> Lower classes spend 100% of their discretionary money' on assets
Assuming you mean non-discretionary expenses. If so, that describes a third of Americans, down from half in 2002 [1]. A strong majority of Americans (a) get more money from the government than they put in, (b) own assets or (c) route discretionary income to consumption over asset accumulation.
We have an inequality problem. But the facts paint a more moderate, and thus addressable, picture than the pundits.
> If so, that describes a third of Americans, down from half in 2002 [1]
Your source is from 2007. I don't have that particular figure; but in 2019, the bottom 50% of the wealth distribution continue to own almost nothing, the top 10% of the wealth distribution own 71% of all assets and the middle 40% own about 28% [1].
> A strong majority of Americans get more money from the government than they put in
This is literally the point of taxes: to redistribute resources.
> (b) own assets
See above, but ownership of assets is distributed incredibly unequally.
> (c) route discretionary income to consumption over asset accumulation
This argument that poor people remain poor because they make bad choices (formally called "culture of poverty") has been heavily criticized. Most economists and sociologists now reject it and have done so for over 30 years.
> poor people remain poor because they make bad choices
Not sure where it was called a bad choice. It's simply a preference for consumption today over asset accumulation. For most people, that's a fine and comfortable way to live.
The problem is, most consumption is not actually flexible - it's semi-fixed cost (i.e. shelter, food, transportation). And those don't vary enough for asset accumulation to be possible at the lower end (especially when you include externality cost from things like eating cheap food).
The difference between earning $100K and $500K for most developers, for example, is [most] of that extra income going into investment assets; that's because the first $100K covers most of the fixed costs, and short of luxury purchases, there's not much more you need day-to-day. The gap between earning $30K a year and $100K a year is way bigger in terms of QOL than between $100K a year and $1M a year.
(I'm in between both worlds in a way since I have friends making < 30K a year and > 200K a year and I have two careers, one high income and one relatively low income and have thought about the issues quite a bit)
"Bad choices" from the perspective of wealth accumulation. Regardless of how you want to frame it, the idea that attitudinal differences prevent poor people from accumulating wealth is no longer taken seriously by most who study the field.
There is a lot of people in lower classes who spend money on stuff like netflix thats 100% discretionary. Or buy iphones instead of el cheapo ones. I say this from personally knowing a lot of people who do this. I dont really blame them for it, since its kinda the pervasive expectation, but still a lot of people spend on "wants" instead of longterm assets. Now the funny thing is the income isnt always really discretionary, I known people who bought stuff they didnt really need then got their power cut off cause they couldn't pay the bill. Its a mess.
No one is getting rich by diverting that $13.99/mo Netflix subscription -- that's $168 a year -- into asset purchases.
As a nearby comment said better than I could (thanks whakim! for https://news.ycombinator.com/item?id=28907429 ), the "culture of poverty" idea has been discredited for decades, yet it persists because it's certainly easier to blame individuals than change a system that so severely disfavors them.
No but somebody might get less poor by not having to less stuff on a creditcard then pay high interest on it. Or not making minimum payments then getting a higher interest rate later. Compound interest is a bitch and a small debt can blow up real fast.
Your link just says "most economists and socioligists agree" btw, it didnt source it. Also it said the point of taxes is to redistribute resources which us heavily contested and a lot of ppl disagree, stating that as fact not opinion makes the other stuff it says look less credible because clearly it has an agenda.
So does suggesting that a poor person could join the moneyed elite by foregoing their $13.99/mo Netflix to purchase assets -- if that isn't an agenda, I don't know what is.
Why, by saving that $168 a year, they could easily afford a single share of Alphabet (currently at 2,846.31) in, what, 16 years?
Bruh. I didnt say "join the moneyd elite". It doesnt matter if some ppl have more, only if some dont have enough, this is why I hate the "inequality" talking point, bc its not an inherent problem.
Im saying that some people who dont have enough could be in a better spot with better choices and that some personal finance education might help. Not everybody privileged enough to have parents who can teach them to be financially savvy. So high schools probably should.
The netflix subscription is a distraction. So are the lattes and everything else people keep harping on about for personal consumption.
Salary, salary, salary. If you're making $200K, none of the above even register (saving $200 a year? or even 2K by forgoing a latte every day - who cares? it won't make an iota of difference). If you're making $30K / year, you could do all of the above, forgo every single pleasure in life and you've still got a huge uphill battle.
The idea that saving and investing 2k/year "wouldn't make a difference" is pretty funny, since investing 2k/year gets you ~300-400k (inflation-adjusted!) after 40 years (roughly the length of a typical working career).
But that's not really the point, I think. The idea that (most) people remain poor for reasons _other_ than their choices is difficult to credit. Obviously their choices are only the _proximate_ cause; there may be structural factors causing those choices in the first place, but most people who are poor (as in, do not have assets) are not poor because they are being literally robbed at gunpoint. Imagine two people living in the same neighborhood:
Person A makes $30k/year and saves nothing.
Person B makes $35k/year and saves nothing.
Person B is _making choices_ that are different from Person A - they are spending an additional ~5k/year on _something_. You can come up with all sorts of reasons why those choices are reasonable - I sure as heck understand not spending the bare minimum on life's necessities - this isn't a moral judgment! But those choices are being made and they have fairly predictable long-term consequences. If it's possible to live on 30k/year in some set of circumstances, anyone who then occupies comparable circumstances and earns more than 30k/year has a choice to either live below their means... or to not do that. You don't need to call them "bad choices" for this to be true.
Certainly there is a non-trivial number of people whose starting circumstances were such that they truly had no good options, but that's not most people who could reasonably be described as "poor".
Sure, that is a valid excuse for the bottom quartile of income earners for not saving, but not the middle class. There isn't enough demand in the wealthiest 10% to warrant 15,000 Starbucks locations
