May 2, 2014

Chart of the Week: How America’s poor can still be rich in stuff

chart of 30-year price changes for various goods and services

In 21st-century America, it’s entirely possible for poor people to have much of the same material comforts — cars, TVs, computers, smartphones — as more affluent people, yet be trapped in low-paying jobs with little prospect of improvement.

That’s the takeaway from this eye-opening chart, produced by The New York Times. As it and the accompanying story make clear, prices for a wide range of manufactured goods have plummeted in recent years, making yesterday’s luxuries widely affordable despite stagnating wages for most workers. (Though the chart only covers 2005-2014, the larger trend extends back to at least the 1980s.) As the Times put it, “the differences in what poor and middle-class families consume on a day-to-day basis are much smaller than the differences in what they earn.”

The differences, though, show up in services — particularly the sort of services (education, health care, child care) that enable people to find and keep better-paying jobs and, over time, move themselves and their families up the socioeconomic ladder.

“Without a doubt, the poor are far better off than they were at the dawn of the War on Poverty,” James Ziliak, director of the University of Kentucky’s Center for Poverty Research, said in the Times story. But relative to middle- and upper-income Americans, he added, “they have also drifted further away.”

Category: Chart of the Week

Topics: Income Inequality, Poverty, Socioeconomic Class

  1. Photo of Drew DeSilver

    is a Senior Writer at the Pew Research Center.

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6 Comments

  1. Jose “JR” Vazquez3 months ago

    I think the idea that consumer goods costs have dropped, and others have not is simply a result of the types of markets they compete in. Cell phones, TV’s, cell service, clothing, toys and computers work in nearly perfect competitive markets. They have to differentiate based on price, performance, or other dimensions to gain customers. In addition, economies of scale are usually used to bring prices down to increase volume sales for producers.

    Health, education, and child care do not compete in truly competitive markets as they are partially subsidized and heavily regulated. This keeps the costs high and makes bring the cost down for consumers difficult. Education especially so. Private for profit colleges compete with non for profit community colleges, state universities and private universities. All of which receive government funds of some sort either directly via appropriation, or via portable financial aid via students. This is what has led to to sick cycle of college costs and little to no incentive to economize on the part of college administrators.

    Reply
    1. Alaina Toadpipe2 months ago

      That is only partly true. But you have contradicted yourself within your own post. Education, for one, is yes heavily subsidized, that brings costs DOWN for the buyer, not up.

      Private, for profit colleges have been getting in a lot of trouble lately for scamming students into paying for degrees that are not of the same caliber as their longer standing, more public counterparts. Further, it isn’t so much that cost of education has gone up as that relative to income, it has gone up far faster because income increases are being kept artificially from increasing with the rest of the market.

      Blaming administration is simply a way of trying to shift attention away from the real problem. There is not one person out there who tries to target “administration” as the problem who can name which specific positions they would cut when faced with actual employee lists of universities and schools and the employee’s job descriptions. So it is unbelievable that there is actually any extra “fat” to cut, since even those claiming it is there can’t find it.

      Reply
  2. Beau3 months ago

    How can TV’s go below -100%?

    Reply
    1. Drew DeSilver3 months ago

      That reflects adjustments that the Bureau of Labor Statistics (the source for the data in the chart) make to account for quality improvements over time. Because you’re getting a much better TV experience for your $500 (or whatever) today that what you could have gotten 10 years ago, that’s counted as effectively an extra price cut. For more info (and an example using TVS), check this FAQ: bls.gov/cpi/cpihqaqanda.htm.
      Also, note that each category’s percentage change in the chart is plotted relative to the overall 23% increase in the CPI between 2005 and 2014. The actual seasonally adjusted price index for TVs in March 2014 was 85% below the index for March 2005.

      Reply
  3. Thomas R3 months ago

    Cell phones being cheaper must be global. According to a recent Gallup study 55% of those in “Africa’s poorest quintile” have a mobile phone.

    It’s a shame we can’t seem to make food and medicine cheaper.

    Reply
  4. Seany Hide3 months ago

    College administrators wake up. You are riding a very inflated bubble.

    Reply