Half of Americans spend half their money on food and shelter; a recipe for restlessness

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There’s a huge blind-men-and-the-elephant problem when talking about the economy.  Writers can’t help but talk about it like’s it a single thing, that’s either doing well or poorly. Basically, if you’ve lost your job, the economy stinks. If you have a good job, it’s hard to understand what everybody is complaining about. In reality, all economics, like all politics, is local. Home prices are up a stunning 18 percent near Seattle, Washington.  That doesn’t mean the housing market is “fixed.”  And even if you are in Seattle, if you are a first-time home buyer, you sure don’t think it’s fixed.

People (like me) who want to comment on the economy intelligently are forced to try to examine more narrow slices of it, and make their judgments a little more nuanced.  That why data that segments the population into finer groups is a gold mine. Fine data can help explain why some people think the economy is like a pillar and others thing it’s like a tree branch.

A gold mine arrived recently. The Labor Department released new data from its Consumer Expenditures Survey, formed by panel of consumers who keep detailed diaries about all the money they spend.  The group is broken up into income groups of 10 — so the top 10 percent of Americans spend like this, Americans in the 81-90 percent income group spend like this, and so on.  Dividing into these 10 slices also helps get away from the bland upper-middle-lower class descriptions that are really too coarse to form the basis of an intelligent discussion. (What does middle class mean, anyway).

Thankfully, the Wall Street Street Journal’s excellent Real-Time Economics blog distilled the data down into an easy-to-understand chart.  It is above, but you should really go read the WSJ story.

The Journal piece focuses on the interesting accounting of the differences between how the rich and poor spend their money. But I found something else fascinating about the chart.  Fully five of the 10 groups — from the lowest 10 percent to the fifth 10 percent — spend more than half their money on food and housing.  More than half! Remember, this doesn’t include gas, or health insurance, or school, or….anything other than food and housing.  Until you earn above the median income in America, you can expect to devote half your spending to the most basic of basic life costs. That’s crazy.  And if you think about the fragile nature of our consumer-driven economy, it’s even more crazy. It’s a fair assumption that if you are spending half your money on subsistence, you don’t have a lot left over for cars or new clothes.  I’ve noted this repeatedly in The Restless Project: It’s not about jobs, it’s about wages. So long as Americans aren’t making enough money, the economy will continue to sputter. Even for you 1 percenters out there, stagnant wages are a recipe for trouble.    Meanwhile, this chart should help make obvious why so many Americans don’t have emergency or retirement savings.

Of course, as you go up the income chain, the percent of your income you spend on the basic is less important. If you take home $100,000 a year, you can drop $50,000 on mortgage payments and food and have plenty of cash left over for vacations and your 401(k). Still, it’s astonishing what people in the middle-income tiers of America spend just to get by every day, and how much of their budget is devoured by fixed costs. We have a lot of work to do to fix America.

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Click to learn about The Restless Project

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About Bob Sullivan 1470 Articles
BOB SULLIVAN is a veteran journalist and the author of four books, including the 2008 New York Times Best-Seller, Gotcha Capitalism, and the 2010 New York Times Best Seller, Stop Getting Ripped Off! His latest, The Plateau Effect, was published in 2013, and as a paperback, called Getting Unstuck in 2014. He has won the Society of Professional Journalists prestigious Public Service award, a Peabody award, and The Consumer Federation of America Betty Furness award, and been given Consumer Action’s Consumer Excellence Award.

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