It seems we're honing these notions of wealth now, which is helpful. Labels like "rich" and "poor" have the double problem of being both absolutist (if you're not poor, you must be rich, and vice versa) and of being very vague, worse: non-empirical.
I prefer categories of affordability to spending. How wealthy/rich you are during any given period is the level of spending you can afford during that period. You may spend more than you can afford, but this does not make you wealthier. Equally, you may choose a cheaper standard of living, but this does not make you poorer.
These are the categories of affordability I would propose.
Cat 1: Zero-affordability You have insufficient means to afford the basic necessities of life for yourself or your dependents. People in this category cannot afford to secure sustainable access to sufficient food, water, clothing or shelter. Your lack of resources is total: you have no access to credit or reliable charitable provision.
Cat 2: Necessaries You have sufficient means to afford the basics, but providing these for you and your dependents wholly exhausts your resources. Being able to afford all the basic necessaries of life does bring an element of spending choice. You may choose to be a bit colder in the winter to be able to afford a TV licence, but this does not mean you can afford a TV licence. This kind of poverty is more recognisable in Britain. It covers the lower end of Neil's "uncertainty" group and crosses over between Chess's categories 1 and 2.
Cat 3: Surplus You have enough to afford all the basics you and your dependents need, plus a small surplus. This surplus you may spend however you wish, but it is not enough to make a substantial difference to your standard of living. It is probably precarious and may well be exhausted by a major spending event. The way you spend your resources may mask how much you can afford. Using your surplus to pay for more luxurious necessaries does not bump you down to Cat 2. This category is the cross over between Neil's uncertainty and well-off groups and Chess's immediate consumption group.
Cat 4: Reserves You have sufficient means to afford the basics plus a surplus which is large enough for you to start building up long-term reserves, which may be long-term savings (not just a rainy-day fund), investments or a rental property (inter alia). Again, the way you choose to spend your money may mask your wealth. The key factor is that you can afford a good standard of living and put money aside for the future. This is definitely Neil's "well-off" and Chess's extended security spending. In the UK, depending where you live, £60k a year will probably start to put you in this category.
Cat 5: Independence Your means are not limitless, but you are debt-free, have secure reserves, enjoy the standard of living which you choose to have and have a surplus. You may own your own business, or be a wealthy pensioner with a generous final-salary scheme; or you may have inherited wealth. Alternatively, you may be a successful professional (lawyer, doctor, vet, architect etc.) You probably use part of your reserves to generate an income for yourself. This is somewhere between well-off and magnate and it is not inconceivable that you will exercise meaningful influence at some level of society.
Cat 6: Unlimited You are so wealthy that there are no meaningful limits on what you can afford. You are magnate +plus and a large scale consumption spender. Being in this category does not make you immorally rich, but does give you the opportunity to be so obscene with your spending that, as the Germans say, you can live like God in France.
Affordability seems to me a better set up than spending, and handles miser more intuitively (notwithstanding Michelle's insightful criticism of misers). I wonder if you're suffering a preponderance of groups? Cat 2 and 3 looked identical to me.
Cat 2 and 3 are similar, but the principle difference is that Cat 2 has no surplus. At the end of the month, when they have paid for all their necessaries there is nothing left at all. Cat 3, on the other hand, has something left. It's not enough to change their lifestyle but it might afford some treats, low level rainy day savings etc.
The difficulty I have with this is that wealth is a continuous line, and you have a whole category for exactly one entry on that line (down to the nearest penny!).
Although wealthiness is a spectrum, there is a fixed point - having just enough to afford your essential needs. There are people at this point, and it would be absurd to say everyone has more than enough or not enough. Those who have just enough are too "wealthy" to be grouped with those with insufficient means, and too "poor" to be grouped with those who have more than enough. While I accept that Cat 2 is only a fixed point on the spectrum, it is a necessary one.
I really like the six categories above - they seem to cover the key differentials - and also agree you need 2 and 3. In practice, 2 isn't a single point, because what you 'need', even under a relatively harsh definition, is debatable. If 1 covers homeless people/DRC style poverty, 2 covers - as it indicates - most of the types of poverty you see in Britain: people who have to go cold to afford a TV license, etc.
Three on the other hand is much more comfortable. When I first came to London (a graduate, earning £25k) I certainly wasn't in 2 - I could afford an adequate rented studio flat, broadband, to eat out modestly now and again and to put a small amount aside - but I was a long way away from the 'Reserves' of 4, which uses words such as earning £60k and buying a rental property as an investment. The distinction between 2 and 3 and 3 and 4 seems useful, largely because most of the population of Britainprobably falls within 2-4.
What category is it when people can never keep any money in the bank, because whenever they have some, they spend it on something? Either luxuries or just poorly-chosen necessaries. What about when people are spending beyond their means, on credit cards etc, and so find their debt is actually increasing even though perhaps their salary might be slowly increasing too?
Both of these seem to correlate with a certain subset of what being poor in Britain means, and neither seems actually likely to be fixed by increasing income even by quite a large amount.
Are you happy that these are covered by my category 2 above, and feel they're not covered in anonymous's categories, or are they missing from both?
My intuition is that some, but not all of of these people would be helped by throwing money at the problem, but I take Naath's point that spending rises to match income, so attitude is more important than income. I think the classic answer to this problem is for the state to run people's lives, on the grounds that they run it better. While I think everyone's happy with that as an alternative to starving to death, once you're out of poverty it starts to feel quite oppressive. What do you think is the right approach to this problem?
The thing about servicing debt is that it is not a luxury or commodity. If you're income is insufficient to clothe, feed and house you and meet your minimum debt payments, then you may well be in Cat 1. You do not have sufficient means to afford the basics.
As with any social problem, there is unlikely to be a "silver bullet" solution to the "poor by overspend" question. The Romans had the cura prodigi, whereby a profligate person lost control over his finances and their management was left to a family member. Some US States have historically allowed the creation of spendthrift trusts which operated in a similar way. This is a uniquely family-orientated approach, typical of the Romans. It does depend on having honest, caring, dependable and sensible relatives though. However, along with some state intervention, it may be a more useful approach.
Doesn't bankruptcy law prevent debt from killing you via poverty? That I'm sure is the intention. Obviously you have to start again with minimal possessions, which is awkward but not lethal.
I prefer categories of affordability to spending. How wealthy/rich you are during any given period is the level of spending you can afford during that period. You may spend more than you can afford, but this does not make you wealthier. Equally, you may choose a cheaper standard of living, but this does not make you poorer.
These are the categories of affordability I would propose.
Cat 1: Zero-affordability
You have insufficient means to afford the basic necessities of life for yourself or your dependents. People in this category cannot afford to secure sustainable access to sufficient food, water, clothing or shelter. Your lack of resources is total: you have no access to credit or reliable charitable provision.
Cat 2: Necessaries
You have sufficient means to afford the basics, but providing these for you and your dependents wholly exhausts your resources. Being able to afford all the basic necessaries of life does bring an element of spending choice. You may choose to be a bit colder in the winter to be able to afford a TV licence, but this does not mean you can afford a TV licence. This kind of poverty is more recognisable in Britain. It covers the lower end of Neil's "uncertainty" group and crosses over between Chess's categories 1 and 2.
Cat 3: Surplus
You have enough to afford all the basics you and your dependents need, plus a small surplus. This surplus you may spend however you wish, but it is not enough to make a substantial difference to your standard of living. It is probably precarious and may well be exhausted by a major spending event. The way you spend your resources may mask how much you can afford. Using your surplus to pay for more luxurious necessaries does not bump you down to Cat 2. This category is the cross over between Neil's uncertainty and well-off groups and Chess's immediate consumption group.
Cat 4: Reserves
You have sufficient means to afford the basics plus a surplus which is large enough for you to start building up long-term reserves, which may be long-term savings (not just a rainy-day fund), investments or a rental property (inter alia). Again, the way you choose to spend your money may mask your wealth. The key factor is that you can afford a good standard of living and put money aside for the future. This is definitely Neil's "well-off" and Chess's extended security spending. In the UK, depending where you live, £60k a year will probably start to put you in this category.
Cat 5: Independence
Your means are not limitless, but you are debt-free, have secure reserves, enjoy the standard of living which you choose to have and have a surplus. You may own your own business, or be a wealthy pensioner with a generous final-salary scheme; or you may have inherited wealth. Alternatively, you may be a successful professional (lawyer, doctor, vet, architect etc.) You probably use part of your reserves to generate an income for yourself. This is somewhere between well-off and magnate and it is not inconceivable that you will exercise meaningful influence at some level of society.
Cat 6: Unlimited
You are so wealthy that there are no meaningful limits on what you can afford. You are magnate +plus and a large scale consumption spender. Being in this category does not make you immorally rich, but does give you the opportunity to be so obscene with your spending that, as the Germans say, you can live like God in France.
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Three on the other hand is much more comfortable. When I first came to London (a graduate, earning £25k) I certainly wasn't in 2 - I could afford an adequate rented studio flat, broadband, to eat out modestly now and again and to put a small amount aside - but I was a long way away from the 'Reserves' of 4, which uses words such as earning £60k and buying a rental property as an investment. The distinction between 2 and 3 and 3 and 4 seems useful, largely because most of the population of Britainprobably falls within 2-4.
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Both of these seem to correlate with a certain subset of what being poor in Britain means, and neither seems actually likely to be fixed by increasing income even by quite a large amount.
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My intuition is that some, but not all of of these people would be helped by throwing money at the problem, but I take Naath's point that spending rises to match income, so attitude is more important than income. I think the classic answer to this problem is for the state to run people's lives, on the grounds that they run it better. While I think everyone's happy with that as an alternative to starving to death, once you're out of poverty it starts to feel quite oppressive. What do you think is the right approach to this problem?
Reply
As with any social problem, there is unlikely to be a "silver bullet" solution to the "poor by overspend" question. The Romans had the cura prodigi, whereby a profligate person lost control over his finances and their management was left to a family member. Some US States have historically allowed the creation of spendthrift trusts which operated in a similar way. This is a uniquely family-orientated approach, typical of the Romans. It does depend on having honest, caring, dependable and sensible relatives though. However, along with some state intervention, it may be a more useful approach.
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