June 30, 2017
America's Poor Spend 40 Percent Of Their Money On 'Luxury' Items, According To Report

America's poor spend some 40 percent of their income on "luxury items," compared to the rich, who spend 65 percent of their income on luxuries, according to a new report issued by a European bank.

As MarketWatch reports, the new findings raise the question of what counts as luxury and what counts as a necessity, as well as giving a revealing picture of the spending habits of the country's poorest.

According to a new analysis by Germany's Deutsche Bank Research, the bottom two-fifths of America's earners -- that is, those whose annual income is $47,300 or less (in 2014 dollars) -- spend a higher percentage of their income on things that aren't considered "necessities." The amount of money spent on luxuries, as a percentage of one's income, increases the higher one goes up the income scale. At the top, the highest wager earners spend only 35 percent of their income on "necessities."

Unfortunately, the definition of "luxury" vs. "necessity" is only vaguely defined in the study.

"[Luxury items are] goods or services consumed in greater proportions as a person's income increases."

That leaves open the question of what, specifically, counts as a luxury item and what, specifically, counts as a necessity. Is a laptop computer a necessity? You don't need one to live, but good luck staying informed or, if you're a child, completing school without one.

America's poor spend 40 percent of their money on luxury items
Is a laptop a necessity? If you're a high school student, absolutely. [Image by demaerre/Thinkstock]

How the poor spend their money is a matter of particular concern to politicians who would use that information as leverage to manage public entitlements. For example, as the Daily Signal reported in 2016, Republican New York State Senator Patty Ritchie introduced a bill that would have prevented food stamp recipients from using EBT money to purchase steak and lobster, among other "luxuries."

poor americans spend 40 percent of their money on luxuries
Should food stamp recipients be allowed to purchase steak and lobster with their benefits? [Image by Jag_cz/Thinkstock]

Similarly, Missouri Republican Rick Bratten also believed food stamp recipients were using their benefits for luxury items denied other shoppers.

"I have seen people purchasing filet mignons and crab legs with their EBT cards."

However, the notion that food stamp recipients are blowing their benefits on high-dollar delicacies is a myth, says a 2015 HuffPost report. In fact, food stamp recipients, always looking to stretch their food dollar, spend their benefits mostly on inexpensive, packaged, processed foods. If anything, the average food stamp recipient's diet is worse than that of a non-recipient.

Do you believe that the government should manage how the poor spend their public entitlements?

[Featured Image by petrenkod/ThinkStock]