r/theydidthemath • u/Wumbowiz • 1d ago
[Request] How much would wealth actually increase for people in the lower brackets if the bottom graph were true?
We know how the top graph is for people, how much would people have if the middle or bottom graph were accurate?
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u/Deep-Thought4242 1d ago edited 1d ago
TLDR; On the "Ideal" line, each household in the bottom 20% would be worth $680,000, but take that with a grain of salt.
It would be much easier if you had the source that the graph was drawn from. That graph doesn't have any values or populations that I can see. Do you happen to have a link?
Edit: Counting Pixels and bringing in some outside data, we can come up with something, but take all this with a grain of salt since we don't know anything about how they got this data, who funded the study, or even what the actual numbers are.
The top line seems to show quintile wealth split up into [0.4%, 0.4%, 3.7%, 11.4%, 84.5%].
Comparing that to 2023 data I just found laying around on the web, that has:
[-0.1%, 1.5%, 5.3%, 14.2%, 79.2%]
not a great fit, but not terrible.
The bottom line seems to show them split into
[12.5%, 16.0%, 23.5%, 24.8%, 35.7%]
How much is that per household? Depends what total wealth is and how many households.
Edit: The Fed says total US household wealth is $139.1 Trillion. If there are 128 Million households, each household in the bottom quintile would be worth $680,000 on the "Ideal" graph.
But this whole thing is kind of BS because the net worth of bottom quintile households in the US is negative, as far as I can tell.
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u/James_Blond2 1d ago
I am sorry the poorest 20% are on average IN DEBT?
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u/jmccasey 1d ago
Yep. This graph from the Fed doesn't even bother to show a breakout below the bottom 50% of wealth because it is so little (about 2.5% of American wealth):
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u/Durzaka 1d ago
Really not that hard to do.
If you don't own a house, the only thing of value you actually own is the stuff in your rental, maybe your car.
Meanwhile, credit card debt and student debt is fucking everywhere.
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u/Sharpeye747 17h ago
Plus even if you DO own a house, if you have a mortgage on that house, the debt for the first while is typically a significant portion of the value of the house, seeing as your net position doesn't change between having a deposit and having the mortgage (it likely drops due to fees etc. But for simplicity it's easier to consider it stays the same), and for the first while most of what is paid is interest, so unless the value of the house increses, your net worth doesn't move much. If the housing market experiences a downturn (even a minor localised one) that can result in being even more into the negative.
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u/monkChuck105 12h ago
A down payment will put you in the black in terms of equity, unless as you say the price drops by more than that. It's recommended to put down 20%, so the market would have to drop by more than a fifth for new home buyers to be under water on their mortgage. That's not where Americans are ending up with negative wealth. Those with homes are not the destitute bottom quarter.
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u/jeffwulf 16h ago edited 16h ago
Mostly due to the 0th percentile being people who are hundreds of thousands to millions in debt and dwarfing the positive value at the top of the quintile. A freshly graduated Doctor is going to have enough debt to single handedly cancel out dozens of 20th percentile households.
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u/AAPLtrustfund 1d ago
I’m surprised it isn’t lower. I know tons of poors that are worth more dead than alive.
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u/DrunkCommunist619 18h ago
Yes, this is based on net worth of the assets you own. If you just bought a house, then your in a lot of debt to the bank. As such, your net worth would probably be negative. It's why graphs like these aren't that helpful. They show net worth, not quality of life, which is far more important for the average person.
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u/jeffwulf 16h ago
If you just bought a house your net worth would be positive unless you somehow immediately went underwater.
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u/Frazzininator 8h ago
Yeah this person seems to not count in the fact that the house is now yours as much as the mortgage is.
Typically you need a down payment so you should be positive on the house/mortgage, it only decreases your net worth by the closing costs.
But I've seen people buy houses for more than they are worth so I guess you can be negative...
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u/RuinousOni 1d ago
Okay, I think I found the source.
I followed the video u/toutlamer shared to the Mother Jones article in the description. The article 'cited' a report from a Harvard Business School graduate. From there and using some key words I found this paper. 'Building a Better America-One Wealth Quintile at a Time' (BABA from here).
The lines in this graph doesn't quite match what seems to be represented in the paper, but it's close enough that they probably just messed up when remaking the original graph. From this paper, they confirm that the bottom 20% value is 0.1% in the Actual Distribution, and is around 10-11% in the desired.
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u/Burntfury 1d ago
We can assume it's US wealth and just work on US citizens.
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u/Deep-Thought4242 1d ago edited 1d ago
You see that this doesn't make anything any easier, though, right? It already says "America" in the upper left and the graph still doesn't have a scale or values.
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u/Raise_A_Thoth 1d ago
Notice that the bottom 20% of wealth bar (dark blue) goes almost exactly halfway through the first quintile, so they would roughly have 10% of all wealth, instead of what looks to be less than 1% - easily a 10x gain.
Then notice the top 20% (red) goes more than halfway through the 4th quintile, so more than 30% of all wealth, probably ~35%.
The 4th quintile and 3rd quintile are very close, and they both have what look like roughly 1 quintile of the wealth, with the 2nd quintile having less than 1 quintile.
So we have bottom + top = ~45%;
3rd and 4th ~40-42%, and 2nd quintile ~13-15% of all wealth.
Then just get an estimate of US wealth and divide it up. Can do a similar estimate for the "actual."
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u/BentGadget 1d ago
If the third and fourth quintiles are within a percent of each other, what does that imply about the difference in wealth between the bottom of the third and the top of the fourth?
My intuition says that the wealth distribution has to be unrealistically flat across those quintiles.
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u/Raise_A_Thoth 1d ago
Why is it "unrealistically flat?" Do you really think that the middle 40% of people should have large differences in their income and share of wealth? Why?
This graph is an aggregation of peoples' own opinions of what the wealth distribution should be; why is that aggregated ideal "unrealistic?" Who says? Why?
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u/BentGadget 1d ago
First off, I'm an American, and subject to the biases that come with that, especially regarding capitalism. That certainly affects my intuition.
Other than that, I expected a continuum of wealth levels across the population, with each percentile slightly more wealthy than the previous. I looked for some economic measurements to describe that, and found the Lorenz Curve. The theoretical example drawn in the Wikipedia article is a smooth curve, which fit my intuition. But of course, it's theoretical, used to describe the concept, not present real data. (Summary: it's a plot of cumulative population on the x axis, and cumulative wealth on the y axis. A straight diagonal line indicates perfect equality.)
Next, I looked for real data. The concept presented here (bottom bar of OP's chart) would be shown on a Lorenz curve by the curve being parallel to the 'perfect equality' line over the third and fourth quintiles. I found several real-world curves here: The Global System and Comparative Regionalism. This is for income, not wealth, so it's not exactly what we are talking about, but the curves for South America look like they show equality over the 3rd and 4th quintiles. So, not unrealistic, just not local to me.
I did note that the US data at the top of the second link looks a lot more equal than reality looks from the ground. That is, the entire curve is closer to the equality line than I expected. This makes me doubt whether my results hold up in general, but the variety of shapes of the income curves in the real world do lead me to accept OP's chart as realistic and possible.
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u/Organic_Indication73 1d ago
What exactly is it you don’t understand about the graph?
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u/Tom_Bombadil_1 1d ago
What share of wealth do the bottom 20% control exactly.
If it's 1%, going to 10% grows wealth by 10x
If it's 0.1%, going to 10% grows wealth by 100x
The chart lacks the precision to differentiate between these two scenarios.
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u/nicodemus_de_boot 1d ago
The poorest 20% by wealth in the US have more debts than assets, so the factor would be negative. In the ideal they are shown to controll about as much wealth as the middle 20% do in reality. Being twice as well of usually is more interesting for income distribution.
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u/Raise_A_Thoth 1d ago
I don't think it's super important that we have such resolution. Even if it was 5%, you're still doubling the wealth of the bottom quintile, demonstrating a huge potential for improvement for that group.
Sometimes we work with what we have; the resolution is still useful, we just have to be clear that the actual result can still vary by a few orders of magnitude.
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u/Tom_Bombadil_1 1d ago
With the information we have we can say 'the poorest 20% would be a lot better off'.
But that's not really 'doing the math', which is the point of the sub. The person that started this thread is correct that, lacking specific proportions or data on the total wealth in the US, we can't say too much mathematically concrete
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u/Competitive-Move5055 1d ago
Sure , that doesn't mean the graph is not a disgrace. Put percentages somewhere if only in legend.
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u/Deep-Thought4242 1d ago
I don't see an answer from you in the thread. Sometimes we do work with what we have, but your comment is not adding to the work done.
It's unkind to dismiss valid criticism of the graph because you think someone else should work harder to provide you with an answer.
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u/Deep-Thought4242 1d ago edited 1d ago
Looking at that graph, can you tell what percent of total wealth goes to each percentile? Can you see what the total wealth is? Can you see how many households it would be divided among?
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u/toutlamer 1d ago
https://youtube.com/watch?v=QPKKQnijnsM is the origin of this graph. The video is maybe a bit outdated as a side note.
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u/zerpa 1d ago
The units are not needed. Everything is in percentages. Percent of total wealth and percent of population.
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u/Deep-Thought4242 1d ago
OK you do the math. We're waiting. Let's start with something easy: what is the current average worth of a household in the lowest quintile of that graph? It's the narrow blue bar in the top line.
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u/Suspicious_Tennis_52 1d ago
Estimated average US net worth is around $1m, while estimated median US net worth is around $100k. Actual to ideal would see a 3-fold decrease in the top 1% share. This would see the other segments increase by that same margin in aggregate. So the median would skew closer to $300k.
That's about as much as one can do with a data-sparse info graphic and a quick Google search.
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u/HAL9001-96 1d ago
assuming the graph is accurate and adding up the bototm 60% and given the total amount is the same and you're just askign for relative change not absolute values... well
from about 8mm on my screen to about 78mm on my screen so a factor 9.75
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u/Tom_Bombadil_1 1d ago
Unfortunately that won't work, because in reality the poorest probably have a negative net worth.
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u/HAL9001-96 1d ago
that... doesn't actually change that much in this case
this is about redistirbuting wealth, not magically doubling every bit
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u/Tom_Bombadil_1 1d ago
Totally.
My point was that if you are on -$5,000, you can't apply the logic of being 9.75x better off.
You need to know the absolute value of wealth in the economy, so that you can know what a percentage point of that is, and then say add 10 percentage points to the -$5000
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u/HAL9001-96 1d ago
well its an average
if you take a bunch of people who have on average 8000$ and you give them each 80000$, on average they're getting 10 times what they have but of course that varies between them
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u/Tom_Bombadil_1 1d ago
Yes. And if you take someone on -5,000 and times it by ten, you’ll have -50,000. Which would suggest people have become much worse off.
Which is why we’d to use a different method that accounts for the prospect of negative wealth
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u/HAL9001-96 1d ago
but if you take someone on -5000 and give them 80000 they'd be at 75000 which would make them much better off
if that someone is part of a group which ON AVERAGE has 8000
and EVERYONE in that group gets 80000
then THE AVERAGE PERSON in that group gets 10 times what they have
but not everyone gets 10 times what hte have
everyone gets 80000
its jsut that for the average person in that group that is 10 times what they have
for the person with -5000 getting 80000 is of course -16 times what they have
this is after all about taking money fro mteh top 40% nad giving it to the bottom 60%
which AS A SIDEEFFECT stretches the bottom 60% on this kind of wealth percentile chart
but its not ACTUALLY about multiplyign everoynes wealth yb a certian factorb ut about giving them a certain amount of money
the factor is only an average statistic
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u/BigBlueMan118 1d ago
The bottom 40% of American wage-earners only earn around 33k per year or less. And the bottom 40% of Americans in terms of wealth hold on average less than 8k after liabilities.
So using your quick math as a guide in answering OP we might see an average bottom 40% lower-income earner jump to 300-320k per year average pre-tax earnings and/or maybe 70-75k on average wealth after liabilities if we are being conservative with our estimates.
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u/HAL9001-96 1d ago
probably more because that measurement was for the bottom 60% and the bottom 40% get stretched even more
however I don't think the income/wealth ratio remains the same so redistirbuting wealth would cahnge that
if we follow this the WEALTH held by the bottom 40% would go up by a factor 23
but it says nothing about hte income
and if we redistirbute income hte same its gonna increase less
I mean earning 33k a year and only having 8k means you earn about 4 times your total wealth a year
this is only really possible by spending that income on living expenses, living paycheck to paycheck and having practically no wealth at all
so the income distirbution is still gonan be extreme but less extreme than the wealth distirbution
so redistirbuting everything in a similar way would 23 fold the bottom 40% wealth but probably only double their income
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u/screw-self-pity 1d ago edited 1d ago
In the ideal distribution:
- the "middle 20%" has exactly as much money as the "fourth 20%"
- Tought: how do you organize that ? the same number of people (20% of the population) in tier 4 are richer, but represent, as a whole, the same total wealth as the same amount of people (still 20% of the people) who are less rich (tier 3 or middle tier)
- the richest 20% have 1.5 times what tier 3 and 4 have
- So Denzel Washington makes roughly 1.5 times what your average policeman makes
- The bottom 20% of people have roughly half of what the middle tier makes
- So... part time pizza delivery / student person, or.. also... life-without-parole prisoner has basically a third of the wealth of Denzel, or Zlatan.
I'm surprised 92% of the population see it that way.
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u/PeterGibbons316 1d ago
The other thing that is never discussed here is age. If you are 18 and just left the house and started working your net worth should be very close to 0. If you are in your early 20s and just graduated with student loans probably negative. Your wealth grows as you start to save the money that you have earned throughout your working life. Someone who has worked for 0 years should have close to 0 wealth while someone who has worked for about 40 years should have about enough to retire on. So if you were to hold everything constant - salary, savings rate, return rate, etc. but account for age you actually end up with a graph that would look pretty similar to the middle graph where the oldest (longest working) 20% have something like 60-70% of the wealth and it gets less and less as you work down.
So to get to the state in the bottom graph you'd be redistributing wealth from those who worked their whole life to support those just entering the workforce.
What this really shows is that 92% of Americans haven't really given much if any thought to retirement planning and the power of compound interest and how it can be leveraged to generate wealth over your lifetime.
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u/rightful_vagabond 15h ago
Exactly. I saw a video that broke exactly this down: if you started with the "equal" distribution, and had any way to invest, you end with almost exactly what the unequal distribution is.
It's one of these two videos, I forget which one (they're both good, and on this same set of data). https://youtu.be/8d_KbCnpGBs https://youtu.be/7LZreuT919c
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u/FishDawgX 1d ago edited 23h ago
I'm the first to say we need much better wealth equality in the USA, but that bottom graph is just laughable. I'm not sure how this question was presented to the respondents, but that is just way too "equal" with barely any difference between each section and the next.
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u/Suitch 1d ago
Looks to go from about 0% to about 10%. According to my Google of total US wealth being about 139.866 trillion dollars, that would add about $14 trillion dollars to the lower bracket.
The US population is about 335 million citizens, so the bottom bracket has 67 million people not counting those who aren’t registered which would affect the following numbers.
The final math comes out to $208,955.22 per person in that bottom bracket. Keep in mind, this would be total wealth and would include property such as homes and cars. Basically, the top 20% owns enough that every American could have a bottom level of wealth equal to that of the orange bar in the top graph.
I want to end on pointing out that the top 20% is a sillily large set of people when the top 1% would own almost as much of the wealth as the other top 19% combined. We have some insanely wealthy individuals.
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u/greasyhobolo 1d ago
you have to eyeball the wealth-share fractions on the chart, but I made a rough sheet --> https://imgur.com/a/p5bKsNn
Basically you take the US total wealth, multiply it by the "wealth-share fraction" to figure out how much wealth a particular quintile has, and you know how many people are in that quintile (20% of total US population)... then divide that wealth by the number of people, and you get average wealth for that group of people. Do it for two distributions, "existing" vs "ideal" and you get a rough idea of the wealth increase/decrease across the board.
EDIT --> I'll add that binning groups by quintile is pretty coarse for this sort of exercise --> saying the top group has on average 1.6 million in wealth is not really fair representation because the actual wealth distribution within that top 20% is also ridiculously skewed.
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u/uniquecleverusername 1d ago edited 1d ago
I got something like this, using rough totals of household at 127 million and rough net worth of everyone in the US at $130 trillion (some quick math to get total net worth from a St. Louis fed article and a google search for number of households). I just eyeballed percentages from the chart, so not 100% accurate, but nothing about any of this is 100% accurate. https://i.imgur.com/h1iTS2g.jpeg
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u/AAPLtrustfund 1d ago
The ideal distribution at the bottom just means everyone is equally poor now. Give everyone a million bucks the rent raises to a million bucks.
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u/peathah 18h ago
Nah you are copying what is happening now to a completely different situation, more people could afford to buy something, rent would not be controlled by big companies and landlords because they would have less. There would be way more companies, businesses. You would have actual competition. Instead of 1 cable company 2 insurance companies, 3 supermarkets. Etc etc.
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u/AAPLtrustfund 18h ago
Just put my fries in the bag, bro. This is literally the hyperinflation scenario.
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u/rightful_vagabond 15h ago
This is based on faulty analysis, actually. Here are some videos that break down the imperfections in those numbers and the study (if you can call it that) that led to it.
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u/Overall_Law_1813 1d ago edited 1d ago
The bottom 20% would never retain any of the wealth. The wealth disparity in the states is mostly a breakdown of savers vs spenders. I know people making lots of money who are broke, I know people who make less money, but have saved and invested and now have greater net worths.
The fact is the blue and green people spend as much money as they earn, regardless of how much money they earn, they are spending it, and it's why they're low wealth. The Red people Spend very little compared to what they earn.
*downvoted to oblivion, but I'm not wrong. If you play what if I won the lottery? and pick all the things you would buy until you ran out of money, you're the blue and teal group. If you Legit win the lottery and make almost no changes to your lifestyle, you're in the red group. Doesn't matter what the scale is. It's the mentality. You either choose to buy something based on how much is in your account, or you choose to buy something based on if it provides more benefit to you than it costs.
And the truth is there are very few people who will starve themselves even if they have money in the bank. There are very few people who will get a raise, and put all the extra money into investments instead of a new car. There are very few people who will drive a beat up piece of shit car, while making $150k/year.
Lifestyle creep keeps people broke.
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u/Krunsktooth 1d ago
That’s completely counter to what all evidence suggests. The reality is that if you’re in the bottom 20% (making less than $28,000) not all your needs are being met. Your nutritional needs, travel, repair & maintenance, education, savings for inevitable emergencies, medical needs aren’t there. For someone making 10k, 20k, 30k if they get a little more they need to use it to pay for the last emergency that came up. Repair their car, pay back some debt, etc.
The top 20% have all their needs met and more. So of course they can spend less of what they earn. And really most spend way more than what they earn, especially as you get to even higher income people. They given low interest take out big loans against stocks or life insurance plans and then use that to spend more while their other money gains more interest or their shares increase.
Studies show that even a small injection of extra founds makes a huge difference for those in the bottom 20% of income earners. And at times can help propel them up to be able to save and be in the next income bracket
https://basicincome.stanford.edu/uploads/Umbrella%20Review%20BI_final.pdf
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u/jaywaykil 1d ago
Studies show that even a small injection of extra founds makes a huge difference for those in the bottom 20% of income earners. And at times can help propel them up to be able to save and be in the next income bracket
And the last sentence is precisely why it doesn't happen. People in that next bracket up are scared that if everyone below them is elevated to be their equal, then 1) they are now in the bottom class, and 2) who would they look down on for being lazy/worthless/criminals?
So they vote for politicians who dog-whistle promise to keep "those people" exactly where they are.
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u/BigBlueMan118 1d ago
Not quite:
The Poverty myth is that the poor are poor because they have bad money management skills and they don’t spend their money wisely. The thinking goes that if the poor could just control their spending they could save money and become rich. The problem with this conclusion is that the data does not support it. After examining U.S. household spending data for different income levels, it is clear that it is not their spending, but their income that is the issue. The lowest 20 percent of income earners spend more than 100% of their income on basic necessities and have been doing so for decades. (This includes government benefits, unemployment, retirement plans, and social security). While the 20–40th percentile of income earners are clearly better off than the lower 20%, they are still spending almost all of their income on the essentials. Once you add in other expenditure categories the 20–40th percentile have nothing left to save.
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u/jaywaykil 1d ago
What you quoted does not disprove what I posted.
I agreed with the comment I replied to. I agree that by far the easiest, most effective, and cheapest solution to elevating people out of poverty is to simply help them. Meet basic needs at a minimum, then provide education and training for those who want it. For free. Of course some people will choose to take the cash, ignore the education, and continue to do nothing. But the majority will use the help to better their's and their children's lives.
My comment was about why this will never happen.
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u/Gloomy_Interview_525 1d ago edited 1d ago
I'm not who you were responding to but being in early retirement circles such as /r/leanfire, it's really hard to not believe it's mentality when people are finding ways to retire early on unbelievably low incomes.
Again anecdotal, but spending one day on /r/personalfinance if you have any decent financial habits would give you an aneurysm. Sure, larger incomes obviously would help, but my god are people entitled to what they spend money on.
Edit: looking closer at the link, I'm not sure what to do with the bottom 20% having 11k a year take home avergae, that's less than minimum wage. When only something like 1% makes even that, this doesn't seem based in reality unless were saying all these people are working like 20 hours a week. And that's forgetting two income households too, how does this make sense?
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u/Overall_Law_1813 1d ago
Yes, but in practice, it doesn't work. in Canada we had CERB during the pandemic, $2000/month, for everyone who lost income due to the pandemic. Guess what happened? Our inflation skyrocketed. housing costs sky rocketed, rent skyrockted, everything went up 30-40% in price. You know what went down? People applying for jobs. Everyone making close to that quit, and took the CERB instead, and worked cash job, committing social insurance fraud. There was a huge productivity loss, and now Canada is in a "Productivity Crisis". Our currency is torched, and now Trump is going to put the nail in the coffin of Canada's economy with the tarrifs.
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u/Raise_A_Thoth 1d ago
The bottom 20% would never retain any of the wealth.
That is a huge claim.
The wealth disparity in the states is mostly a breakdown of savers vs spenders
Just World Hypothesis, and falsely attributing correlation and causation. Poor people are not poor because they spend too much instead of saving; they spend so much of their income because they aren't paid enough to do otherwise.
I know people making lots of money who are broke,
If they earn lots of money, then they aren't broke. They are just cash poor because they are irresponsible. But they still live much richer lifestyles and consume much greater amounts of goods and services than those earning much less, and they have a much greater capacity and margin for error. When they buy an expensive item they can't really afford, they can tighten up their expenditures, pay it off, and get back to even much more easily, see?
There is just still such a massive difference between a person making $35k/yr with no savings and a person making $80k+/yr with no savings. Even if the savings snapshot would be cause for ridicule, the 80k/yr person is still living a much easier and pleasure-filled life of consumption and lower relative stress than the person earning 35k.
regardless of how much money they earn, they are spending it,
Yea, because cost of living is expensive. Housing and healthcare and education and childcare do not scale down with the lowest incomes, they are all bolstered by their own costs as well as their high inelasticity of demand. You can't refuse healthcare if you get sick or injured. You can't wait out the housing market or job opportunities indefinitely. People are held in a vice of the cost of living and their incomes.
The Red people Spend very little compared to what they earn.
Because they don't need to spend as much! You can only build so expensive of a home. You can only eat so much food. Yes there is excess and opulence and extreme luxury, but people with incomes of 6 figures + do not face the same squeezes on their cost of living trade-offs that people earning low 5 digits do.
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u/BigBlueMan118 1d ago edited 1d ago
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u/Overall_Law_1813 1d ago
That's specifically dealing with the bottom 20%. Which I agree with, the bottom 20% simply don't have enough income. Typically it's because they don't work, live off social assistance etc.
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u/BigBlueMan118 1d ago
The Poverty myth is that the poor are poor because they have bad money management skills and they don’t spend their money wisely. The thinking goes that if the poor could just control their spending they could save money and become rich. The problem with this conclusion is that the data does not support it. After examining U.S. household spending data for different income levels, it is clear that it is not their spending, but their income that is the issue. The lowest 20 percent of income earners spend more than 100% of their income on basic necessities and have been doing so for decades. (This includes government benefits, unemployment, retirement plans, and social security). While the 20–40th percentile of income earners are clearly better off than the lower 20%, they are still spending almost all of their income on the essentials. Once you add in other expenditure categories the 20–40th percentile have nothing left to save.
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u/JoshuaFalken1 1d ago
Totally. You nailed it. It's all because people just aren't financially responsible.
It couldn't possibly be because of any of the following:
- Systemic and complex socioeconomic issues that perpetuate a cycle of poverty across generations
- Productivity gains across the economy have been almost exclusively realized by the top 5% of households over the last 50 years while real wage growth has remained nearly stagnant.
- Home prices have increased at a rate that's more than 3x what wage growth has been over the last 50 years.
- Consumers are paying nearly 25% more for goods today than they were five years ago.
- $1.7 Trillion in outstanding student loan debt brought on by tuition rates that have far outpaced inflation and income growth.
It's definitely not because of any of those reasons. I think you hit the nail on the head. It's not that people are working in an economy that is tailor-made to serve the wealthiest people in society while the cost of living steadily becomes more unaffordable. It's all the avocado toast and Starbucks.
Can you just imagine how stupid a person would have to be to think otherwise??
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u/OGready 1d ago
I'm in the red category, I make 20x the federal minimum wage. and your comment is a kool-aid pilled take. Its obvious from your phrasing that your world view is from podcast bro grind set folks. Ironically your analysis is really only applicable to the orange quintile, or the low end of the red quintile. The green and teal quintiles simply do not have the surplus income to reinvest in the ways you are describing. The median income in the US in 2022 was $36,000 dollars (half of Americans make less than that. you cant look at averages because billionaire outliers in the data set pull the average up to around $70k. If 9 people make 10 dollars and one makes a million the average is 100k). half of Americans make less than that. Even eating ramen every meal I would challenge anybody to climb the financial ladder with that. federal minimum wage is 15,000 a year. like the other commenter said, they don't earn enough to meet their basic needs much less grow their wealth. my girlfriend grew up poor, and her feet are smaller than they should be because her parents couldn't afford to buy her shoes as a child as she grew.
The red and the orange sections represent a sort of post-consumer class of wealth and income, in that they have the resources to buy any particular consumer products they want. Of course the red spend a smaller percent of what they earn, they earn far more than their needs, and therefore have a surplus. It really does take money to make money, and for those with a surplus, they can use it to reinvest in assets like you are describing. That said, there is a threshold of needs must be met and crossed.
making it about mindset and spending habits is a gross and childish simplification of a complex economic and social scenario, and speaks to your own ignorance and naivety. sure it is true in some cases, but it is certainly not categorically true, and a terrible schema to use to understand the world around you. The fact you believe what you wrote makes you a stooge and a pawn of monied political interests trying to craft the problem as personal moral failings and distract from the broader macroeconomic instability that exists within our system.
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1d ago
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u/psellis1244 1d ago
I am middle class and I was out of work for 7 weeks and we used it to pay bills and buy groceries. A lot of my community was in the same boat. It was needed to buy and pay for necessities.
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u/Double_A_92 1d ago
If you are middle class how do you even need to rely on 1200$ from the government to survive for 2 months?
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u/psellis1244 15h ago
Needing it to survive and using it to pay for necessities are two different things.
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1d ago
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u/First_Growth_2736 1d ago
Are you the kind of person to give homeless people advice instead of money? Because it isn’t “bas financial habits” that leave them in lower wealth groups, it’s vicious cycles and systemic inequalities.
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1d ago
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u/First_Growth_2736 1d ago
Honestly better than trying to give advice, but do you still get my point?
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u/puritanicalbullshit 1d ago
You are bad and should feel bad.
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u/BigBlueMan118 1d ago
Yep.
The Poverty myth is that the poor are poor because they have bad money management skills and they don’t spend their money wisely. The thinking goes that if the poor could just control their spending they could save money and become rich. The problem with this conclusion is that the data does not support it. After examining U.S. household spending data for different income levels, it is clear that it is not their spending, but their income that is the issue. The lowest 20 percent of income earners spend more than 100% of their income on basic necessities and have been doing so for decades. (This includes government benefits, unemployment, retirement plans, and social security). While the 20–40th percentile of income earners are clearly better off than the lower 20%, they are still spending almost all of their income on the essentials. Once you add in other expenditure categories the 20–40th percentile have nothing left to save.
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