I like the idea of simple living. It means consuming what is needed and trading more stuff for more free time. Things cost money, but money costs time…so instead of buying that 50 dollar sweater you could instead trade that for 3 extra hours with friends or family….since that is approximately how much time it would take to earn the money. If you count after tax dollars to buy the sweater, which you should, it would be more like 4 or 5 hours. Which would you prefer: 4.5 hours of free time, or an extra sweater?
Well there is an organization that advocates simple living as alternative to consumerism and a way to get back to more human values, instead of market values. I don’t think there is much chance of it ever taking off. It is only really attractive to a small minority who already favors leisure and/or harbors some latent resentment of the current system.
But I am interested anyway, so I called a lady who had signed up to be a local representative here in Greenville. I want to talk to people who have actually tried to scale back their lifestyles.
Personally, I see several major obstacles to “simple living” that would make it almost unfeasible for most people with normal aspirations. The most important is that it forces you to drop out of normal society. You cannot participate in the conversations about houses and cars, nor can you go out to dinner and bars to drop 80 bucks a night. You won’t be able to afford to live near those that would be your social and intellectual equals. At Christmas you wouldn’t be able to give the thousands of dollars in gifts that most people give. You would have plenty of free time to spend with your friends and family, but since they work all the time, it would still be difficult to coordinate schedules since most of their free time is spend in money spending activities such as expensive dinners or lavish vacations…which you couldn’t do. Your children would not be afforded the same opportunities as you had. Your decision to scale back would be forced onto your children.
In short, “Simple Living” is alienating and could be construed as exile from society, not an escape from conspicuous spending. If you are prepared to leave, be sure of your next best alternative as returning is hard to do. Also be prepared to leave for good as keeping your hand in both cookie jars leaves you realizing both alternatives poorly instead of having the best of both worlds.
So the lady was an ex-CPA who worked for twenty years and raised 3 kids before she went on to “simple living”. Her husband still works. I was highly unimpressed as she had not overcome any of the objections I raised above, but simply chosen not to buy the new Mercedes every few years or vacation in the Hamptons for the summer. She was quite proud of herself anyway, and I applaud her for the effort, which seemed sincere.
Being an accountant gave her a good head for business and we had a long conversation about the escalating importance of work and the toll it is taking on our lives. It is amazing that nearly any discussion executed well enough always ends in the same stalemate: it comes down to a question of values.
It is horribly difficult to prove anything, even appeals to history can be said to represent single data points, not trends, or to be misrepresentative because the situation was not analogous.
Statistics are often employed as proof as well, but they depend on the way the survey was structured, how the questions were asked, to whom they were asked, and how the numbers were analyzed. They give off an air of empirical science, but are largely just value judgments repackaged in numerical form. If you torture the numbers long enough, they’ll say anything you want them to. Just ask Enron.
Take this data for instance: While our GDP is skyrocketing, poverty levels have remained nearly constant. The largest bulk of the gains in wealth over the last 20 years has gone to the rich. Income inequality is the highest it has been since before WWII. These are all facts, undeniable.
I can even throw in some statistics to back it up if I feel like finding the data on my computer…but I don’t. Actually I’ll throw in one chart just to make it seem more scientific:
This kind of information could really sour one on the economy and the structure of our society. It could be used by politicians, by labor unions…by anyone that stands to gain from it. But it doesn’t prove anything…though I often quote statistics like this myself. Data is never scientific; people pick the facts they want, the ones that back up what they believe. If they don’t find the right facts, they keep looking until they do.
Consider this alternative view: The reason the lower income brackets are not rising as fast as the higher ones is immigration. Through the 1980s and 1990s, America accepted more than a million legal immigrants annually – for each of the last twenty years the US has accepted more legal immigrants than all other nations of the world combined, along with a huge influx of illegals, estimated at 8 million currently within our borders.
The result is that today 11 percent of the US population is foreign-born, the highest proportion since the 1930s. Immigrants start at the bottom of the bell curve, often below the poverty level and keep blue collar wages from rising because the low-skilled labor pool is kept artificially plentiful by immigration.
Does this explain all of the rising income inequality in the US?? The source from which I got those stats (a book I’m reading called “The Progress Paradox”) says largely yes.
And I am sure it explains some of it, especially the persistence of poverty. Although no number of immigrants can explain the ballooning of CEO pay: 
All across Europe it never exceeds 40 times the pay of the average worker.
Anyway, the short moral to this long story is this: don’t listen to all these “experts”. There certainly are experts in this world, but it is so hard to tell the difference between someone who is very well-informed on a subject and someone who is very well-informed and has an agenda to promote…..that I hesitate to believe what any of them say.
I think I’ll stop here since this post has dragged on long enough. Next time I’ll continue with the specifics of our conversation, how it came down to value judgments and how it contrasted with a similar conversation I had with Arlie Hochschild yesterday. She is a leading researcher at UC Berkeley on the work/life and family movements.
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Hey
Awesome post!!! Your passion and dedication to this subject is fantastic.
Just one question? With all the pros and cons of the “simple life,” is there a realistic way to incorporate those “values” into your life?
I agree, not buying a lexus or forgoeing a cruise is a laughable example of scaling down. However, I don’t think that one would have to dip into poverty to scale down. In fact, wouldn’t it be possible to spend less money on wants (vs.needs)and still be able to maintain the same standard of living as before?
I would rather have 4-5 hours of free time with friends and family than a sweater, but wants and needs are often conflicting and compromising.
I mean, what if you had no other sweaters, or worse, no one to spend the extra time with?
Just a comment on your first chart. Either you have 101% of the people defined, or that “top 1%” has greatly added to the reason why the “top 20%” looks out of whack with the general flow of the chart. Would you really expect the numbers to show any differently? Could you honestly hope that each level of income increased at the same percentage?
Three things come to mind:
1) It takes money to make money– The people with more money, generally, will make more money with it.
2) You reap what you sew– The harder you work, the more you will earn. Although, I don’t have cool looking charts to plug in here, I would wager that the people giving it their all at their job will earn more than those that coast by. Even in the lower levels of income. If not for the hard working blue collar employee the numbers may look even more construed. I would also wager that as you go up in the brackets that a higher percentage of workers are giving it their all. Again, no data, but just my opinion.
And 3) Pro athletes get paid WAY too much by people who make even more than them– It’s not their fault, really, as it is the lower brackets of income giving them their money.
As far as the CEO chart, all I have is one theory. With all the downsizing that companies have been doing especially of late (mainly downsizing consists of having fewer upper management positions), this would in turn lead to a lower average worker income figure. Plus, there would be extra funds available from the reduction of salaries that they would spread out across the positions still remaining (again upper management) due to their increase in resposibility. Obviously, the CEO would get the biggest portion of this as he “is” the CEO.
Just my 2 cents on that particular part of your entry. As for “simple living”, I don’t wear sweaters because they make me itch.
Josh,
Here is my answer to your points:
First, about the income inequality chart: it does not add up to 101%. It is as you said: the top 1% is skewing the wealth of the top 10%. If the financial wealth (not just income) of the average family in the bottom 80% were represented by a bar graph one inch high, the bar representing the financial wealth of the average family in the top 1% would be 33 feet high.
In response to this question: “Could you honestly hope that each level of income increased at the same percentage?” My answer is Yes. I do not mind in the least that the rich have more in absolute terms than the poor. I accept a level of income inequality because the opposite (total income equality) eliminates the motive to produce.
However, I do not accept that the rich should have an ever growing percentage of income. If their percentage were ever increasing, eventually they would have 100%. Income inequality is a social bad. It creates resentment, crime, depression, and contributes to poor health.
Next issue: “You reap what you sew– The harder you work, the more you will earn.” Wow, the American Dream, huh: Work hard and you’ll get rich.
How many of us wish it were that easy? It is true that there is a possibility of getting rich through hard work. And it is true that the cases where it is true are highly publicized, thus perpetuating the American Dream….but the American Reality is largely quite different:
In a recent study following U.S. adults through their working careers, economics professors from the University of Michigan found that about half of those whose earnings ranked in the bottom 20 percent in 1968 were still in the same group in 1991. Of those who had moved up, nearly two-thirds remained below the median income.
The U.S. economy provides less mobility for low-wage earners, according to an Organization for Economic Cooperation and Development study, than the economies of France, Italy, the United Kingdom, Germany, Denmark, Finland or Sweden.
The reason the American Dream seems more valid for people like you and I is that we are already in the top 20% of income brackets. Upward mobility for us and the dream of making it rich is within our reach, because by most measures…we are already rich (which I am very thankful for).
Next point: Pro Athletes. The stakes of the game have indeed risen as the amount of money involved has risen, but player salaries as a percentage of team revenues has risen in recent years too.
This is largely a result of the NBA Players Union negotiating ever sweeter deals with management. The lesson here is not that the players make too much, it is that unions can protect employee (player) interests. (The reason the players union negotiates so well is that they have a monopoly while the teams do not. A player can always move to another team, but there is only one Tracy McGrady or Baron Davis. This gives the players union a lot of cards to play.)
Unions need not be the drain on the economy people think they are. In a free market they are the natural countervailing voice to management. In a very real way a loss to employees, such as removal of health benefits, is a gain to management, who now has that money to spend elsewhere. Unless Labor speaks with one voice, its best interests will not be protected.
As for runaway CEO pay, it is largely a result of Reaganonics, which severely cut tax rates for the rich and allowed CEOs to be paid more, where before they were reigned in by legistlation and the then prevelant public opinion that making too much money is unfair. Bush Sr. continued the policies and the practice of paying CEOs with stock options coupled with the late 90s stock market boom led to the out of control situation we see now. It has little to do with downsizing. Again, I don’t mind CEOs making more, or even far more, but a 1000% increase in last 20 years while the median pay increase has been around 15% is a little suspect.
Just my 2 cents.
For everyone’s information, I don’t know if I intend to do anything about all this. I would like to save the world, but I will not sink my own in the process. I like myself too much for that. If I ever decide that the advantages of making the system work for me outweigh my interest in helping the system work better….I’ll just have to go get rich myself.
I just find it an outrage that there is no public dialoge on this information. It is as if we are taking a medicine that is making us sick and the doctors of economics tell us the cure is to take more medicine.