Each year, the U.S. government tells Americans how much money the country spends on stuff, like houses, cars, and alcohol. Organizing this information by income, Josh Zumbrun at The Wall Street Journal produces this nice chart of spending on food, health care, and other categories.
Share of Spending on Certain Categories, by Income Group
Two clear stories. To the far left: The richest 10 percent spend much less of their income on food. To the far right: The richest 10 percent spend much more of their income on insurance (and relatively more than all but the very poorest on education).
When you have money, you spend less on the stuff that ensures you survive the day and more on the stuff that ensures that you (and your children, and your possessions, and your estate) survive and thrive for many years. Poverty is a chaos that screams in the present tense, and the anxiety of having no money forces poorer families to direct their attention to immediate concerns. As a result, the poor spend relatively more on what will keep them alive, because they must. And the rich spend more on what will keep them rich, because they can.
I was thinking about this while reading Tyler Cowen's Sunday column in the New York Times, which was titled, "It's Not the Inequality; It's the Immobility." Immobility, here, refers to social rather than geographical mobility; it's about lower-income people being able to make more money. Cowen is making the point that the country would have better policies on issues like immigration and licensing if we focused on making laws that would maximize opportunity for all, rather than worry that those same policies might exacerbate income inequality.
But the danger of setting inequality and immobility in opposition is that they're not in opposition. Matthew O'Brien has written eloquently on "opportunity hoarding," the idea that rich people are talented at doing all the right things you need to stay rich and make sure your kids get rich, too. Rich couples live in richer districts, read more to their kids, send them to better schools, hook them up with better internships, slide them into better entry-level jobs (or, better yet, into the family business), and finally pass down their insured and well invested wealth. Even education, the great American equalizer, makes for a poor equalizer. And it's not only because wealthy teenagers are more likely to go to school. Young people born to rich families who don't go to college are 2.5 times more likely to end up in the richest quartile than young people born to poor families who do go college. Wealth sticks, and nothing enriches like richness.
It's boring to point out that having more money affords you more food, more clothes, more housing, and more cars. But the richest families actually spend less on food, clothes, housing, and cars than the poorest families as a share of their income. The real difference between the rich and the poor is that the rich spend a larger share of their much larger income on insurance, education, and, when you drill into the housing component, mortgages—all of which are directly related to building wealth, preserving wealth, and passing it down in the form of inheritance of direct investments in the lives of their children.
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