I'm about to take us from off the rails to into the forest, but since we're on the subject - poor people are poor, yes, but I think the biggest problem is lack of financial education. I know people that are making enough money to live comfortably, but are crippled by debt caused by poor decisions when they are younger, or poor decisions now.
I say better financial education, and then the next step.
You know, better financial education would be great.
I don't think it's enough, though, when you're trying to stretch a $230 paycheck to $300 in expenses.
I don't think it's enough, either, when you look at how poor people get dinged with so many more fees than the less-poor whenever they go out to do anything in the world.
And I don't think most of the "save what you can" advice is particularly meaningful when you're telling people to put aside $10 a month. One big family gathering could wipe out a year's savings on food costs alone!
I think the first solution has to be getting people--especially the poorest--paid more for the incredibly taxing work poor people tend to do, like cleaning, cooking, all those jobs where you're on your feet 8, 10, 12 hours a day and your body's worn out by the time you're 40.
I agree, but feel the root cause is actually easy access to credit. Credit has been driving the economy for the last few decades. If we didn't have easy access to credit that may have forced wages to stay tied to productivity increases.
Oh and the decline of unions meant that workers lost their ability to successfully lobby their government, business meanwhile increased their lobby efforts.
So, I see the root causes as a rigged game against workers. (Rigged as the odds slightly against our favour, so we get just enough wins and benefits as to not realize that we are loosing overall).
Speaking of finance and education... One things that makes no sense to me.
Take 2 different scenarios:
1) Youth gets paid $4/hr (well below the minimum wage) to work in their chosen field as an apprenticeship. Graduates with a certification in their field with a little bit of money saved up, no debt, and real work experience.
2) Youth gets into massive student loan debt, gets a degree but has no real job experience or employment prospects. Has to work the next decade to pay off their student loans.
The one that makes the most sense and that would result in people being better off is illegal.
Because the best personal finance advice it could give for the majority of people would be 'don't get into debt, don't buy shit you don't need, and support unions'.
Two of the three would be the death knell for our economy, whereas the third is politically unpalatable.
I get the feeling that naming a course "home economics" and including subjects like how to cook and clean and run a household is "too lame" for students these days. A better name might be something along the lines of "how to not end up in a van down by the river." [1]
We did have that kind of a subject, 4-7 grade I think. Learned basic cooking and baking, doing the dishes, cleaning the floors basic nutrition theory (macros, vitamins, trace minerals, fibres and I even think we touched into calorie counting before finishing off.)
I had an "economics" class in school that was mostly a personal finance class. It boiled down to "credit cards will destroy you", which isn't a bad lesson.
In my experience, it is taught in school, only as an afterthought and a single semester-long high school course with usually one of their least competent teacher, much like the computer literacy courses.
It wasn't even taught in my school unless you didn't sign up for any other elective classes (e.g. shop, computer classes, etc). So on top of it being only taught once, it wasn't even taught to the majority of people that signed up for something else.
That's a great way to make sure that everyone mentally checks out of class and doesn't learn anything (even if it wasn't much.)
My high school had a financial literacy requirement, but it was a half year class taught by one of the worst teachers I've had (very nice lady but like the computer teacher they were just riding out to retirement and relegated to these classes that were undersupplied and they weren't knowledgeable in), the content was out of date, and sparse. They cover things like writing checks, bank account creation, but I remember nothing covering how loans work or anything of that nature because the math required would make the class too tough for general education. The class was really something the school just paid lip service to as the state required it. It's a damn shame school's don't have better experiences because people enter the world totally unequipped for the financial predators that loom.
Loans (interest, and also contracts in general) are not required to be presented at a level that /most/ of the population can understand. There is a giant, thick, legal language contract that even if you are a lawyer you probably don't really understand (it hasn't been adjudicated, so you don't know what a judge feels it says).
Disclosure: I do use credit cards, but only as a convenient and insurance providing mechanism for accessing my bank account and recouping some of the fees built in to prices by the predatory banking industry.
Does better financial education actually help? I mean, I know it sounds like it should, but does it? I ask because I have a super-hazy memory of seeing some report that it turns out not to make much difference to later wealth, happiness, etc.
Compound interest isn't much help to those spending their whole paycheck meeting their basic needs. Knowing how to properly invest doesn't help those who can't generate enough income to effectively invest, and didn't receive any help from family or angels.
That raises an interesting question. If you were poor, would you want to sacrifice your happyness a bit to ensure that your children will be better off than you? Sure this is quite a slow solution but it would actually work if done consistently.
Happens all the time. I keep running into stories from people that grew up in a poor household, or is a parent in the same situation. And always the parent will sacrifice a meal or similar to make sure that the kids get to eat.
In nature, getting between a mother and her baby is perhaps one of the most dangerous situations you can be in. very few predators, unless they are out of options, consider humans a viable meal. But even ruminants will potentially attack you to defend their young.
Trying to treat humans as cold calculators of utility is perhaps the worst idea economists have clung to over the years.
This got downvoted and I'm curious why. (Perhaps because talking about my "super-hazy memory" sounds lazy? I dunno -- if I'd omitted the last part, would my comment have been better received? It doesn't seem like that would actually have been an improvement.)
If you downvoted the parent of this comment and would like to help me do better in future, I'm all ears...
I say better financial education, and then the next step.