You Are What You Spend
The New York Times did a very interesting article last month looking at the difference in standard of living of the quintiles of income in the US. The thing that makes this article particularly interesting is that rather than looking at income, which is a pretty standard measure of “standard of living” they look at how much is spent. It is very interesting in that is shows the difference in money spent between the quintiles is much lower than the difference between incomes. This implies that the effective standard of living is not as different as incomes would imply. The flip side of this of course is that those lower quartiles are much more susceptible to dips in the economy, since they rely more on readily available financing. Since the upper quartiles save more, they will be more able to withstand extended downturns in the economy, with the one exception that they do have a tendency to spend much more on their homes, and thus might be vulnerable in that regard.
While the article was interesting in and of itself from a financial perspective, I found the graphic to be of particular interest. The top half shows where the different quintiles spend their money, but the bottom half shows what major purchases are considered “essential” for modern life. I find that graph shockingly interesting. For one thing it gives me hope that we will make it through the coming oil apocalypse. Clothes washers didn’t pass 50% penetration until the mid 60s, dryers later and air conditioners didn’t even exist until the 60s. We did without some of the largest consumers of electricity through the 50s. Another item of interest is the dip below 50% of car penetration near 45. The real doozies will be the stove and the refrigerator. How did people cook in the 20s anyway? Only 20% penetration of the stove?