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Why Do People Stay Poor? [pdf]

sticerd.lse.ac.uk

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Re: Why Do People Stay Poor? [pdf]

#141

Post by DubiousPusher »

ghufran_syed wrote: post #121

I’m not qualified to judge the technical merits of the paper, but their conclusion seems plausible. They concluded that in an illiterate rural population, there did seem to be a threshold effect in asset levels above which it seemed much easier to progress economically. But it’s unclear to me how applicable this is to the poor in the US or other developed economies, particularly when we’re talking about a population…

Maybe it's just me but this seems like a fairly pedantic point. I guess if you're not familiar at all with issues of domestic and international poverty you might make the mistake of comparing these numbers but I've never had a real conversation with someone who confused the two.

I grew up well below the poverty line in the USA and it was pretty self evident that I was not leading the same kind of lifestyle as someone in poverty in a developing country.

I think your point is mostly true but I'm also just not sure how useful it is.

Re: Why Do People Stay Poor? [pdf]

#142

Post by magicalhippo »

drbojingle wrote: post #83

off the top of my head I think it depends on the type of poor you are. Some people are poor because of their situation and some situations are more difficult to escape than others. Some people are poor because of their habits and inclinations and they just don't change those habits (for one reason or another), so they stay poor.

Reminds me of my buddy. We were in our early 20s. He was single, lived alone, had a job and was generally doing alright. We were chatting and he told me he'd been living off ramen noodles for the past two weeks to make ends meet.

The very next day he called me up. It was payday and with excitement told me he'd just bought another TV tuner card for his PC.

Another...

He already had one he barely used. But now he could watch two channels at the same time without turning the TV on! The TV that was incidentally in the same room...

And so he ate ramen noodles for another month...

Re: Why Do People Stay Poor? [pdf]

#143

Post by jfrunyon »

Easy answer: because expenses are higher for poor people.

Instead of buying a home, the lower class rent their whole life. Instead of their daddy giving them a home, the middle class pay interest on a mortgage most of their life.

Instead of buying a 20-pack of $necessary_product that costs $20 and will last for months, the lower class buy a 2-pack that costs $5 and lasts a couple weeks because they need the $15 to pay rent. And then they have to spend more money on gas (or bus fare, or a taxi, or time and energy walking, or ...) to get to the store again sooner.

Instead of the employer providing any supplies that are needed, the lower class have to buy their own uniforms or tools.

Instead of a 5% interest rate on their loan, they have a 25% interest rate.

Because they don't make enough money to set some aside as savings, they have to pay late fees or NSF fees or overdraft fees.

Re: Why Do People Stay Poor? [pdf]

#144

Post by starclerk »

benibela wrote: post #109
feralimal wrote: post #74

Earlier quoted context omitted.

Sorry - my mistake. I was going off memory. 2 times, including the principle. Looking here: https://finance.icalculator.info/mortgage-calculator.html I enter, Mortgage Amount: 100000 Annual Interest Rate: 5% Term of Mortgage: 30years The interest paid is 93255.20

But that is still cheaper than paying rent for 30 years

I semi-regularly plug numbers into this Buy v Rent calculator by NYT [1]. They're pretty equivalent in the 10-30 year range and match housing prices I've seen.

It's hard to beat the SP500's >8% average return [2].

[1] (paywalled) https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...

[2] https://www.investopedia.com/ask/answers/042415/what-average...

Re: Why Do People Stay Poor? [pdf]

#145

Post by DubiousPusher »

ip26 wrote: post #136
nicbou wrote: post #39

Earlier quoted context omitted.

People vastly underestimate how hard it is to do anything without capital/savings. If you are one missed paycheque from going hungry, you can't afford any risks. No going back to school, no going freelance, no interviewing, no investing in anything. You can't afford the means to make money, whether it's a car, a computer or nice clothes. You can't afford them breaking down, but you also can't afford maintaining them.…

you [...] can't afford maintaining them Not sure I can entirely agree, when I was broke I had a fair amount of free time and I spent a lot of it learning to repair motor vehicles. Parts are not free, but labor & markup is most of the cost anyway.

> when I was broke I had a fair amount of free time

How did you manage this? I was working my ass off just to keep the bills paid and doing chores to avoid costly services like dining out and maintenance.

Re: Why Do People Stay Poor? [pdf]

#146

Post by missedthecue »

jfrunyon wrote: post #143

Easy answer: because expenses are higher for poor people. Instead of buying a home, the lower class rent their whole life. Instead of their daddy giving them a home, the middle class pay interest on a mortgage most of their life. Instead of buying a 20-pack of $necessary_product that costs $20 and will last for months, the lower class buy a 2-pack that costs $5 and lasts a couple weeks because they need the $15 to pa…

Why have the poor gotten richer over time then? We don't have the same percentage of rich and poor as we always have had.

Re: Why Do People Stay Poor? [pdf]

#147

Post by mythrwy »

jfrunyon wrote: post #143

Easy answer: because expenses are higher for poor people. Instead of buying a home, the lower class rent their whole life. Instead of their daddy giving them a home, the middle class pay interest on a mortgage most of their life. Instead of buying a 20-pack of $necessary_product that costs $20 and will last for months, the lower class buy a 2-pack that costs $5 and lasts a couple weeks because they need the $15 to pa…

My feeling is "the easy answer" is "All Of The Above" and the bubble choices proceeding encompass a range of reasons from "A" to "ZZZ".

Re: Why Do People Stay Poor? [pdf]

#148

Post by xenospn »

magicalhippo wrote: post #142
drbojingle wrote: post #83

off the top of my head I think it depends on the type of poor you are. Some people are poor because of their situation and some situations are more difficult to escape than others. Some people are poor because of their habits and inclinations and they just don't change those habits (for one reason or another), so they stay poor.

Reminds me of my buddy. We were in our early 20s. He was single, lived alone, had a job and was generally doing alright. We were chatting and he told me he'd been living off ramen noodles for the past two weeks to make ends meet. The very next day he called me up. It was payday and with excitement told me he'd just bought another TV tuner card for his PC. Another... He already had one he barely used. But now he could…

At least he didn't get a payday loan to get that tuner!

Re: Why Do People Stay Poor? [pdf]

#149

Post by mythrwy »

quickthrowman wrote: post #132
woodandsteel wrote: post #105

Earlier quoted context omitted.

>Some people are poor because of their habits and inclinations and they just don't change those habits (for one reason or another), so they stay poor. That's true. But often the reason they have those bad habits is they were taught them by the environment that, through no choice of their own, they were born in.

Absolutely. It’s not only bad habits they were taught, but the huge amount of things they weren’t taught. I was taught how to budget, how compound interest works, and so on by family members. I used to do rental property maintenance in places where people didn’t know to use a dish strainer to prevent sink clogs, nobody ever taught them. Now, spread that out over hundreds or thousands of other things they’re not aware…

Agreed. And knowing is not enough, you have to have enough discipline or environmental training to act at the appropriate junctures.

Re: Why Do People Stay Poor? [pdf]

#150

Post by arcticbull »

missedthecue wrote: post #146
jfrunyon wrote: post #143

Easy answer: because expenses are higher for poor people. Instead of buying a home, the lower class rent their whole life. Instead of their daddy giving them a home, the middle class pay interest on a mortgage most of their life. Instead of buying a 20-pack of $necessary_product that costs $20 and will last for months, the lower class buy a 2-pack that costs $5 and lasts a couple weeks because they need the $15 to pa…

Why have the poor gotten richer over time then? We don't have the same percentage of rich and poor as we always have had.

I think what you've identified is that the poor have gotten better off due to technical innovations reducing the price of basic goods and enhancing their functionality -- while on average wages have tracked inflation. This is a systemic improvement.

Meanwhile, the rich have gotten exponentially richer, as public policies have shifted ever more in their favor. For much the 1900s the top income tax bracket in the US was over 80%, peaking at 95%. Now its 37%. The estate tax for much of the 1900s was 80%. Now it's practically 0% for all intents and purposes.

The poor have gotten slightly better off, the wealthy have gotten dramatically better off, and the gap between the two has widened. Systems designed to keep the two groups together have been chipped away at, and are buckling. This is a result of social policy.

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