Readers of More Spock know that income inequality is one of my pet topics. I struggle with how a society can generate such huge amounts of wealth using capitalism as its foundation, but can’t figure out how to ensure more people benefit. The only solutions offered by the “champions of the people” are to have government seize more of the wealth from some and give it to others or nationalize parts of the economy.
The first solution is based on the faulty concept that wealth is a zero-sum game – that the only way for one person to accumulate wealth is to take it from another. Since wealth is created – it’s not a static amount that moves around – efforts to redistribute via taxes tend to limit wealth creation throughout the economy. In other words, the wealthy get poorer while the poor stay poor. The second solution is hugely inefficient as government can’t pivot nearly as quickly as private enterprise when market conditions change. Neither of these solutions have ever really worked very well anywhere in the world. There must be a better way.
While conceding that systemic forces contribute to stubborn levels of poverty, and being short of macro-economic ideas, I’m going to focus this short piece on things that poor people in America do that help keep them poor. I’m NOT saying that being poor is 100% the fault of the poor person. There is no doubt that poorer people face economic headwinds that are difficult to overcome. I am saying that if some poor people made better decisions, they might put themselves in a better position to overcome poverty given the challenges they are already facing. In other words, they should control the things they can control. Here are a few things I see that cause me to scratch my head.
Smoking
According to the CDC, “Both men and women with incomes below the federal poverty level had a significantly higher smoking prevalence than those who lived at or above the poverty level.” They noted exceptions to this trend exist for Asian women and Hispanic men. But it’s safe to say that the working poor are more likely to smoke cigarettes than more prosperous individuals.
Cigarettes cost between $6.00 and $13 per pack, depending on what state you live in. Even in the states with the lowest cigarette taxes, a pack-a-day smoker spends $2,000 per year on this habit. This jumps to nearly $5,000 if they live in New York or other high-tax location. Multiply this cost by 5 years, 10 years, 20 years, etc. and you can see the economic impact. $2,000 per year deposited into a savings account for 10 years is over $20,000 in accumulated wealth. $2,000 per year in a Robin Hood account invested in an S&P 500 Index Fund likely results in even more wealth accumulation.
To put this in perspective, a smoker who earns $15 per hour, spends between $1.00 and $2.40 of those earnings on their smoking habit. Unfortunately, too many poor people choose to smoke, and their kids choose to smoke. This contributes to their ensnarement at the lower end of the economic ladder.
Tattoos
I am not anti-tattoo. People have every right to use their body as an artistic canvas however they please. Likewise, I don’t think employers should consider tats when making hiring decisions unless the tattoos are offensive, indicate gang affiliations, or something that is relevant to the business. That being said, I see a lot of individuals working entry level jobs with multiple tattoos. According to Fash.com, the average tattoo costs $250 with a range of $50 to $4,000 for a full back or large, custom tattoo.
When I am served at the drive-thru window of a fast food restaurant by a teenager or young adult with a full sleeve tattoo, I often think how much they’ll wish they had that money back 20 years from now. Again, I am not talking about poor judgement as it pertains to getting something done to your body in your teens and twenties that is essentially permanent. I’m talking about spending money that is in your bank account on such when you don’t have much in there already. Or even worse, buying it on credit.
Body Adornment
It is not uncommon for me to go to a retail store and watch a young woman behind the counter attempting to enter information into a cash register while working around her long acrylic fingernails. I am sure I am not alone in thinking, “why would you get nails like that if your job requires you to keyboard?” Then I start to question how she performs certain daily functions with those claws in the way. If young females who fall into the working poor category are looking to the Kardashians and other popular culture stars as their role models for style, they are making a financial and a career mistake. Financial because purchasing and maintaining acrylic nails can be expensive – a totally unnecessary expense for someone who is attempting to climb the economic ladder. And a career mistake because it demonstrates to her employer that her performance and productivity in the job is not that important to her. Why should the employer invest in her career development and advancement if performance is not important to the employee?
Ditto as it applies to body piercings and other modifications that are done for a person’s individual brand, but limits them as they attempt to work an entry level or trade job.
Financial Illiteracy
The owner of a building trade company recently told me about a guy who was working for his company through a temp agency. He offered this man an opportunity to join his company for a higher hourly wage, benefits like health and dental insurance, a retirement plan with company match, and paid holidays and vacation. The guy rejected the job because, “I ain’t gonna work one week for free!” The business owner’s company payroll was paid weekly, but one week in arrears. He’d get paid for his first week of work on the Friday of his second week and then weekly thereafter. He passed on a great opportunity because he believed he’d never get that first week of pay back (?).
Another business owner lamented that his lower-paid employees wouldn’t take advantage of his generous 401k plan. “They spend their money on cigarettes and tattoos when they could be getting free money, tax-deferred, from our company match. Go figure.”
Our public schools apparently do little to prepare students for a financial life after school. Unfortunately, when someone is born into poverty, it’s likely that their parent(s) aren’t going to be much help either. How do we teach financial literacy to kids? Public schools seem more interested in teaching social justice and victimization than teaching individualism and the available paths out of poverty.
Conclusion
I can say for certain that if my modest net worth was wiped out and I suddenly found myself with a low-paying job and little or no money in the bank, that I would watch every penny. After shelter, food and clothing, I wouldn’t spend money on anything that wouldn’t help me in the future. Certainly not cigarettes, tattoos and body piercings. But maybe that’s why I have a modest net worth and am not living paycheck to paycheck.