The Rich Get Richer

[disneysteve]

When I was in college I got a summer job as a heavy equipment mechanic and started at $6/hr. I had no real experience and it was just a summer job. I don't recall what minimum wage was back in 1976. The point is that my son made about $6/hr in High School a year ago. I bought a brand new Toyota Celica for $3900 in 1975 (Senior in High School). A brand new car like it would cost at least $15,000-20,000 today. So wages have not changed much but car prices have skyrocketed. This is just one reason the rich get richer and poor get poorer. Wages have not gone up proportionately to the rise in prices of goods. This is more true towards the lower end of the pay scale in my opinion.

In 1976, the federal minimum wage was $2.30. If you were earning $6.00 at that time, you were making 2.6 times the minimum wage.

Today, the minimum wage is $7.25. Earning 2.6 time that would give you a current income of $18.85.

[irmanator]

Growing up in a lower class neighborhood there are basic norms that people adhere to. If everyone around you is not striving for more than young people tend to follow this lead. I'm sure the opposite attitude prevails in more affluent neighborhoods. When people talk about the "cycle" of poverty it is such a true statement.

Exactly my point. Exactly why I would rather be the poorest in a middle class neighborhood than the richest in a poor neighborhood. When I lived in the city, they neighbors had a bad attitude about certain things. Now that I live outside the city in a semi rural area I am around people whose attitude is better and I am learning things from them.

[asmom]

I'm surprised that no one has brought up the fact that wealth is relative. Poor in one country may be well-off in another. It is also a reflection of your values, your needs and your wants. I have met many, many hard-working intelligent "poor" people who are perfectly happy; I spoke to a wonderful lady today who told me how happy she felt to have her health, a wonderful family and her faith but yes she is poor. She would be surprised to find that she is lazy and terrible with money.

Does that mean every poor person is noble with a value system that values family over possessions? NO. Does that mean that every rich person is materialistic and greedy? NO.

It just means that one's financial status is a reflection of many different factors. My personal philosophy: take care of your own business and don't worry about what anybody else does or does not have.

[maat55]

The rich get richer because they use good sense with money, the poor get poorer because they use bad judgment with money.

[julee_m]

Sometimes people with good judgement have bad luck, and conversely those with bad judgement have incredibly good luck. Someone could work hard and save and then get a debilitating disease and see their savings disappear. Many people who claim bankruptcy have medical bills despite having health insurance. I hate over-generalization. There are so many different factors impacting wealth, including having good examples, good looks, social contacts, education and just plain luck.

[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]

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]

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?