The Poor Are More Frugal Than The Rich


Welfare Reform 3x2


The good news: Americans are spending more. The bad news: that’s only true for the well off, as the poor are spending less than they were before the crisis.

Between 2008 and 2012, the top fifth of income earners, or those who make more than $150,000, increased their spending by more than $2,300, according to the Bureau of Labor Statistics. That makes up nearly half of the country’s entire increase in expenditures. But over the same time period, the bottom fifth, or those making less than $30,000, actually decreased their expenditures, spending about $150 less.

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That decline is driven by the poor buying about $150 worth less in clothing, although they have also decreased spending on entertainment, personal care, alcohol, and even reading. The rich, for their part, are spending more on alcohol, personal care, and reading and have made much more modest decreases in entertainment and clothing spending.

It also turns out that the poor aren’t just spending less, but they’re also trying harder to save their money. A survey from Gallup finds that while overall Americans have become much more interested in saving than in spending since the recession, there are big differences by income level. Those who earn less than $20,000 are more than three times as likely to prefer putting money away to spending it. The gap is much narrower for those who make more than $75,000 a year.

The differences in spending are connected to differences in how much these groups’ earnings have grown. Between 2008 and 2012, the richest Americans accounted for more than 80 percent of the total increase in income, while the bottom three quintiles basically saw no increase at all.

But generally speaking, despite the idea that the poor bring their hardship on themselves by being unwise with their money, the lowest-income Americans have smaller budgets and spend more on basics, which means they have much less to spend on extras like entertainment and eating out. And despite the cultural conception of the welfare queen, those who receive public assistance like welfare and food stamps spend less than half of what those who do without the programs spend while also putting a bigger share of that money toward necessities.