Poor Judgment

Richard Quinn

MANY AMERICANS SEEM to think of themselves as poor—even though they don’t come close to meeting the official definition.

Let’s start with some objective measures. One standard official measure says that, for 2019, a two-person household is in poverty with annual income of $16,910 or less. According to an MIT calculator, a two-adult household in Calhoun County, Alabama, needs to earn at least $8.54 per hour each—with both working fulltime—to support themselves. In Bergen County, New Jersey, that hourly rate jumps to $11.43.

Who is in poverty? The least likely are families headed by married couples, at 4.9%, and the most likely are single women with children, at 25.7%. Single-father families are in the middle, at 12.4%. As you might suspect, the highest poverty rates are among the least educated: 24.5% of those who never graduated high school are in poverty, nearly double the rate for folks with a high school diploma. Poverty is also high among those with disabilities. Overall, 12.3% of Americans are officially in poverty.

But suppose we get away from objective measures—and look at what folks say about themselves. A variety of surveys suggest that 40% to 75% of Americans view themselves as living paycheck to paycheck or say they would struggle financially if they were faced with an unexpected expense of as little as $400.

But here’s the thing with surveys: They rely on individual perceptions. Consider this from the Pew Research Center: “The vast majority of Americans—95%—now own a cellphone of some kind. The share of Americans that own smartphones is now 77%, up from just 35% in Pew Research Center’s first survey of smartphone ownership conducted in 2011.”

If as many as 75% of Americans are truly living paycheck to paycheck, why are 77% still springing for a smartphone? Who are the 20 million who visit Disney’s Magic Kingdom every year? Why are so many saying they feel poor, and yet just 12.3% fall below the official poverty level? Something doesn’t jibe.

Let’s talk about this paycheck-to-paycheck thing. There is a big difference between poverty and feeling like you’re in poverty. What makes the difference? It isn’t necessarily income, but rather spending.

My definition of living paycheck to paycheck: Once you pay for basics like food, housing, clothing and health care, you have little or nothing left over. But it seems my definition is wrong—because people with six-figure incomes say they’re barely squeaking by. For instance, a CareerBuilder found that 9% of those earning $100,000 and above say they live paycheck to paycheck. How can that be?

I recently had a debate with a friend who has a very different view of necessary spending. He made his point by saying, “Do we expect families to forgo the trappings of living in this society—a computer and broadband service, smart phones, a flat-screen TV—because they are ‘non-essential’? Should parents not pay fees associated with youth sports or buy kids equipment necessary to participate in group activities? What’s essential, or at least very important, for mental health and social integration beyond the basics of food and shelter?”

If this is the common view of “necessities,” no wonder so many Americans don’t have $400 in the bank. But surely folks would be willing to give up some stuff—if only temporarily—to escape the stress of living on the financial edge? It seems not. Asked what short-term spending sacrifices they would be willing to make, the CareerBuilder survey found that 37% of workers said they wouldn’t give up their pet, 19% wouldn’t give up eating out, 17% travel, 11% alcohol and 53% their mobile device.

For those who are truly poor, more money may indeed be the answer. But for most Americans who say they’re living paycheck to paycheck, I suspect the key is education—in all its forms, from lifestyle to life choices, and especially saving money, budgeting and spending habits.

Richard Quinn blogs at Before retiring in 2010, Dick was a compensation and benefits executive. His previous articles include How to Blow ItDon’t Call Me ThatHappily Ever After and The Office. Follow Dick on Twitter @QuinnsComments.

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