, etc., it is very, very difficult to make any progress in life. The poor, as GREENBACK alluded to, often work manual labor, physically demanding and dangerous jobs where they are unlikely to have health insurance. One simple injury can be devastating. I could tell you any number of stories along those lines from my practice.

As for getting 2nd or 3rd jobs, that is nearly impossible when your 1st job requires 10-12 hour shifts 6 or 7 days each week, often with fluctuating hours and mandatory overtime. Also, you are dependent on public transit so may spend an hour or more commuting in each direction. If you also have a family to care for, it doesn't leave any time for much else.

It is also undeniable that the poor spend a much larger percentage of income on necessities. They pay the same prices as the rest of us pay for stuff. In fact, because of the retail options available to them, they often pay even more than the rest of us. I can get a gallon of milk for $2.09, for example, at my nice suburban market. That same gallon of milk in the poor neighborhood may be $3.50.

For those fortunate enough to own a car, they get hit with higher insurance costs because of where they live. Someone earning $250/week who spends $35 to fill his tank is putting out 14% of his weekly gross income whereas that $35 would only represent less than 2% of my income.

I could go on and on with examples. The point is that even someone trying to do everything right has struggles that the rest of us don't have in our lives. That makes rising above the poverty surrounding them very challenging.

[Broken Arrow]

Incidentally, I came across a chart by the Spectrem Group that measures the number of millionaire and affluent (net worth < $500k) households.

Unlike the dot com bubble, it seems that all sectors of the rich have clearly taken a hit last year.

[GREENBACK]

Doesn't look like the rich are getting richer there B.A.. Do they also have a poor chart to show that the poor are getting poorer?

[Broken Arrow]

Originally Posted by GREENBACK

Doesn't look like the rich are getting richer there B.A.. Do they also have a poor chart to show that the poor are getting poorer?

Well, I suppose it does seem that way.

However, 2002 through 2007 wasn't all that bad for all economic classes. People were having a good ole time spending borrowed money through the housing bubble.

The original point is, "The rich gets richer, while the poor gets poorer", to imply a widening gap. Maybe.

But as 2008 shows, that's not entirely true. In 2008, the rich trended down along with everybody else.

So, the rich does not always get richer.

[watsoninc]

Additionally, the ultrawealthy (net worth of at least 30 million) were hit harder than the merely rich.. Consider the results of 13th Annual World Wealth Report. It showed that although both the magnitude of wealth and the number of millionaires decreased by about 19% in 2008. The ultra-wealthy saw their ranks drop 25%, with their wealth dropping 24%.

This is particularly relevant in interpreting such data because the loss of wealth among the ultra-wealthy disproportionately affected the overall trends. Although the ultra-wealthy make up less than 1% of the total millionaires, they hold 34.7% of the wealth.

[happygirl]

I think the cycle of poverty is very real for many. When you are a toddler, you look to the adults in your life to teach you everything.

For example, if parents use poor grammar, a child will most likely learn poor grammar. Then when that child is a teen and trying to get a job, he stands less chance of being hired than a child raised with parents who used proper grammar and taught their child how to present himself in a positive manner. Then, in addition to having more difficulty finding a job, that teen's self esteem starts to erode when he is rejected time and time again and the cycle continues. So, this teen decides he could never make it in college, after all he can't even find a good after school job, so he gives up and settles for whatever low paying job he can find. Then he'll become a parent and will be a role model to his children so they will follow his example and it starts all over.

This is obviously not the case with all poor people, but just one example. I think as a society we too often fail to take responsibility for our own actions and situations, but we also fail to show compassion and understanding and offer a helping hand to those who need it.

[Alex_Adviser]

The richest 2% of adults in the world own half its wealth, the richest 10% own 85% of it, and the bottom half with just 1%.- (From James Petras, “ Rulers and Ruled in the U.S. Empire”)

The above statement speaks everything about why the rich are getting more richer.

[money blogger]

Originally Posted by jIM_Ohio

The poor will always have a few attributes in common from one generation to the next:
1) they are closer to earning zero than anyone not deemed poor
2) when others make more money than another, that person might have a feeling of being poor
3) what really needs to be measured is if the people which are poor now, are also the same people which are poor in 15 or 25 years.

Rich get richer- of course
2 main reasons
If I have capital or the ability to borrow it, I can make money
and no matter how much money a certain segment of the upper class makes, they will always want to make more.

It is very possible the difference between the rich and the poor is not just the money, but also in the attitudes and value people have about money.

Thanks for the comments Jim,

I'm so glad you picked up on and mentioned the attitudes. This is the most important part. If people are comfortable being poor, they will never make a transition to middle class and eventually wealth.

[karenkc]

Originally Posted by m3racer

The average American IS lazy. It amazes me how lazy we are as an American society. I was having this discussion with a colleague from Japan. He was amazed at the entitlement programs here in the US. He said if you graduated with a US degree in social services you would be unemployed in Japan because there is no such thing over there.

There is a large difference between the two cultures though. In Japan when you're hired you're expected to stay at the same company for life. In the US it's common to be laid off, fired, etc.. There are obviously more factors than just that one difference also. It takes some complex thinking to get to the root of an issue. good luck!

[Vytautas]

The question may sound simple, but I'm sure based on just the discussion here, you can tell it's not quite so simple. The main discussion here seems to be based around the types of attitudes, abilities, circumstances people have that got them to where they are.

I don't think this really answers why "the rich just get richer". The first point, which has already been mentioned, is that people with lower income have to spend a higher proportion on "necessities" (however you want to define those), leave a lower proportion for "wants". Beyond those two categories lies the money people put into savings or investments, which can be anything from an emergency fund to majority ownership in a company.

The rich have more money that they can use on wants and the last category. They can cover their wants with ease and then have a larger amount remaining to use as an emergency fund, save for their kids education, save for retirement, etc. None of these necessarily make one much richer, just more secure in their life.

Beyond these, the rich have more money they can put into investments whether it something basic such as mutual funds and stocks or investment into a business that they have expertise in.

I think this is a good basic explanation in general for why "the rich get richer" but it really doesn't cover everything.

To really the answer the question though, you need to look at trends over a longer period of time than just the recent recession. One common piece of data to look at is the what % of the nations income the top .01% of people get. I attached an graph showing this information.

A basic explanation of this data is the increase in social welfare (and corresponding tax increase) after the Great Depression and then reversal of this starting with the Reagan administration.

It is pretty clear that the rich are getting richer, and due to their ability to get richer, the less they are hindered in this pursuit, the quicker their wealth accelerates.

[kanjoh]

The rich are absolutely getting richer. Income inequality is a serious problem. To me, the solution is not redistribution of wealth as much as it is about educating the population about how to manage their money better.

Once people understand how to be more effective, savvy consumers, they will have far greater control over their own wealth and their ability to generate more income.

[snafu]

I'm back in China...I have to admit I forgot what being poor really looks like. Government is trying but corruption is still rampant. We are so privileged in western countries, we don't really understand what it means to be poor. Did anyone see SlumDog Millionaire? Getting enough to eat to sustain you for the day is the goals of millions.


During the Bush administration, there was a giant widening of pay structure between Executive level and staff. I thought I read... Bank Executives increased their salary/bonus/perks by something like 70% in the past 12 years! Line workers rarely kept up with inflation!

[tripods68]

Here's my two cents.

If we can control health care cost from rising in double digit and house affordability index does not go out-of-whack while "real" wages rises more than inflation rate, middle class once again will bring this country economy on the right track. Some here may not agree but I do believe this is one of many solutions.