1. Money
Joshua Kennon

The Press and Government Now Consider a Family Earning $45,000 To Be Low Income

By December 15, 2011

Follow me on:

If any of you saw your local newspaper or favorite national news outlet this morning, you might have come across an article by Hope Yen of the Associated Press called Census Shows 1 in 2 People Are Poor or Low-Income.  In it, the reader is subjected to what are meant to be frightening facts and figures about the state of poverty in the United States; how we have some how devolved back into post-Industrial Revolution England as street urchins out of a Charles Dickens novel grovel in the streets next to super-rich textile barons wearing diamond-encrusted cufflinks.

Typical American Family with Two Kids Now Classify as Low IncomeThe article explains that low-income is typically defined as those earning between 100% and 199% of the poverty level.  With a little bit of research, it isn't hard to discover that in 2011, the poverty level for a married couple with two kids was $22,350, meaning that this typical household would be considered low-income if it was earning $45,000 per year.  To put that into perspective, such a family would be in the top 1.72% of income in the world.  It would be richer than 983 out of every 1,000 households on the planet. That is how we are defining low-income now.

Only in the United States can you rank in the top 1.72% of global income, enjoy heating, air conditioning, two cars, cell phones, video game systems, and high definition televisions and be considered low-income.  Only in the United States can a member of the press, in sincerity, publish an article that essentially states the median family with a near median income in one of the richest nations in the history of the world is low-income.  The sense of historical, and global, perspective is entirely lacking for two reasons: Envy and Ignorance.

When most reasonable people hear about low-income or poverty households, they think of struggling senior citizens who can't afford heat in the winter or a single mom with three kids holding down two jobs just to keep her family from going hungry.  That is poverty.  That is the sort of thing we need to protect against as a society.  That is why we need to create upward ladders of social mobility and downward safety nets of social protection such as food banks, shelters, and work training programs.

By reclassifying such a large percentage of the population as poverty-stricken or low-income, the psychology of what will happen is not a mystery.  Familiarity and donor fatigue will kick in and the middle and upper classes, seeing that "poor" people are able to afford things like the occasional Playstation or Disney World vacation will have less of a problem ending those important social programs.  The "why should I work while they get the benefit" mindset will kick in and, in some cases, it will be justified.  Meanwhile, the true poor, the people who might be shivering under a blanket on nights when the windchill is -10 degrees Fahrenheit or who haven't eaten in two days, suffer the most, getting lost as collateral damage.

How can this failure of intellect occur?  It is something called the contrast principle.  Basically, humans compare themselves to their neighbors, friends, colleagues, and contemporaries to determine where they rank.  If you are earning $100,000 but live in a neighborhood where everyone you know is earning $300,000, it is likely that you would be dissatisfied with your life.  If you are typical, you would try to keep up with the guy next door when he bought an $90,000 Lexus even though on a percentage-of-income basis, you should only be buying a $30,000 Ford.  In our parents' and grandparents' generation, mass media wasn't nearly as ubiquitous as it is today.  Now, as you sit at home in the comfort of your modest, though historically luxurious dwelling, you can see into the lives of people earning $10 million or $20 million per year, who spend more on a watch than you earn in twelve months.  When you struggle to write a check for school supplies, that is present in the back of your mind.  If it didn't have an effect, Madison Avenue would be out of business.

There is an enormous difference between someone earning $50,000 a year and someone earning $500,000 per year.  To pretend otherwise is foolish.  It is equally as absurd to pretend that someone earning $50,000 a year is low-income.  They're not.  They're not even close.  They are living a life that is historically unfathomable to all but a handful of elite; the type of thing ancestors fought and died in the hope of attaining.

Not everyone wants to know how to get rich.  Not everyone will someday have a portfolio generating dividends, interest, and rents sufficient enough to let them write a check for a second or third home.  I've made clear that your goal should not be to die with the highest net worth possible, but instead, live a life getting the most utility out of your money possible.  That is all well and good but let's be clear.  Someone earning $45,000 per year, or more than 983 out of every 1,000 people alive on the planet is not low-income.  They are only low-income if they are trying to afford the things that a family earning $150,000 or $500,000 a year can afford.  Trying to paint their situation as some sort of catastrophe when they live better than many of the European Royalty did 400 years ago is absurd, offensive, and ignorant.  It shows no knowledge of history or empathy for how most men and women live.  It's enough money that a reasonable person, living in a reasonable home, driving a reasonable car could retire with a multi-million dollar net worth if they began saving and investing early in life.

Comments
December 18, 2011 at 2:52 pm
(1) Lou says:

While you are correct in the fact that “poor” in America is quite different from “poor” in, say… India; the fact still remains that poor people in America are in dire straits. You cite the fact that poor people have access to cars and climate control- if we had a decent public transportation infrastructure, we wouldn’t NEED cars to get to our jobs. I’d be more than happy to eschew gasoline and maintenance costs on my car if I could count on our bus system to get me where I need to go and on time. Climate control is a MUST in areas with extremes in weather, not a luxury as your article implies. Every year people in one of the wealthiest countries in the nation die of heat exhaustion, or freeze to death because they couldn’t afford air conditioning or central heating. Health care is run as a “for profit” industry making it nearly impossible for a family of four on this median salary to provide adequate health care for children and adults alike. We live in a country where people are sickened and die from illnesses we have the ability to treat because they lack the money for the doctor and put off visits until they are unable to be saved. Inner ear infections, dental abcesses, pneumonia… these should NEVER be a killer in such a wealthy country. Articles like this one are insulting and misleading- Break down what is NEEDED and what can be purchased with that salary (clothing, food, gasoline etc) and you find that $44K for a family of four means Ramen every night and nothing new, ever. You should be ashamed of yourself for tacitly defending a system that instead of acknowledging its own unfairness seeks to deflect concern by stating that the problem does not exist.

December 18, 2011 at 7:51 pm
(2) John says:

Lou your comment has so much ignorance in it I am actually sad for you.

Climate control is a need? I live in an area that has some pretty intense heat. I’ve used the air conditioning about a total of 12 hours in the last year. Not to mention that our ancestors somehow survived without heat or air conditioning.

As for healthcare, by what right do people demand the value of healthcare? Just because you live doesn’t mean you should be able to demand value from others, that is no better than slavery. Not to mention your belief that ‘for profit’ is somehow evil…

And by the way, my wife grew up in a family of 6 where the parents never made more than about $25,000 total between them. Not only did they live perfectly comfortable lives (without being on any government programs, by the way) but the kids are all either in college, on their way to college, or graduated from college and making well above average money.

It’s amazing what you can do when you make good decisions, work hard, and don’t need things handed to you.

Oh, and by the way, the author of this article grew up to a family that didn’t even have money for food sometimes. I’ll bet you’ve never had a real need unmet in your life.

December 20, 2011 at 1:19 pm
(3) Jean says:

Apply the author’s logic to life expectancies and you get an interesting result. Since Americans live much longer than 400 years ago and longer than many in less developed countries but not as long as some longer-lived Americans, the comparatively shorter-lived Americans should be satisfied with their current lifespan. Hence stop complaining and stop all research on cancer. After all you already live long enough (the same way that you already earn enough). Just make do with your lifespan, the same way that you make do with your 45K.
Ridiculous!

December 20, 2011 at 11:20 pm
(4) Ed says:

Jean
It seems you missed the point entirely. I don’t believe the author is saying anyone should be satisfied or stop trying to earn more. I think he implying that it’s not up to government to give handouts to everyone. I for one am disgusted with what I am paying in taxes each year when I see how lazy most people are. If you are not making enough get a second job, if that’s not enough, get a third job. If you have to miss your kids soccer game because you have to work tonight, tough.

December 22, 2011 at 10:43 am
(5) Abe says:

Numbers are deceiving and should be placed in their context. Having $1,000 in your account in most 3rd world countries is like having $10,000 in the US. A familly of 4 after deducting all the must expenses that can’t be avoided in our sytems(mortgage, insurances, taxes, childcare, transportation….) is left with very little spendable cash. If you make less than 45,000, it is ver hard to make ends meet. So please do not compare apples and dogs. If we go any lower our lifestiles will probably catch up with poor in poor countries.

December 22, 2011 at 4:33 pm
(6) Eric says:

It seems proper to point out that all areas aren’t the same. It’s more expensive to live in Los Angeles, for example, than Memphis or Detroit. The cost of living in an apartment varies wildly, depending upon location. The federal government makes no such distinction, which is really odd.

December 27, 2011 at 10:57 pm
(7) Mike says:

Interesting conversation/topic. I think the comparisons, as Eric and Abe said, are not totally clean. $45,000 in Kansas City will go much farther than Boston or San Francisco, which require 42% more income for a comparable cost of living. Also, it does not mention how many dependents are being supported by the $45K. I personally work two jobs and retired from the military. I dont want to support people too lazy to help themselves but do not mind helping those who really need a leg up.

Other topic, mentioned, healhcare. Just a short note. I think we need to do more on healthcare (a compromise between the mandatory plans and using HSAs to spur competition). IBM and another company have setup a number of programs providing preventative medicine and doctor visits that saves alot of money. IBM figures by totally getting rid of preventative deductibles and promoting a healthy lifestyle they are saving $170 Million per year for their company alone. We could all learn something from that. We need to take the best from all these programs and make this work for all.

January 13, 2012 at 12:01 pm
(8) Denise says:

I very much agree with this article. When the definition of “poor” gets so redefined by media and government, you really don’t know who needs help and who doesn’t. The author is right to say that those who are middle and upper class will second-guess their giving, at least for the people in our own country. I know that many have opted to give more to foreign causes, such as programs that provide wells and water, for this very reason. I grew up in a VERY low-earning household (with 5 children in it) and my parents never would accept charity. I think that my dad let his sense of pride sometimes get in the way of what was best for his children, but for the most part that childhood experience has proved beneficial. My idea of needs and wants (what defines a “decent” house, car, etc.) are really different from a lot of people I know. We have an average income, but I really feel like we are VERY fortunate. We are so rich compared to most of the people in this world. And I agree with the author: $50,000 a year can be used by a family of 4 wisely with the ability to still invest and save for college and retirement.

May 30, 2012 at 2:23 am
(9) Sean says:

I am actually quite surprised at how many negative comments there are to this post. The author is quite right about the fact that 45k is quite a bit. I do not understand Lou and his comment “Climate control is a MUST”, and “$44K for a family of four means Ramen every night and nothing new, ever.” Come on now Lou that is not even near true. You don’t need climate control, it is called window power. Growing up for me that is all we had until I joined the military. In the winter you use blankets, I remember helping my grandma take old pairs of jeans and old cloths and quilt them into the warmest blankets I have ever had. Yes I would go out every day in the bitter cold to chop fire wood for the night, and at night we have a small fire in the wood stove in the living room that we crowded around an played board games. then around 10 pm we would kill the fire for the night and filter off to our rooms to hide under the blankets. My grandpa and I would get old boards and pull out the nails, then straighten them so they could be re used. In the summers we would have a small garden where we grew food, and I walked to and from everywhere until high school where I took the bus. I’m sure you are thinking that this was great depression era or something. But no, I started high school in 2000.

May 30, 2012 at 2:24 am
(10) Sean says:

Earlier this year from Jan-May I tried a small challenge to see if I could go the summer with spending no more than 2$ per day on food. I fed myself very well, and still had plenty to spare for my 2 roommates to eat with me every night. I had a few plant growing in boxes next to the windows. I cooked everything from scratch and ate very well. I had a ton of baked goods biscuits, muffins cakes. I ate pasta’s with fresh tomatoes and onions. I by no means had to eat Ramen every night. I had fresh bread, tomatoes, onions for sandwiches and salads. Yes I drove to work, but I did ride my bicycle into work a couple times, and I feel I could easily give that up. I worked full time and I go to school full time also. Despite what you think 45k is enough. Also, the reason health care is so expensive is because if someone comes into the ER they have to be treated. When they refuse to pay for it, which a very large percentage of visitors do, the hospital “eats” the bill. So to make up for the lost money they are forced to roll those costs into the bills of other patients. (the ones that can pay)

But maybe I am crazy and weird for not complaining that I have enough. I might be wrong for working hard and trying to make my life better instead of demanding the government to do it for me.

November 11, 2012 at 11:48 am
(11) Anthony says:

I’ll end up making between $44,000 and $45,000 this year. I work 44 hours a week and take any overtime when its offered.

My wife and three kids (one who is moderately autistic) manage to squeak by on my income.

Both our cars each have over 100,000 miles on them, and are base models. No frills there. We rent at the moment and pay $550 a month for a two bedroom house that 5 of us live in. We buy cheap generic brand food and spend about $200-$250 a week on groceries, and diapers/toilet paper ect…

After utilities and car insurance and fuel and all that adds up we have 0 dollars to save. We have gone over our budget more times than I can remember tryin.g to find places to save. We don’t drink. I quit smoking. And we only eat out if we are invited to for a special occasion.

We have internet which is our only luxury. I’m trying to find a provider who offered it cheaper at the moment.

We are frugal, live well within our means. And have nothing extra. I’m ok with this and so is my wife. For now. We are always working towards saving and we are not doing bad. I’m optimistic.

But it chaps my ass to no end at how many lazy people mooch off of government “entitlements”. Why is it that I am doing the right thing, teaching my kids to take care of themselves, all the while these worthless moochers live better, eat better, drive better cars than we do. And do the bare minimum if anything at all?

It’s disgusting. Unfair. Wrong. It’s all wrong. I’m not complaining about my life. My life is good. But when we work hard to live within out means, and deny ourselves and our children anything extra such as a trip to the Indiana children’s museum, or the zoo. And see our taxes going to the scum who laugh all the way to the bank I cannot help but be angry.

November 11, 2012 at 11:55 am
(12) Anthony says:

I forgot to mention that we have no car payments either. There’s no way we could afford one.

December 13, 2012 at 3:28 pm
(13) hintman says:

with an income of 50.000, you cannot afford rent, utilities and 2 car payments. Not to mention food and utilities. My wife and I are lucky to get 45000 this year and we are broke!!

January 11, 2013 at 8:53 am
(14) Michael Carr says:

Author Joshua Kennon,

You, sir, are speaking truth. A Cell phone is not a need. An I-Pad tablet is not a need. Winter heating set to 73 is not a need (I grew up using blankets/sweaters when cold). Summer AC set to 68 is not a need (I grew up with out AC). Cable is not a need. Internet is not a need (It is very useful commodity). Water Softener is not a need. Eating out is not a need. Smoking is not a need. Drinking is not a need. Gambling $ already in our possesion is not a need. An expensive hobby is not a need. A video gaming system is not a need. A new car – with a payment – is not always a need. Having 2 cars for a family of 3 or 4(Husband, Wife, Child{ren}) is not truly an absolute need.

Should we go on? I think not. We all clearly see the point I’m trying to make. If we don’t see the point then perhaps we should elaborate further, for misrepresentations sake.

If we could – as far as self-responsible moral agents go – begin to realize the difference between a need, a want, and the unnecessary, all of which we face every day, I believe many more government dependant situations would revert back to our national roots: self-reliance.

## I have the right to do anything,” you say—but not everything is beneficial. “I have the right to do anything”—but I will not be mastered by anything.## -Paul

That being said, there are certain unavoidable situations that require outside assistance. I grew up with our family needing assistance. In retrospect, sometimes we really did need aid. Other times, once again retrospectively, I believe my father made poor choices & the government gave us tax-payer-funded-assistance. Mind you the latter of these two needs were completely undeservingly given to us.

Joshua, you hit the nail on the head as I saw you referencing the fact that outside assistance is not relevant to ANY and ALL circumstances.

February 16, 2013 at 6:58 pm
(15) christina says:

45, 000 is NOT enough in 2013! The gas prices are ridiculous the food cost is higher than its ever been and healthcare is a joke! My husband n I bust our butt to provide and I’m sorry but I want to spend time with my children not work when I’m not sleeping. We live month to month n if one of us gets really sick we could be without a home in a blink. I only shop resale we rarely go out if ever and because its too expensive I am without health insurance. ( the rest of my family is covered) I’m not looking for a hand out but realize I am the family of four we work hard but we are struggling! N oh yeah because we don’t want a mountain of debt we jave never had a credit card we simply buy what we can afford.

Leave a Comment

Line and paragraph breaks are automatic. Some HTML allowed: <a href="" title="">, <b>, <i>, <strike>

©2014 About.com. All rights reserved.