7/16/2004

Are the Poor Really Poorer?

I know we talked about this in class already but I just read an article about it today by Arnold Kling.  In this article Kling describes how much better off the lower class is now than in 1970 by comparing what percentage of households in 1970 did not have "certain basic middle-class necessities" (like a telephone or refrigerator) to the percentage of households currently without these items.  He also compares the percentage of households then and now that own(ed) items considered to be luxury items in 1970 (a dishwasher, clothes washer, clothes dryer).  Kling's examples demonstrate that the quality of life of the poor is substantially better now than in 1970.  While I agree with Kling's main point, that the lower class is better off now than in 1970 I don't agree that this point can be illustrated by the ownership of these items.  Many of the luxury items listed are considered necessities by our current culture and all of the middle class necessities are considered to be necessities for anyone except the extremely poor, by our standards.  (How appalled would we be to discover that one of our friends does not have complete plumbing?)  But how much debt has our lower class created in acquiring these items?  In 1970 households didn't have most of these items because they chose to spend their money on basic necessities.  Now people see these items as basic necessities and pay for them on credit so they can have them.  I know many people who qualify for subsidized housing and/or Medicaid who can still afford cell phones, satellite t.v. and newer cars than what I drive.  This article asks "Are many of the families you know worse off (than in 1970)?"  Many of the families I know have more stuff than in the 1970s but less money for basic needs like food and health care, possibly because they can get assistance for food and health care. 


15 comments:

Dr. Tufte said...

Ooh, this is a tough one.

It is absolutely true that today's poor have more (generally) than the poor in 1970 (or even the middle-classes in most other developed countries). But then we get into more gray areas.

One is the distinction between necessities and luxuries, or needs and wants. I am not thrilled with the idea that society changes what it views as poor by reclassifying luxuries as necessities or wants as needs. To me this seems to be both subjective thinking, and weak to boot. The problem is that using a fixed list of items to classify someone as poor or not, in an environment where the economy slowly and steadily grows, is eventually going to lead to very few people being poor. This is great, and probably a factual description, but there will still be people that will feel poor. What do we do then, tell them their feelings are wrong? Or that they are selfish?

As to people not having enough for necessities in a country with food stamps and so on, this probably reflects a third-party-payer problem. If someone else subsidizes your purchases, you will want to buy more, or alternatively spend less of your own money. The latter is what is described in the post, while the former is problematic if there is a limit to the willingness of the third party to pick up the tab.

Anonymous said...

Adam Smith already had a concept of minimal decent living standard. In his days, it was the "clean linen shirt" and other basic clothing items that were necessities. With technological and social progress, the standard gets upgraded. (Why otherwise are we toiling 40+ hours weekly? To barely recreate the standards of our forefathers?)

But as good as the documented progress has been (which I'm not disputing on principle), these numbers must be taken with a grain of salt. There is a considerable "underclass" in the US that eludes proper "documentation". It includes, among others, people who don't have a permanent address (homeless, "drifters", etc.) and illegal immigrants. Because of the nature of this, it is hard to put numbers on that group.

There are also other groups where I'm not sure whether current surveying methods inadvertently bias against them -- people without telephone, those who are isolated from "mainstream" society, or don't speak or read English. For example, what about Native Americans living on reservations? Even if such people are in the census and can technically be reached by surveys, their response rates may be low.

Boris said...

I agree with the comment that people are generally better off today than they were in 1970. Most people today have most of their needs covered, and the majority have many of their "wants" as well. I also agree that the list of needs does change with time. People definitely do have different needs today, but I do think that those needs, for the most part, are fulfilled.

Senator Miller said...

It's true that the poor are better off, but it is important to realize the relativity of the situation. It's very impressive and a good sign that our poor are getting richer over time, but also in the same breath, it's important to note that the gap between the rich and poor are widening. Ultimately, I'd like to see that gap lessen and move forward as an economy more collectively than individually. Not necessarily by instituting more policies, but instituting better "institutions" as mentioned by Romer. It would seem that as the greater the gap becomes, the poorer class will become more stagnant and resentful, because no matter how rich the poorest in our country become, they will always view themselves in comparison to their fellow peers and citizens.

morty said...

It seems to me that there are many different kinds of poor. On the Navajo Reservations in New Mexico it is much like a third-world country. Most poeple dont have running water, plumbing, cable, microwaves. Yet almost all of them drive newer (last 5 years) F150s. They shop at second hand stores for clothing and yet they have nice stereos in there cars and go see a movie every weekend. Now don't take me wrong, this is a generalization and does not apply for all of the people on the Navajo Reservation. But if you ever get a chance to go to Gallup NM, do it. and see for yourself.

micahnay said...

I would have to say that I agree with Jules. People are able to buy more “stuff” today, which contributes to our quality of life. I don’t know how I ever survived without my washer and dryer. The problem is…I really couldn’t afford these machines that make my life far more enjoyable. I bought them on credit. Because I bought them on credit, I will end up paying close to double the original cost of the machines. Credit is readily available to everyone, and because of that, the average person has 2.5 credit cards in his or her wallet. The average credit card debt has increased thirty-five percent from last year to three thousand two hundred and fifty dollars per person. If there is two hundred and fifty million people in the United States, that is eight hundred twelve billion five hundred million dollars in deficit spending my Americans per year. And we wonder why we have so many bankruptcies! I do think that we live better, but I also believe that we are paying a higher price for the luxuries that we enjoy. About three hundred thousand people declared bankruptcy in 1980, in 2003, there were 1,625,208 personal bankruptcies filed. This is because people did not spend nearly as much on credit in 1980 as they do today.

C-Dizzle said...

It seems that this subject could be pretty touchy to some people but it’s true. So many people live outside of their financial means just to “keep up with the Jones’”.

I’d like to go off on a slight tangent of the article and state my opinion briefly on the welfare system. I feel that it is fundamentally flawed in that it seems to reward people for not working. I know that there are always exceptions to the rule and people who are not capable of working who need the welfare. It’s the other people who can work and provide for themselves that my ‘beef’ rests with.

As Jules stated, “I know many people who qualify for subsidized housing and/or Medicaid who can still afford cell phones, satellite T.V., and newer cars than what I drive.”

I lived in Las Vegas, NV and saw plenty of this. I was amazed to drive by the ghetto areas of town and see nice Hummers and other fancy cars parked in front of a government subsidized apartment complex.

The government needs to seriously rethink their “free handout” system. For the capable people, all they’re doing is promoting another generation of bums that live off of my tax dollar. Why doesn’t the government have some sort of system where the people accepting government help have to do something in return…like community service or something appropriate to the individual?! We need to teach the people to work and be self sufficient rather than promote laziness.

Once the people learn to work for themselves, perhaps they’ll spend less tax dollars and more of their own money and purchase the modern necessities with real money rather than credit.

james said...

The third person paying the difference is usually the government. Recently they have addressed the issue of haow much they are willing to pay, I believe there is a five year time limit on foodstamps and other government programs. This is as it should be. It used to upset me when I would drive by the Hud housing in Las Vegas and see the new Cadillacs park in the drive ways of the "poor".

kavindavis said...

I had fun with this at work with all the older people that work there. I did what we did in class, I asked them if they felt poorer people had more money today even if you take inflation into acount. Of course they began to comment on the good old days and how you could buy a drink and a burger for a doller. So I asked them, "How many people going to collage have a car?" They all said, "everyone." So I asked, "how many of you had cars when you went to collage?" None of them did, and they understood my point after that.

kamm said...

There is no doubt that the poorer have more now than they did back then because our economy has flourished in so many respects.

I think another issue to consider is will the poor be poorer in the next 20 years? Possibly one of the reasons people are so much better off now than they were 30 years ago has a lot to do with responsibility and becoming self sufficient.

Sure it's important that we don't let people starve to death, but if the government continues to give so much money to the poor, I worry that they will become overly dependent. The less dependent we are on the government, the more self sufficient we will be. "It's good to give a man a fish and feed him for a day. It's better to teach him to fish and let him provide for himself the rest of his life."

Kid said...

I agree with Kamm, you can feed a man for one day if you give him a fish. But if you teach him how to fish, he can feed himself for the rest of his life. I’ve always found it interesting to be standing in a line at the supermarket and I see a person with a cart full of food and they wipe out their food stamps to pay for it. When this happens I start to look at what kid of stuff my tax money is buying. Many times I’ve noticed that the welfare beneficiaries eat better then I do. I have to say even as a poor college student I’ll spend the extra money to buy Kraft Mac and Cheese because hands down it tastes the best. But seriously, it’s a little disturbing to think that I’m spending my hard earned money to buy Kraft Mac and Cheese and the welfare beneficiary is spending mine, yours and hundred of other, hard working Americans, money on T-bone stakes. What are we teaching them, by letting them spend, not their money, the American taxes payers’ money on whatever they darn well please.

Kid said...
This comment has been removed by a blog administrator.
kavindavis said...

Grading the econimy by stuff is strange to me also. For example, I just bought a microwave for 10 bucks at a yard sale, my grandparents bought one in the 70's and spent 400 dollers. And look at computers you can pick a computer up for 500 bucks, were 10 years ago my mom spent 2000 dollers on hers. So I think stuff just got cheeper.

metromut said...

A micorwave, cell phone and satellite TV are not necessaties. Truly poor people do not have homes ot cars. Maybe there needs to be a whole new "catagory" for the truly poor. I think low income and no income are way different classes...There are different levels of poor...poor, poorer and poorest.

Dr. Tufte said...

Spelling mistakes in Kavindavis' and Metromut's comments.

Thomas Sowell has a book called The Vision of the Annoitted. In it he discusses how the two classes in our society are now 1) the people who judge things by how good they are (the annoitted), and 2) the people who judge things on a cost/benefit basis.

The problem as he sees it (and me too) is that the annoitted say things like "I want to alleviate poverty". The problem is, who wouldn't? I'm in favor of more puppies for everyone too. People in the second of Sowell's groups say "Great. How would you like to reduce poverty?". Once you get to that second question, you have to ask how to define poverty, and it seems clear from the comments that there isn't even a reasonable way to start.