Thursday, September 15, 2011

Feeling Poor

In a wealthy country like the United States, you don’t have to be poor to feel poor. Public opinion surveys consistently bear this out. Even among households with an income of $200,000 — meaning every five years, they bring home another million — it is not hard to find people who feel poor. Of course, if you look at households whose incomes are slightly below average, the proportion who feel poor is much higher.

The large number of people who think themselves poor creates a skewed view of what poverty really is. Having to put off replacing the carpets for a year or having to vacuum them yourself is not a problem of poverty. Deciding whether to cancel a Netflix subscription is not a problem of poverty. Real poverty involves uncertainty about the basic materials of life and work: food, heat, transportation, medical care, education, and things like that.

The skewed view of poverty creates a skewed view of policy questions. To hear some conservative politicians talk, you would think that when people don’t have access to food every day, it gives them a greater incentive to work, and as a result, they work harder. The reality is mostly the opposite. Food gives people the energy to do better work. Workers who are more comfortable are more able to focus and think systematically, and as a result, they solve problems better. 

With more U.S. households seeing their income decline than advance, more people are poor than before, but the number of people who feel poor is increasing faster. This feeling of poverty and the accompanying scarcity mentality affects people’s decisions, especially when it comes to “Can I afford it?” questions. People who feel poor are more likely to look for ways to stay where they are than to move forward. When life is about paying the bills, other possibilities and opportunities go unnoticed.

In the aggregate, when large numbers of middle-income and high-income consumers feel poor, the result is a sluggish economy. It is one of a number of factors slowing down the U.S. economy this year.