No, The Poor Aren’t Poor Because They Waste Their Money


A father picks up food at a pantry

As a percentage of their budgets, the poor spend much more on the necessities and have less left for things like eating out and entertainment, according to the latest data on consumer spending from the Bureau of Labor Statistics (BLS).

The lowest 20 percent in income spends just over $22,000 a year, while the richest 20 percent has nearly $100,000 to spend. That makes sense, given that they have more money overall: about $167,000 a year before taxes compared to under $10,000 for the poor.

But the poorest also have to put more of that money toward necessities. Housing is the biggest difference, as the poor spend about a quarter of their tight budgets on either rent or a mortgage, while the rich spend about 18 percent. The poor also spend about double the share on utilities, around 10 percent versus 5 percent, and more on transportation. In all, the lowest quintile spends more than 60 percent of its budget on the basics — housing, utilities, transportation, and home-cooked food — while the rich spend less than 45 percent.

The gulf also opens up when it comes to the finer things in life. The poor spend nearly double the share that the rich spend on food they cook at home, while the rich spend more on eating out. The rich also spend more on entertainment and alcoholic beverages. Derek Thompson at The Atlantic graphed some of those differences:

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CREDIT: The Atlantic

The differences in spending on food have other troubling details. The BLS reports that all income groups spent more on food in 2012 compared to the year before except for the bottom two quintiles. The lowest group decreased its spending on food at home by 1.3 percent, instead of increasing it more than 7 percent the year before. It’s not that food got cheaper: the cost of groceries increased by 2.5 percent that year. And the need has been steady: in 2012, more than 18 percent of Americans struggled to afford food, up from 17.8 percent in 2008. But there may just not be enough room in budgets to get enough to eat.

The stereotypes about the poor — that they bring their financial struggles on themselves by unwisely spending their money — go perhaps double for those who receive public assistance. But the same spending trends hold true for people who are enrolled in housing assistance, welfare cash assistance, food stamps, and other programs. They spend less than half of what families who aren’t recipients spend while putting a bigger share toward food, housing, and transportation — 77 percent of their budgets. They also spend less on eating at restaurants and on entertainment.