Each year, the U.S. government tells Americans how much money the country spends on stuff, like houses, cars, and alcohol. Organizing this information by income, Josh Zumbrum at The Wall Street Journal produced this chart of spending on food, health care, and other categories. Two clear stories emerge here. Notice on the far left of the chart that the richest 10 percent spend much less of their income on food. On the far right, we see the richest 10 percent spend much more of their income on insurance (and relatively more than all but the very poorest on education).
When you have money, you spend less on the stuff that ensures you survive the day and more on the stuff that ensures that you (and your children, and your possessions, and your estate) survive and thrive for many years.Poverty is a chaos that screams in the present tense, and the anxiety of having no money forces poorer families to direct their attention to immediate concerns. As a result, the poor spend relatively more on what will keep them alive, because they must. And the rich spend more on what will keep them rich, because they can.
Tyler Cowen’s Sunday column in the New York Times, titled “It’s Not the Inequality; It’s the Immobility” makes a somewhat different argument. Immobility, in this case, refers to social rather than geographical mobility; it’s about lower-income people being able to make more money. Cowen makes the point that the country would have better policies on issues like immigration and licensing if we focused on making laws that would maximize opportunity for all, rather than worry that those same policies might exacerbate income inequality.
But the danger of setting inequality and immobility in opposition to each other is that they’re NOT oppositional terms.
Matthew O’Brien has written about “opportunity hoarding,” the idea that rich people are talented at doing all the right things you need to stay rich and make sure your kids get rich, too. Rich couples live in richer districts, read more to their kids, send them to better schools, hook them up with better internships, slide them into better entry-level jobs (or, better yet, into the family business), and finally pass down their insured and well invested wealth.
Even education, the great American equalizer, makes for a poor equalizer. And it’s not only because wealthy teenagers are more likely to go to school. Young people born to rich families who don’t go to college are 2.5 times more likely to end up in the richest quartile than young people born to poor families who do go college. Wealth sticks, and nothing enriches like richness.
It’s boring to point out that having more money affords you more food, more clothes, more housing, and more cars. More interesting by far to illustrate how the richest families actually spend less on food, clothes, housing, and cars than the poorest families (as a share of their income). The real difference between the rich and the poor is that the rich spend a larger share of their much larger income on insurance, education, and, when you drill into the housing component, mortgages—all of these things are directly related to building wealth, preserving wealth, and passing it down in the form of inheritance of direct investments in the lives of their children.
Excerpted from The Atlantic, “Rich People Are Great at Spending Money to Make THeir Kids Rich, Too,” by Derek Thompson, 2015.
What are some of the tangible impacts of being forced to “live in the present” when you are poor? Can you think of some different ways that it’s actually more expensive to be poor?
What impact might “living in the present” have on someone’s ability to engage in long-term planning?
Have you or your family ever had the experience of living as they say “paycheck to paycheck?” Have you (or anyone you know) ever had difficulty buying food?