Tuesday, April 03, 2012

Economics Question: Does Poverty Force People to Spend More?

Is being poor self-reinforcing because it forces one to spend more on stuff a little bit at a time over time, as opposed to saving up and/or forking over a large sum at once, and eventually spending less?

I don't consider myself "poor," but I do have a personal situation that illustrates the question:

I have dental problems. That's no secret -- I've talked about it, and other people have talked about it, both to my face and behind my back (no, Sully, it's not "meth mouth" -- I'm not a druggie).

I've had these problems for years, and have taken steps toward getting them corrected. A couple of years ago, for example, I had all of my top teeth pulled and got a denture. That ended up costing around a thousand bucks.

The denture only got used for awhile. My remaining bottom teeth are so fragile that if I wear the denture, it breaks them ... and I haven't been able to afford to address the bottom teeth yet.

Essentially, I need another thousand bucks worth of dental work (at a minimum -- if I go to one of the $299 denture places, they'll extract my remaining teeth for $30 a pop, so $600 for two dentures since the old one has long since ceased to fit due to gum shrinkage, and $340 for the extractions).

Since I don't have a thousand spare bucks to get all that done, I spend money on benzocaine gel, over-the-counter pain relievers and decongestants (I've noticed that usually the most painful times are when I'm congested -- I guess the sinuses press on the tooth nerves), occasionally on antibiotics, etc.

I can attest with certainty that I've also missed out on opportunities to make more money due to this problem. Not only am I embarrassed to be seen this way (which means that I no longer do public speaking engagements, which have been an occasional income source in the past), but I spend probably a week out of each month in severe, sometimes literally blinding, pain that reduces my personal productivity.

And, like I said, I don't consider myself "poor." Granted, I personally make little enough that even if I consented to fill out tax returns I'd have little or no liability; and granted, until very recently about half (sometimes more!) of what I made went to a child support obligation; but my significant other makes fairly good money, nobody's starving at my house, and we do live beyond the bare necessities.

I suspect that laying out a thousand bucks at a whack is a pretty big deal for most people, and out of the question for the truly "poor."

I also suspect that this is self-reinforcing because various things nickel-and-dime the truly poor to death and stop them from getting out of the hole.

A newer car would set them back three grand, but they can't manage that ... so they trickle out $50 or $100 a month repairing the old clunker because they absolutely have to have it to get to work.

Or they mow two or three yards a week and know they could make good money running a full-time lawn service, but they can't fork over for the additional equipment and other startup costs, so they just keep on working at Taco Bell.

Or any health problem -- mine above is just an example -- costs them X days in lost income from being off work each year, but they can't get the cash together to get it correctly addressed, so they spend a little bit at a time on pain reduction and such and just try to muddle through.

I assume that this is a well-described economic phenomenon, but I thought I'd bring it up for comment. It's pretty much a matter of needing to post something to the blog, and the only thing on my mind being this damn toothache. So anyway, discuss.

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