Consumer expenditure survey illustrating the income divide(erikrood.com)
erikrood.com
Consumer expenditure survey illustrating the income divide
http://erikrood.com/Posts/consumer_expenditures.html
76 comments
Let me ask a really stupid question: isn't AGE the most defining factor here rather than race etc.? Especially percentage of those owning a home without mortgage - if anything, fractions of a percent may buy a home they'd live in outright, so it must be just because they already paid out that home, and they are old.
Same for the large percentage of women in lower earning groups and larger overspending there: that's natural, young women make less money, but they also get a lot of money from boyfriends, frequently those in the top income group, and spend it, so why is that a problem at all?
Same for the large percentage of women in lower earning groups and larger overspending there: that's natural, young women make less money, but they also get a lot of money from boyfriends, frequently those in the top income group, and spend it, so why is that a problem at all?
And if you consider retirees that makes perfect sense.
It's hard to draw any meaningful conclusion from these graphs.
It's hard to draw any meaningful conclusion from these graphs.
The poorest groups primarily rent.
Breakdowns are "Rent, Home without mortgage, Home with mortgage."
I wonder what percentage of the bottom 20 percent are homeless. Because that data is not even being included. It assumes the most destitute all have homes of some sort. This is not true.
Breakdowns are "Rent, Home without mortgage, Home with mortgage."
I wonder what percentage of the bottom 20 percent are homeless. Because that data is not even being included. It assumes the most destitute all have homes of some sort. This is not true.
Given that the homeless overall make up about 0.5% of the population, I doubt it would have much effect on the survey either way.
I bet that the 0.5% of the population that are homeless are found almost entirely in the bottom 20%. This would mean they are about 2.5% of that group.
And it may be higher, depending on the definition of homeless being used. Most people think of street people as The Homeless, but social workers, et al, also consider many other people to be homeless. They are often counted among the hidden homeless. These include people who are couch surfing, living with relatives temporarily to avoid being out in the street, people in temporary shelters and people in substandard housing considered unfit for human habitation.
And it may be higher, depending on the definition of homeless being used. Most people think of street people as The Homeless, but social workers, et al, also consider many other people to be homeless. They are often counted among the hidden homeless. These include people who are couch surfing, living with relatives temporarily to avoid being out in the street, people in temporary shelters and people in substandard housing considered unfit for human habitation.
> I bet that the 0.5% of the population that are homeless are found almost entirely in the bottom 20%. This would mean they are about 2.5% of that group.
Seems a bit obvious.
> And it may be higher, depending on the definition of homeless being used. Most people think of street people as The Homeless, but social workers, et al, also consider many other people to be homeless. They are often counted among the hidden homeless. These include people who are couch surfing, living with relatives temporarily to avoid being out in the street, people in temporary shelters and people in substandard housing considered unfit for human habitation.
> couch surfing
Couch surfing is (usually) not homelessness, I slept on people's couches when I was trying to get out of my mom's house in the most expensive city in Canada. I lived just fine, though. Couch surfing is not always great, but it isn't homelessness.
> living with relatives temporarily to avoid being out in the street
Unless your relatives are abusive, I don't think living with relatives counts as homeless either. If I were comfortable around my parents, I don't see why I would've moved out yet, it'd be a waste of money.
> substandard housing considered unfit for human habitation
Substandard housing is tenuous, I've lived in places with a horribly leaky roof, flaky electricity, and questionable structural integrity... but I don't even think that quite counts as homeless. I guess it's closer. "Unfit" is ill-defined, many houses that people would gladly have lived in in the 40s would be considered "unfit" today, but I doubt these "unfit" homes are presenting an overwhelming mortal danger like being homeless.
> temporary shelters
Temporary shelters I don't know about, I don't think they count people living in camping tents (or other non-permanent tents) as housed.
Seems a bit obvious.
> And it may be higher, depending on the definition of homeless being used. Most people think of street people as The Homeless, but social workers, et al, also consider many other people to be homeless. They are often counted among the hidden homeless. These include people who are couch surfing, living with relatives temporarily to avoid being out in the street, people in temporary shelters and people in substandard housing considered unfit for human habitation.
> couch surfing
Couch surfing is (usually) not homelessness, I slept on people's couches when I was trying to get out of my mom's house in the most expensive city in Canada. I lived just fine, though. Couch surfing is not always great, but it isn't homelessness.
> living with relatives temporarily to avoid being out in the street
Unless your relatives are abusive, I don't think living with relatives counts as homeless either. If I were comfortable around my parents, I don't see why I would've moved out yet, it'd be a waste of money.
> substandard housing considered unfit for human habitation
Substandard housing is tenuous, I've lived in places with a horribly leaky roof, flaky electricity, and questionable structural integrity... but I don't even think that quite counts as homeless. I guess it's closer. "Unfit" is ill-defined, many houses that people would gladly have lived in in the 40s would be considered "unfit" today, but I doubt these "unfit" homes are presenting an overwhelming mortal danger like being homeless.
> temporary shelters
Temporary shelters I don't know about, I don't think they count people living in camping tents (or other non-permanent tents) as housed.
https://en.wikipedia.org/wiki/Homelessness
The legal definition of homeless varies from country to country, or among different jurisdictions in the same country or region.[2] The term homeless may also include people whose primary night-time residence is in a homeless shelter, a domestic violence shelter, long-term residence in a motel, a vehicle, squatting, cardboard boxes, a tent city, tarpaulins, shanty town structures made of discarded building materials or other ad hoc housing situations. According to the UK homelessness charity Crisis, a home is not just a physical space: it also provides roots, identity, security, a sense of belonging and a place of emotional wellbeing.[3] American government homeless enumeration studies[4][5] also include people who sleep in a public or private place not designed for use as a regular sleeping accommodation for human beings.
The legal definition of homeless varies from country to country, or among different jurisdictions in the same country or region.[2] The term homeless may also include people whose primary night-time residence is in a homeless shelter, a domestic violence shelter, long-term residence in a motel, a vehicle, squatting, cardboard boxes, a tent city, tarpaulins, shanty town structures made of discarded building materials or other ad hoc housing situations. According to the UK homelessness charity Crisis, a home is not just a physical space: it also provides roots, identity, security, a sense of belonging and a place of emotional wellbeing.[3] American government homeless enumeration studies[4][5] also include people who sleep in a public or private place not designed for use as a regular sleeping accommodation for human beings.
> The term homeless may also include people whose primary night-time residence is in a homeless shelter, a domestic violence shelter, long-term residence in a motel, a vehicle, squatting, cardboard boxes, a tent city, tarpaulins, shanty town structures made of discarded building materials or other ad hoc housing situations.
I fully accept this definition, I just don't consider staying with relatives or friends, or in a degraded-but-serviceable house, to be homelessness, even if you don't have any other decent choice.
I'm not ecstatic with my housing choices right now. I live in a ~7m² room with no windows or ventilation, but that doesn't mean I'm anywhere near homeless.
I fully accept this definition, I just don't consider staying with relatives or friends, or in a degraded-but-serviceable house, to be homelessness, even if you don't have any other decent choice.
I'm not ecstatic with my housing choices right now. I live in a ~7m² room with no windows or ventilation, but that doesn't mean I'm anywhere near homeless.
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Pretty shocked that ~50% of the bottom 20% has a college degree. Would have expected much lower
This surprised me as well, but given the negative ROI of many college degrees, I suppose it's not all that surprising. [1] Also, assuming that they are counting 2-year colleges in this calculation as well, though I could not find an answer to that.
[1] http://erikrood.com/Posts/college_roi_.html
[1] http://erikrood.com/Posts/college_roi_.html
May be sensitive to definition. Is an associates counted, for example.
A couple other possible confounds come to mind, such as highly-educated stay-at-home parents.
A couple other possible confounds come to mind, such as highly-educated stay-at-home parents.
The bottom 20% includes a lot of under 25's. That would account for a higher proportion of college grads. It may also account for a good portion of the overspending among this group, since it would capture people in college living on student loans. By that measure, I was spending over 200% of my income every year between tuition and basic living expenses while in grad school.
I think there's a lot of negative economic exaggerations going on to promote political views on either side. Paint a bleak picture that only your team can solve.
Something something protectionism, something something basic income.
It all seems like junk to me.
Something something protectionism, something something basic income.
It all seems like junk to me.
Except both are valid economic strategies for increasing income. Protectionism reduces the labour pool, so demand is higher relative to supply, which increases wages. Basic income increases wages by redistributing wealth.
The downside to protectionism is it makes it harder for firms to find workers. The downside to basic income is that it's a massive expense to government, would require higher taxes, and may reduce incentives for people to work (which is why it's mostly being trotted out as a way for people to subsist when automation potentially wipes out labour).
The downside to protectionism is it makes it harder for firms to find workers. The downside to basic income is that it's a massive expense to government, would require higher taxes, and may reduce incentives for people to work (which is why it's mostly being trotted out as a way for people to subsist when automation potentially wipes out labour).
I'm not saying there's no validity to either of them as strategies, just that they're big differences from the way we operate today and there's nothing to mandate their application except these politicized exaggerations.
I more mean the bleak pictures painted to gain these ideas favor are pretty much junk in my opinion.
I more mean the bleak pictures painted to gain these ideas favor are pretty much junk in my opinion.
> ~50% of the bottom 20% has a college degree
I don't see "has a college degree" in the data. I think you are projecting it on the data.
It's more aptly described as "any college courses" and it's likely self-reported. Remember that the vast majority of "college" is not postgraduate degrees at elite Ivy League universities, but rather started (but didn't finish) at a community college or for-profit diploma mill.
I can easily imagine {teachers, college students, temporarily unemployed/underemployed taking care of dependents, retired persons} falling in the "college" + "bottom 20%" category.
I don't see "has a college degree" in the data. I think you are projecting it on the data.
It's more aptly described as "any college courses" and it's likely self-reported. Remember that the vast majority of "college" is not postgraduate degrees at elite Ivy League universities, but rather started (but didn't finish) at a community college or for-profit diploma mill.
I can easily imagine {teachers, college students, temporarily unemployed/underemployed taking care of dependents, retired persons} falling in the "college" + "bottom 20%" category.
There's data in there about educational attainment. It makes a clear distinction between bachelors-or-higher and anything below that. Associate's degrees or just a few courses without completing a program fall into the latter grouping.
But yes, you're right. It's not clear exactly what data is being graphed.
But yes, you're right. It's not clear exactly what data is being graphed.
That's probably a combination of:
1) Going into debt for college makes you poor, and
2) A lot of college degrees are just not worth the cost, if you're expecting them to lead to a good income.
1) Going into debt for college makes you poor, and
2) A lot of college degrees are just not worth the cost, if you're expecting them to lead to a good income.
> Going into debt for college makes you poor
But these data don't have anything to do with "being poor" -- it's entirely about income, which is still positively correlated with more education.
But these data don't have anything to do with "being poor" -- it's entirely about income, which is still positively correlated with more education.
How many of those are retired?
Does the population considered for these graphs include people who are retired? If you are living primarily off of savings, I imagine you would be included in the bottom 20% bracket.
I'd be curious to see more specific breakdowns. There's a big difference between someone around the 80th, 85th, and 90th percentile vs someone in the top 1% or top 0.01%. I'd guess that for the very rich, they spend less than 20% of their income. If someone has better info, I welcome corrections.
The most significant implication seems to be that as more money flows to the top, it is not being recirculated at the rate it would if it were still in the hands of middle or low-income workers. This is not a moral judgement on the especially rich (in this case). They're making more money than they can reasonably spend, and even if they could spend more, it wouldn't be in their best interest. As I understand it, though, this is not a good thing for the economy.
The most significant implication seems to be that as more money flows to the top, it is not being recirculated at the rate it would if it were still in the hands of middle or low-income workers. This is not a moral judgement on the especially rich (in this case). They're making more money than they can reasonably spend, and even if they could spend more, it wouldn't be in their best interest. As I understand it, though, this is not a good thing for the economy.
I feel the labels are switched in this picture
http://erikrood.com/Posts/renter_home_income.png
ah, yep, good eye! will fix this evening when I get back to computer
Also, it looks like you say, "The bottom 60% of earners spend more than they make in a given year." while the first figure seems to show the bottom 40% do so.
Updated both, thanks.
I'm surprised to see over 50% of top 40% owns their home outright. Are people paying off their home early or is this baby boomers who have lived in the same home for 30 years? I would like to see the age breakdown of each segment.
As housing costs increase and rent payments continue to flow to the top, inequality will continue to accelerate. Housing policy that promotes affordability needs more attention and effort behind it.
As housing costs increase and rent payments continue to flow to the top, inequality will continue to accelerate. Housing policy that promotes affordability needs more attention and effort behind it.
If you fought in WW2 and came back, there was a massive boom of affordable housing across the nation. It grew in the 1950s and 1960s, when wages were growing. Between those who bought 30+ years ago (and didn't refinance every 5 years) + those families who passed their real estate down in their inheritance, I can easily see that being a large percentage of the population.
The fact that they are in the bottom 20% of income seems less relevant. If you are in/near retirement or simply underemployed, owning your home means you have to work less to cover your costs.
The fact that they are in the bottom 20% of income seems less relevant. If you are in/near retirement or simply underemployed, owning your home means you have to work less to cover your costs.
I think you nailed it. People in their 50s and 60s are more likely to both have a higher income and own a home without a mortgage.
Questions of clarity not addressed in this post (needs digging in the underlying data):
* Is this individuals, individuals who work, or households? * Is this data self-reported or somehow collected and correlated by experts? * Does any of this data include people who don't file taxes? * What is the definition of the "college degree" category? Does this include the "college" category or degrees from non-accredited colleges/trade schools? * Does "income" represent all benefits or just paycheck? I'm under the impression that civil servants make little in paycheck, but their benefits are back-loaded with pensions and health benefits that aren't visible if just analyzing "income".
These all have a large impact on the data and could easily sway the impression that the reader gets.
* Is this individuals, individuals who work, or households? * Is this data self-reported or somehow collected and correlated by experts? * Does any of this data include people who don't file taxes? * What is the definition of the "college degree" category? Does this include the "college" category or degrees from non-accredited colleges/trade schools? * Does "income" represent all benefits or just paycheck? I'm under the impression that civil servants make little in paycheck, but their benefits are back-loaded with pensions and health benefits that aren't visible if just analyzing "income".
These all have a large impact on the data and could easily sway the impression that the reader gets.
> The bottom 40% of earners spend more than they make in a given year.
This stat presumably includes people who are retired, people who are dependents (e.g. on a parent), and people who are on welfare. I don't think you can conclude much without breaking that down further.
This stat presumably includes people who are retired, people who are dependents (e.g. on a parent), and people who are on welfare. I don't think you can conclude much without breaking that down further.
Does not include dependents, groups into families. May include retirees though I could not verify this either. (you're welcome to dig through the data linked in the article yourself, let me know if you find anything). I think the general point would still stand even excluding retirees, but agree that would be a more telling cut of data.
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Or, the lowest 20% of earners according to CES under-report their income, which may include tips and cash payments, so CES thinks they are overspending.
This is a fair point, but could 50% of their income really be tips and cash payments? It seems high to me but I have no insight into how those things work in the US.
Easily more than 50% for some tipped workers.
When I delivered pizza, my tips were more than my paycheck.
Wow, I never realized it was that bad
For many, it could be close to all of their income.
Where is the divide illustrated? I see a spectrum across the population with no clear dividing lines.
Is this based on before or after tax income? I would assume after, but it doesn't really say.
After tax income. If you dig through the data [1] you'll find that.
[1] https://www.bls.gov/cex/tables.htm#annual
[1] https://www.bls.gov/cex/tables.htm#annual
How is it possible for so many people to overspend their income? Credit cards will only tide you over for so long, and once you carry a large balance, it's hard to get additional unsecured credit.
Despite claims to the contrary there's still a lot of economic mobility in the US - just as most homeless people are homeless for a only short period of time, many people will dip in and out of poverty throughout their lifetimes and not that many are "chronically poor".
During the lean times, the temporarily poor may be cashing out savings and 401k (and taking huge penalties), burning through home equity lines of credit, borrowing money from relatives, working under the table, etc.
eg. Have a 60k a year job, 40k a year expenses and over a couple of years save up 20k in savings. Get laid off and your income goes down to 20k that year but you're only able to cut your expenses to 30k. You drain half your savings, spending 150% of your income that year. Next year, you're able to land a job paying 65k and you can start building up your savings again.
During the lean times, the temporarily poor may be cashing out savings and 401k (and taking huge penalties), burning through home equity lines of credit, borrowing money from relatives, working under the table, etc.
eg. Have a 60k a year job, 40k a year expenses and over a couple of years save up 20k in savings. Get laid off and your income goes down to 20k that year but you're only able to cut your expenses to 30k. You drain half your savings, spending 150% of your income that year. Next year, you're able to land a job paying 65k and you can start building up your savings again.
So of the top 50% of income earners, half of them have their houses paid off completely? That doesn't seem right.
Maybe these graphs will help:
Median Family Income: https://fred.stlouisfed.org/series/MSPNHSUS
Median Price of New Homes: https://fred.stlouisfed.org/series/MEFAINUSA672N
Comparing 1965 to 2015, in 1965 a new home cost less than half of what a family earned in a year, in 2015 it cost 4 times annual earnings. Times have changed. The crossover point, where median house prices exceeded median family annual incomes didn't occur until the 1980s -- meaning people who bought houses during that period or prior likely had little trouble servicing multi-decade mortgages, or even paying them off early.
Median Family Income: https://fred.stlouisfed.org/series/MSPNHSUS
Median Price of New Homes: https://fred.stlouisfed.org/series/MEFAINUSA672N
Comparing 1965 to 2015, in 1965 a new home cost less than half of what a family earned in a year, in 2015 it cost 4 times annual earnings. Times have changed. The crossover point, where median house prices exceeded median family annual incomes didn't occur until the 1980s -- meaning people who bought houses during that period or prior likely had little trouble servicing multi-decade mortgages, or even paying them off early.
Childhood: Imagining animals in the clouds.
Adulthood: Finding axes to grind in charts.
Income before taxes is not "income before taxes net of transfer payments." (It can't be, because one of the most salient transfer payments in the US, the EITC, is administered through the tax system.)
One might assume that poverty is sticky and therefore the bottom 20% of earners is relatively constant, but while poverty might be sticky "low income in a year" is not sticky on a year-to-year or decade-to-decade basis.
Many people in the lowest 20% for income were middle class N years ago and still are. They're spending out of their savings faster than their savings throw off interest/dividends. That's OK; their retirement math mandates it. ("Wait, how can you afford a mortgage on $10k a year of inc... oooooh.")
Some folks also deal with substantial income volatility on a year-to-year basis. Relevantly to many HNers, there are a variety of structures in which business owners hit the bottom 20% in formative/bad years.