A Tale of Two Mothers


It’s all we hear.  The RICH are getting richer while the POOR are getting poorer.

The RICH don’t pay their fair share.

The poor are being abused by the rich.

And on and on it goes.

But is that the true picture.

Consider this story:

Two single mothers of two.  Each woman is single and has two children.  Both have jobs.  Both work 40 hours a week.

One woman works a job that pays her the minimum wage.  The other, her job pays her $60,000 a year; nearly $30 an hour.

Who is more well off?

If you said the woman making 60k, you’d be wrong.   After all is said and done, the woman making minimum wage will have more money left over, more disposable income, than the woman making 60 thousand dollars.

The minimum wage earner:

  • She will earn $14,500 a year.
  • She will pay not one penny of income tax to the federal government.
  • She will have to pay for child care.
  • She will pay payroll taxes and state income taxes.
  • She will see the Earned Income Tax Credit.
  • She will receive food stamps.
  • She will take advantage of the school lunch program.
  • She will receive Medicaid.
  • She will be able to take advantage of S-CHIP.
  • She will receive Section 8 housing subsidy.
  • She will receive assistance paying her utilities.

At the end of the year, she will have $38,000 in disposable income.

The woman making $60,000 a year:

  • She will earn $60,000 a year.
  • She will pay not one penny of income tax to the federal government.
  • She will have to pay for child care.
  • She will pay payroll taxes and state income taxes.
  • She will receive none of the entitlements above afforded to the woman making minimum wage.

At the end of the year, she will have $34,000 in disposable income.

Why would the woman making minimum wage change the system?  Why would she vote to change how money flows from the rich to the poor?

It isn’t coming folks.  It’s here!  Socialism is already here.

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13 comments
  1. Karyn said:

    what’s the math you use to get to the 38K? i’m curious?

  2. pino said:

    what’s the math you use to get to the 38K?

    Here:

    And now that I read this, it doesn’t take into account the expenses the 60k mother has vs the minimum wage mother.

    For example, the 60k mother has to pay full price for her food while the poor mother receives much of her food at discounted prices. While they have accounted for subsidies for rent, the fact remains that most rent for the poor is virtually free; the subsidy basically amounting to free money.

    Add to the fact that if she is able to claim a disability under SSI, she could further add to her income; by as much as $8,000 per year.

    This is rather depressing. Here I figured that Obama would simply move us CLOSER to socialism. We’re already there; already there.

  3. Karyn said:

    I’d agree something is amiss here…takes away incentive to work (or work documented)….but i will say, I wouldn’t say the 15K mom has 38K of DISPOSABLE income….the majority of that is dedicated benefits for foods, healthcare or utilities. which means while the benefits certainly count for something, there is MUCH LESS left over to truly be disposable for the 15K mom than the 60K mom… maybe it depends on your definition of disposable…. or maybe Corey’s getting to me and I’m just being a contrarian. 🙂

    • pino said:

      I wouldn’t say the 15K mom has 38K of DISPOSABLE income

      I think you’re right. The money represented doesn’t represent disposable income; it represents income AFTER taxes.

      I would have to add in expenses for both women to arrive at a disposable number.

      maybe Corey’s getting to me

      That dog’gone Corey.

  4. However, being able to construct an example of two people doesn’t deny basic statistics and trends. Also, I think you demonstrate something else — the fact that the middle class is losing ground. People earning $60,000 a year are not doing as well as they used to, while those earning $150,000 are doing much better.

    The gap between the very rich and everyone else, including the middle class is what has been growing:
    http://www.cbpp.org/files/6-25-10inc.pdf

    • pino said:

      being able to construct an example of two people doesn’t deny basic statistics and trends.

      While in many cases taking a a specific example is anecdotal, in this case, the entitlements are representative of the population that earns those levels of income.

      I think you demonstrate something else — the fact that the middle class is losing ground.

      If your metric is salary. Compared to 1970, the “middle class” is doing much better. The fact that they are being compensated in things other than straight salary is the doing of the tax code. For example, it is cheaper for employers to compensate individuals in health insurance rather than salary; so they do.

      Further, time off, be it paid vacation, training, maternity leave and sick days are compensation. And ALL those forms of compensation are growing for the middle class. Lastly, retirement accounts have become much more standard, again, another form of compensation.

      People earning $60,000 a year are not doing as well as they used to

      Compared to their equivalent salary in 1961, people today are MUCH better off. Living space is much larger, cars are more plentiful, the amount of TVs is much greater. More people have dishwashers, air conditioning and washer/dryers. After food, shelter and clothing, they have a larger amount of income remaining.

      Again, they live longer, report better health and are active much later in life than previously reported. They are better educated and have more leisure time than they did in 1961. I disagree with you that the middle class is in any way worse off.

      The gap between the very rich and everyone else, including the middle class is what has been growing:

      In terms of salary, for sure. And perhaps in other ways. However, if I could chose a world where I would be twice as well off as I might otherwise be but it also meant that the very wealthy were even BETTER off, I would jump at the chance.

  5. Henry said:

    Twenty years ago, I took some time off. I quit my job and started doing community service work 5 days a week. After two months, I got a call from the utility company. Somehow, they knew I was out of work, and they wanted to help me sign up for a low income program. I quickly pointed out that I had not been fired or laid off. I had quit. It was totally my decision to stop working. I could go back any time. The utility worker said that did not matter. I was still entitled to these benefits. She sent me the papers to sign, and she contacted other agencies, so that I could get their services also. Imagine how much I could have received if I had aggressively went out searching for free services!

  6. pino said:

    The utility worker said that did not matter. I was still entitled to these benefits. She sent me the papers to sign, and she contacted other agencies, so that I could get their services also.

    I think that a lot of the time, lost in the rhetoric, is the fact that the Liberal is really and truly working to make the lives of people better. I honestly believe their heart is in the right place.

    Which only makes it harder to persuade them. In their mind, the conservative is greedy and wants to continue to exploit the poor. We have much work to do, friend. Much work!

  7. I size of the middle class is shrinking, as the wealthiest increase dramatically fast, while there is little to no increase in the working poor and the lower 50% of the population. There is no reason for the super wealthy to be amassing so much while the rest get relatively poorer. Politics is relative. I think that’s been tolerated because cheap Chinese goods made it seem like people still were well enough off, and really cheap credit allowed people to consume more. Also, two income families became the norm, so people augmented that way. The US distribution of wealth is starting to look more like a third world state than an industrialized state, and sooner or later people aren’t going to take it. When we’re giving tax breaks to the richest — those who earn well over $200,000, even as their wealth has gone up massively in the last decades compared to the rest. Moreover, it’s marking a weakening of our economy relative to the rest of the world; we’re no longer seen as the economic powerhouse we once were. Countries like Germany prove you can have more equality without becoming socialist or abandoning effective market economies.

    All that said, I think the problem is that we have a sick system at two levels. We hand out money to the very poor, creating a psychology of dependency that works against self-sufficiency and incentive. Then we de-regulate big money, so they can use their wealth and power to structure the game to bring them massive profits and wealth to the top 2% of the country. The middle class suffers from each. I would reform social welfare programs to focus on creating opportunity, while increasing tax rates on the very wealthy — most of their money ultimately stimulate foreign economies, not ours, as they spend and invest overseas. If we don’t rebuild our productive base and have a viable working class, I’m afraid we’ll see economic decline hasten.

    • pino said:

      I size of the middle class is shrinking, as the wealthiest increase dramatically fast, while there is little to no increase in the working poor and the lower 50% of the population.

      I’m not sure what your “unit” is in each of the cases you make. Is it population, dollar amount, ratio of population?

      In any event, I’ve heard arguments like this before. And it seems to me that the shrinking middle class began near 1970. I tried to whip up a nifty graph with data but it is proving more time consuming than I thought–I promise I’ll run the numbers. Anyway, my point is that since 1970, we’ve seen massive numbers of immigrants. Those folks are the poorest of the poor. Even if the natural population stayed the same in relative wealth, it would appear that the poor were being left behind. Only because that segment of the population is growing.

      The fact is, in America, the poor don’t stay poor. Most people move UP the chain during the course of their lives. And the very rich? They don’t STAY the very rich year after year. THAT population also continues to change.

      I suspect you feel that the top decile of earners, the top 10%, continue to make more and more money while the rest of the folks make less and less.

      There is no reason for the super wealthy to be amassing so much while the rest get relatively poorer.

      I would make the case that you and I are much MUCH better off than our 1961 version of ourselves would be.

      When we’re giving tax breaks to the richest

      Everyone received tax relief, not just the rich. And as a percentage of their marginal rate, the rich took the smallest relief. The poor took the largest, 33% cut from 15% to 10%.

      I would reform social welfare programs to focus on creating opportunity, while increasing tax rates on the very wealthy

      I’m with ya of half that 😉

  8. Henry said:

    In many cases, the rich are getting richer because we willingly give them our money. We eat at their restaurants; we subscribe to their wireless network services, and we fill our automobiles with their fuel. If we stopped buying. They would stop being rich.
    Am I upset that there are people richer than myself? No way. Am I upset that there are people poorer than myself? Again, no way. One person in this country is the richest; one person is the poorest. Everyone else has people both above and below them. The argument should not be about who has or has not. It should simply be about making things better for everyone.

  9. Yes, we make quite a bit of money, so I’m not complaining about my own situation. I’m looking at the stats, and I see a massive shift of wealth to the very rich over the past few decades, something that historically has signaled political and economic difficulties, and which isn’t happening elsewhere. I think there is a myth in the US that it’s all just what we choose — that the rich somehow deserve to be rich because they made better choices. The reality is (and I suggest books like “All the Devils are Here” By Nocera and McLean, looking into the financial crisis) that if you are very wealthy, you can rig the game in your favor.

    That’s where the top echelon is right now. They aren’t winning fair, the game is rigged because they have the information and power to rig it. I’d have no problem if it were because of what Henry said — just them selling me what I want. But that’s not what we have, we have powerful actors manipulating the game, buying off Democrats and Republicans alike. The biggest threat to free markets comes from very successful capitalists who see real competition as threatening to their status. They will do what they can to rig the game, meaning actually circumventing what markets would otherwise do. I think many of you think you’re defending free market capitalism, when you’re really defending efforts by the powerful to circumvent what the market would do.

    • pino said:

      if you are very wealthy, you can rig the game in your favor.

      As I suspect generally, people are more Alike than DISalike.

      I agree with you. If the wealthy, or politically connected, are able to impact the system, the system is broken. I am as against individual entitlements as I am against corporate entitlements.

      I think many of you think you’re defending free market capitalism, when you’re really defending efforts by the powerful to circumvent what the market would do.

      There may be some truth in that.

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