The Optical Illusion of Prosperity
"We have created a system where the only way to survive is to be destitute enough to qualify for aid, or rich enough to ignore the cost. Everyone in the middle is being cannibalized."
Simplify Asset Management’s Chief Strategist and Portfolio Manager Michael W Green examined how the US poverty line is calculated, and discovered that it has been wildly miscalculated for years. In fact:
“[…] if you measured income inadequacy today the way Orshansky measured it in 1963, the threshold for a family of four wouldn’t be $31,200.
It would be somewhere between $130,000 and $150,000.”
The big differentiator is childcare, which in the US averages out at $32,773 a year, but it’s not the only differentiator. Our costs are enormous, and a poverty line at $31,200 only really helps legislators avoid having to provide (and therefore pay for) real support.
A family of four that genuinely earns $32,773 will receive all kinds of state help. A family that earns $80,000 does not. As Green points out, the difference largely comes from costs that went away during the pandemic:
Childcare ($32k): Suspended. Kids were home.
Commuting ($15k): Suspended.
Work Lunches/Clothes ($5k): Suspended.
Of course, many incomes also went away, depending on the jobs that were keeping these families afloat. Knowledge workers were relatively sitting pretty, while people who worked in retail, etc, were in trouble. There’s a lot more help that we can provide everyone. But this is one reason why I cannot stand return to office mandates, particularly when peoples’ salaries are under the $140,000 threshold that Green identifies. (Hint: outside high earning categories like big tech, it’s almost all of them, and inside those categories there are plenty of people who are earning lower.)
It sounds like Green is moving to show that 401(k)s and similar instruments are also a scam for most ordinary earners — something I tend to agree with. If society is an operating system that allows people to live well, start businesses, be healthy, etc, it’s failing us on every level. I say it’s time for an upgrade.
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