Rich get Richer?

[Solinvicta]

I agree with previous posters that there are systemic issues that stack the deck against the poor, but that it's certainly possible for some poor people to climb the socio-economic ladder. I mean, look at how many neighborhoods are set up. If you're in a middle-class neighborhood, you have no problem going to the bank to cash a check...but if you're in a poorer section, there are all kinds of "for fee" check cashing services. Not having an emergency fund can mean that your car breaking down means you're going to be stuck with debt, and interest on that debt.

I'm pretty fortunate myself, and have a solid, middle-class job. I'm not for wholesale re-distribution of wealth, or removing incentives that make people work and produce well in a capitalist economy. But, I think there needs to be enough redistribution that a poor person - even a poor person who isn't trying to work hard to "make it" - has basic, nutritious food, basic shelter, preventative medical care, and access to educational resources.

[lucille]

Originally Posted by Solinvicta

I agree with previous posters that there are systemic issues that stack the deck against the poor, but that it's certainly possible for some poor people to climb the socio-economic ladder. I mean, look at how many neighborhoods are set up. If you're in a middle-class neighborhood, you have no problem going to the bank to cash a check...but if you're in a poorer section, there are all kinds of "for fee" check cashing services. Not having an emergency fund can mean that your car breaking down means you're going to be stuck with debt, and interest on that debt.

I'm pretty fortunate myself, and have a solid, middle-class job. I'm not for wholesale re-distribution of wealth, or removing incentives that make people work and produce well in a capitalist economy. But, I think there needs to be enough redistribution that a poor person - even a poor person who isn't trying to work hard to "make it" - has basic, nutritious food, basic shelter, preventative medical care, and access to educational resources.

There have been some recent studies about the "unbanked" and zones that literally have no grocery stores. Unbanked is the growing group of people who can't get a checking account from a bank or that live in an area where there are no banks. Something these studies noted was the evaporation of community banks. Community banks originally were set up to be a less hostile option than private banks that were gradually becoming less fair or willing to do business with small consumers. Sound familiar? No food zones are areas, mostly urban where there are no real grocery stores for miles. The only way to find one would be to drive or take a long bus ride. So people in those areas depend on convenience stores or little corner grocery stores both that charge insane prices and carry little fresh or healthy food. So people who can least afford it buy unhealthy food at a high price or eat fast food partially because they are sort of lead that way due to the better option being so hard to get to.

Making sure there are banks and grocery stores in low income areas that are not ripping people off could go a long way to evening the playing field for low income people.

[kav122]

wow, lucille! Thanks for that insight. I had thought about the "check cash" and "rent-a-center" places in poor neighborhoods, but I never thought about how banks and grocery stores are so important! Makes a lot of sense!

[Julie Rains]

Originally Posted by kav122

My view is that just like inherited wealth, a great ivy league education, and fabulous connections can be unevenly distributed and "locked out" to some, so can AMBITION and INTELLIGENCE and SOCIAL SKILLS.

It hurts me to hear people doing well, that are so quick to judge, and assume that we are playing on a level field, economically and otherwise.

I loved what Rosie said about "success being the convergence of hard work and luck" and I agree that the playing field isn't level. I just wrote a post on the middle-class advantage. It doesn't mean that hard work can't change things but there are so many variables in success; and I'll go ahead and say that success isn't necessarily = net worth.

Like everyone else who has posted, I have lots of thoughts on this topic:

In Trent's defense, if you are confronted daily and relentlessly with people who are whining but have what it takes to be successful, then it may be frustrating not to convince them to think differently. As a blogger, it is hard to write a short post and explain everything that you are thinking about and all the issues...at least it is for me.

Depending on the type of economy, certain skill sets are valued more than others. I love Michael Jordan but does he work as hard as teachers, police officers, nurses , etc? He happened to have a skill that is valued in our economy, and some good advisors who helped him with a nice side income (endorsements).

Speaking of side income, this is a new phenomena, sort of. When I was a kid, there were a few people who worked more than one job or had a side business. The Internet has changed this dramatically - now it seems that everyone in their 20s or 30s makes money on eBay, through blogging, running online businesses, etc. So the sideline may seem normal but it's not penetrated the entire mindset of the population yet.

My dad did try to have a side income once; he and his brother (who used to be the CEO of an investment firm, so he had some business savvy) invented a football board game and tried to sell it to insurance companies to use for a promotional item. It didn't sell like they thought it would so everytime I went to a birthday party as a kid, I brought...a football game. I even gave one to my son's second grade teacher about 40 years after the game was invented (they bought a lot of inventory). My point being is that side incomes may not always materialize.

The people who I know who have 7-figure portfolios (or 8 or 9) never had second jobs. They held high-paying jobs and made money by investing in the stock market or real estate (which I guess could be counted as a side job), or they had average to really good paying jobs and built wealth through stock options and stock programs. I think that focus on the job is important and sometimes you shouldn't blur your focus with too many outside activities.

But I digress to the point of "working hard" which I find tricky. Lots of people work hard and don't get ahead and the side income or second job may actually detract from getting ahead IMHO. Some people work hard but not smart or just don't see the things they should be changing in order to thrive or move up that rung in class, if that is important to them.

Mental illness (as discussed earlier) can be a bigger factor in not realizing one's potential than others realize -- I am not talking just about debilitating illness but mild to severe depression or learning disabilities, for example.

Also, what Rosie mentioned about Risk is something that I thought about alot when I was writing my middle class post. Predatory practices (rent-to-own) do prevent many from escaping poverty but...to move from the middle to upper class (however that is defined) does require taking chances, usually through investments that a cushion of wealth can protect you from being out on the street if the idea/company, etc. fails or while you are waiting for cash flow to be generated.

I hope I have contributed some to this engaging discussion.

[kav122]

Julie-I agree with almost everything that you said...it is a whole big jambalaya of reasons that we have poor. Not to detract from the Michael Jordan's out there, because that's just the way the cookie crumbles. I didn't like the "screw 'em, I can't help that they are poor...they should work harder/smarter/better" attitude that was in the comment section of Trent's post, though. And I'm sure Trent is a little more deep than what that one post sounds like, but I truly got the impression that he thinks that by working "better" ANYONE can be wealthy. Heck, I'm all for working hard and getting ahead, but I have a deep rooted empathy for poor and I don't think that some of the privledged in America really understand that not everyone is living F-A-B-U-L-O-U-S here. Quite honestly I wish that some people would open their eyes and look around, although I know that Wisebread's readers are generally sympathetic and understanding, so I am preaching to the choir.

On a sidenote, did anyone see 60 minutes last night? http://www.cbsnews.com/stories/2008/...n3889496.shtml Stan Brock is amazing and doing wonderful wonderful things for the poor and un/underinsured here in America. Not to mention the thousands of doctors, nurses, dentists, staff, donors, etc that make his project to bring a little bit of health peace of mind to Americans. I admire Stan Brock even more when they said that he doesn't make any money from the project and lives in an abandoned school that Knoxville, TN leases to him for $1. He said the project is run on a shoestring. I say he needs to teach the government a thing or twenty about how to run our healthcare.

[Julie Rains]

For me, I got stuck about the difference between "doing well" and moving to another socioeconomic class. For example, I know someone who is the Millionaire Next Door but b/c he lives in an average neighborhood (house value of less than $200K), doesn't belong to a country club, and his kids (probably) don't have trust funds, I don't think he has made the leap to the upper class; others might disagree. You could describe this person as doing well. I should add that he and his wife have been active in missions and used to have a kid from the area that suffered from the Chernobyl disaster every summer for several years - that's adding value to society but not really adding to the family's net worth.

Do I think that building wealth is more accessible than people realize (over a lifetime not by the time you are 30)? Well, yes but I think there are lots of hurdles and some people seem to do better than others quickly, some have great success their first time out in a business venture, others have setbacks (misjudge the market, suffer from illness, job loss, divorce); add in the hurdles of financial illiteracy, predatory practices, lack of education, little family or peer support, etc. and those obstacles increase exponentially.

[lucille]

Another issue that is adding to the heap of things hedged against the poor is the loss of manufacturing jobs. It used to be that someone with an 8th grade education could get a job working in a meat packing plant or an automotive factory type of job and make enough money to support a family, own a decent home and have a few nice things like vacations or a boat. Now those same jobs either don't exist or they pay $9 an hour. So working those jobs are no better off than working at Walmart. Either way they are poverty jobs. The other option is even lower paying jobs like Taco Bell for $6.

What this does is close out the options that used to exist for people with limited education or honestly limited ability due to some factor like mental capacity or learning issues. Most blue collar now days equals poverty or close to it with a very few exceptions.

Now heap on lack of grocery stores, lack of decent public transit, lack of banking options, rent to own stores, payday lenders and a lack of housing standards for rentals.

[Miss Rosie]

Originally Posted by lucille

Most blue collar now days equals poverty or close to it with a very few exceptions.

Now heap on lack of grocery stores, lack of decent public transit, lack of banking options, rent to own stores, payday lenders and a lack of housing standards for rentals.

I'd add lack of access to post-secondary education, lack of decent secondary education, lack of medical care, lack of law enforcement, even lack of infrastructure in some areas.

It's to the point now where poverty isn't a single-issue problem. It's a minefield, where one wrong move can blow your legs off, financially if not literally.

[7million7years]

Absolutely. But don't look to 'median net worth' tables to show you that, or to the average person. Ask somebody - anybody - who is rich and they will tell you that (a) it's true and (b) they may even tell you how. You see, there are some common rules to wealth ...

Anyhow, my goal was to achieve a $5 Net Worth within 5 to 10 years ... I actually made $7 million in 7 years (hence the name of my blog where I share my thoughts on how to get rich, from my own experiences), starting from $30k in debt.

But, once I go there, I found that it almost-literally 'rained millions' ... it took me less than two years to do 4 more deals (all different: one a business; one a real-estate transaction; two associated with contracts) that netted: $6 mill; $1 mill; $1 mill; and (hopefully, signing in the next month) $3.5 mill.

Once you understand the 'rules of money' don't let anybody tell you that the Rich don't get MUCH richer, MUCH quicker than the rest of the world.

[Julie Rains]

I thought this recent study (Economic Mobility Study - PDF) from the Pew Charitable Trusts was interesting. While I'm not saying it doesn't happen, statistically the very rich tend to stay rich; the very poor, poor.