Consumer expenditure survey illustrating the income divide

If you&#x27;re curious why:<p>Income before taxes is not &quot;income before taxes <i>net of transfer payments</i>.&quot; (It can&#x27;t be, because one of the most salient transfer payments in the US, the EITC, is administered through the tax system.)<p>One might assume that poverty is sticky and therefore the bottom 20% of earners is relatively constant, but while poverty might be sticky &quot;low income in a year&quot; is not sticky on a year-to-year or decade-to-decade basis.<p>Many people in the lowest 20% for income were middle class N years ago <i>and still are</i>. They&#x27;re spending out of their savings faster than their savings throw off interest&#x2F;dividends. That&#x27;s OK; their retirement math mandates it. (&quot;Wait, how can you afford a mortgage on $10k a year of inc... oooooh.&quot;)<p>Some folks also deal with substantial income volatility on a year-to-year basis. Relevantly to many HNers, there are a variety of structures in which business owners hit the bottom 20% in formative&#x2F;bad years.

Let me ask a really stupid question: isn&#x27;t AGE the most defining factor here rather than race etc.? Especially percentage of those owning a home without mortgage - if anything, fractions of a percent may buy a home they&#x27;d live in outright, so it must be just because they already paid out that home, and they are old.<p>Same for the large percentage of women in lower earning groups and larger overspending there: that&#x27;s natural, young women make less money, but they also get a lot of money from boyfriends, frequently those in the top income group, and spend it, so why is that a problem at all?

And if you consider retirees that makes perfect sense.<p>It&#x27;s hard to draw any meaningful conclusion from these graphs.

<i>The poorest groups primarily rent.</i><p>Breakdowns are &quot;Rent, Home without mortgage, Home with mortgage.&quot;<p>I wonder what percentage of the bottom 20 percent are homeless. Because that data is not even being included. It assumes the most destitute all have homes of some sort. This is not true.

Pretty shocked that ~50% of the bottom 20% has a college degree. Would have expected much lower

Does the population considered for these graphs include people who are retired? If you are living primarily off of savings, I imagine you would be included in the bottom 20% bracket.

I&#x27;d be curious to see more specific breakdowns. There&#x27;s a big difference between someone around the 80th, 85th, and 90th percentile vs someone in the top 1% or top 0.01%. I&#x27;d guess that for the very rich, they spend less than 20% of their income. If someone has better info, I welcome corrections.<p>The most significant implication seems to be that as more money flows to the top, it is not being recirculated at the rate it would if it were still in the hands of middle or low-income workers. This is not a moral judgement on the especially rich (in this case). They&#x27;re making more money than they can reasonably spend, and even if they could spend more, it wouldn&#x27;t be in their best interest. As I understand it, though, this is not a good thing for the economy.

I feel the labels are switched in this picture <a href="http:&#x2F;&#x2F;erikrood.com&#x2F;Posts&#x2F;renter_home_income.png" rel="nofollow">http:&#x2F;&#x2F;erikrood.com&#x2F;Posts&#x2F;renter_home_income.png</a>

I&#x27;m surprised to see over 50% of top 40% owns their home outright. Are people paying off their home early or is this baby boomers who have lived in the same home for 30 years? I would like to see the age breakdown of each segment.<p>As housing costs increase and rent payments continue to flow to the top, inequality will continue to accelerate. Housing policy that promotes affordability needs more attention and effort behind it.

Questions of clarity not addressed in this post (needs digging in the underlying data):<p>* Is this individuals, individuals who work, or households? * Is this data self-reported or somehow collected and correlated by experts? * Does any of this data include people who don&#x27;t file taxes? * What is the definition of the &quot;college degree&quot; category? Does this include the &quot;college&quot; category or degrees from non-accredited colleges&#x2F;trade schools? * Does &quot;income&quot; represent all benefits or just paycheck? I&#x27;m under the impression that civil servants make little in paycheck, but their benefits are back-loaded with pensions and health benefits that aren&#x27;t visible if just analyzing &quot;income&quot;.<p>These all have a large impact on the data and could easily sway the impression that the reader gets.

&gt; The bottom 40% of earners spend more than they make in a given year.<p>This stat presumably includes people who are retired, people who are dependents (e.g. on a parent), and people who are on welfare. I don&#x27;t think you can conclude much without breaking that down further.

Or, the lowest 20% of earners according to CES under-report their income, which may include tips and cash payments, so CES thinks they are overspending.

Where is the divide illustrated? I see a spectrum across the population with no clear dividing lines.

Is this based on before or after tax income? I would assume after, but it doesn&#x27;t really say.

How is it possible for so many people to overspend their income? Credit cards will only tide you over for so long, and once you carry a large balance, it&#x27;s hard to get additional unsecured credit.

So of the top 50% of income earners, half of them have their houses paid off completely? That doesn&#x27;t seem right.

Childhood: Imagining animals in the clouds. Adulthood: Finding axes to grind in charts.

The title should probably be the title of the article here.

So that&#x27;s the spending requirement for a reasonably comfortable life. Good to know