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Poor Judgment

Richard Quinn  |  April 3, 2019

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 QuinnsCommentary.com. 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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Langston Holland
Langston Holland
2 years ago

Dick! I think you need to check those CareerBuilder numbers – surely the alcohol and cellphone percentages are transposed! 🙂

More seriously, I never expected this site to focus so much on the human element in the money equation. While the Guide largely hammers home the numbers, the blog has become just as important to me (maybe more so) in its focus on the emotional component. Logic machines we are not.

It’s also scary how effective modern homogeneous societies and communication tech has been in making people want stuff that is miles away from what we need, even with happiness and fulfillment included in the need category. Fight the power!

Another great post, thank you.

Jim Wasserman
Jim Wasserman
2 years ago

Great piece. I think people also forget there are choices between having every latest thing as a “necessity” or having nothing. Older IPhone models do just fine for most uses. Vacations can be done on the cheap. Old folks (like me) remember one night a week as family restaurant night.

Mik Barbasol
Mik Barbasol
2 years ago

We live in a society of entitlement that has permeated our politics, schools and lifestyle…the ending won’t be pretty.

Jeffery Surratt
Jeffery Surratt
2 years ago

The people not willing to give up a pet, phone, eating out, travel, alcohol or any other non-essential thing that they love now, will have plenty of time to give up all kinds of stuff during their retirement years. Enough said.

James Dunn
James Dunn
1 year ago

I have seen this first hand. A relative borrowed $500 to pay for his electric bill and fuel oil for his home furnace. THe following week the family went to Bermuda for a vacation!

Steve Griswold
Steve Griswold
1 year ago

It’s hard to save at times and I find myself even always looking for a vacation in an over the water bungalow or to some tropical island escape. I have cut down on my daily coffee and save that cash for retirement.

SecretStatePolice
SecretStatePolice
1 year ago

re: “The vast majority of Americans—95%—now own a cellphone of some kind. The share of Americans that own smartphones is now 77%,”

There are two kinds of phone users. Those who replace their phones every 18-24 months with the latest model, staring at it 18-24 hours a day, and splurge on expensive unlimited data plans.
And casual folks, still nursing a phone from 4-5-6 years ago, on prepaid plans, with limited data, and barely use the phone for more than a few calls, texts, and Google maps.

For the heavy phone users, it’s a pricey addiction. For light users, it’s just a useful appliance with a subscription no worse than the utility bill.

DrLefty
DrLefty
7 months ago

A lot of people have found that they’re saving money since the pandemic started (assuming they didn’t lose their jobs) because they’re not traveling, eating out, buying clothes or gas, or going to movies, concerts, or sporting events. Yes, we may be spending more on in-home alcohol and we’re definitely spending more on groceries and maybe utilities because we’re home all the time, but it’s still quite a consumption difference. Oh, and things like gyms and exercise studios, massages, and salons.

The interesting thing will be whether Americans revert back to old spending patterns once they feel the world is safe again. Some people may learn to like watching their savings accounts grow, and now that they know their way around a kitchen or around mixing their own cocktails, they may prefer to stay home more.

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