Does that second chart on the percentage of poverty in each state bother anyone? The entire South, with the understandable inclusion of Michigan (too dependent on the auto industry)? Uniformly (with the exception of Florida)? Does this stark North/South divide remind you of anything? But I wonder what the economy is like in those southern states? I wonder if those two are related?
OK. It's an impressive display. But it begins on the wrong premise. "It costs money to live" should be the post title.
As a foundation, there is a flat fee amount that every human being in the USA must pay to survive. The amount can be calculated as a mean value of food consumption, shelter, and health maintenance costs. Any other costs added to these three foundational costs are related to lifestyle decisions and are, therefore, a type of variable costs.
The visual display makes assumptions that simply obfuscate any rational comparison across socio-economic categories. For example, the payday loan concept is misleading. It suggests that poor people are reliant upon payday loans and are then gouged by the payday loan industry,which traps them deeper into poverty. However, very successful small businesses use similar loan relationships with their banks to keep their cash/payment systems flowing during periods of time when accounts receivables do not keep up with accounts payable.
Customers don't always pay on time and there is not always a customer available to pay. So the business has a line of credit with a bank ready to cover these shortages. The interest paid on these cash-ready loans is variable,depending a very improtant factor - the historic ability of the business to pay its bills, which simple is the credit rating of the small business. This is not different that the credit rating of a low-wage earner seeking a temprorary loan from a pay-day loan store. If a small business accounts receiveable time line becomes too distant (average time an average customer pays its outstanding bills exceeds 30 days) then the interest rate is automatically increased to cover the bank's risk. The small business must work hard to collect from customers in order to keep that interest rate low. Likewise, if a low-wage earner increases his/her wage and pays his/her bills on time, then the need for a payday loan decreases and s/he can shop for better loan terms.
Yes, those with less income most often do pay more for home and auto loans. But this is a function of probability - not a personal vendetta against the poor. And it does not mean that it "costs" more to be poor. If does, however, mean that if a person with a lower credit rating wants a loan (far any reason - car, home, etc.) they will pay more in interest to borrow the cash.
This is a system those on the left believe is the cause of poverty. Overwhelmingly, the data show a relationship between family instability and higher poverty rates. The solution is not to change the credit system. Rather, it is to develop a skill base that allows individuals to dictate their own credit terms, if/when they should need credit.
This is why I like hearing Larry talk about non-profits that counsel people past dysfunctional behavior and build skills to help people enter into the workplace.
Does that second chart on the percentage of poverty in each state bother anyone? The entire South, with the understandable inclusion of Michigan (too dependent on the auto industry)? Uniformly (with the exception of Florida)? Does this stark North/South divide remind you of anything? But I wonder what the economy is like in those southern states? I wonder if those two are related?
ReplyDeleteOK. It's an impressive display. But it begins on the wrong premise. "It costs money to live" should be the post title.
ReplyDeleteAs a foundation, there is a flat fee amount that every human being in the USA must pay to survive. The amount can be calculated as a mean value of food consumption, shelter, and health maintenance costs. Any other costs added to these three foundational costs are related to lifestyle decisions and are, therefore, a type of variable costs.
The visual display makes assumptions that simply obfuscate any rational comparison across socio-economic categories. For example, the payday loan concept is misleading. It suggests that poor people are reliant upon payday loans and are then gouged by the payday loan industry,which traps them deeper into poverty. However, very successful small businesses use similar loan relationships with their banks to keep their cash/payment systems flowing during periods of time when accounts receivables do not keep up with accounts payable.
Customers don't always pay on time and there is not always a customer available to pay. So the business has a line of credit with a bank ready to cover these shortages. The interest paid on these cash-ready loans is variable,depending a very improtant factor - the historic ability of the business to pay its bills, which simple is the credit rating of the small business. This is not different that the credit rating of a low-wage earner seeking a temprorary loan from a pay-day loan store. If a small business accounts receiveable time line becomes too distant (average time an average customer pays its outstanding bills exceeds 30 days) then the interest rate is automatically increased to cover the bank's risk. The small business must work hard to collect from customers in order to keep that interest rate low. Likewise, if a low-wage earner increases his/her wage and pays his/her bills on time, then the need for a payday loan decreases and s/he can shop for better loan terms.
Yes, those with less income most often do pay more for home and auto loans. But this is a function of probability - not a personal vendetta against the poor. And it does not mean that it "costs" more to be poor. If does, however, mean that if a person with a lower credit rating wants a loan (far any reason - car, home, etc.) they will pay more in interest to borrow the cash.
This is a system those on the left believe is the cause of poverty. Overwhelmingly, the data show a relationship between family instability and higher poverty rates. The solution is not to change the credit system. Rather, it is to develop a skill base that allows individuals to dictate their own credit terms, if/when they should need credit.
This is why I like hearing Larry talk about non-profits that counsel people past dysfunctional behavior and build skills to help people enter into the workplace.
Sign me up for the ANON 12:33 TEAM!! Well stated
ReplyDelete