And yet low-income Americans increasingly have few other places to turn. “Congratulations, You are Pre-Approved,” Buddy’s says on its Web site, and the message plays to America’s bottom 40 percent. This is a group that makes less money than it did 20 years ago, a group increasingly likely to string together paychecks by holding multiple part-time jobs with variable hours.
And then there's the family that spent $4150 worth of monthly payments on a $1500 sofa set. They're paying $110 per week for the sofa, a smartphone, and some speakers. I think most of us know that this sort of thing is going on, yet that number is still pretty shocking. Part of the reason it's shocking is that their weekly payment exceeds the total cost of the sofa on which I'm sitting, which my wife found on Craigslist for $80 four years ago (at the time, neither of us owned a smart phone or decent speakers). And it's a pretty nice couch.
Buddy's--the rent-to-own retailer described in the article--will also sell you an "early model iPad" for $1440. This is a device that did not exist 20 years ago (or even 10). The skyrocketing price of iPads, then, isn't great support for the story about people having to get by with less in the time series. The cost of the two cell phone bills mentioned in the article isn't either.
The story reminded me of this:
So there's something that doesn't fit here. We're talking about people feeling increasingly squeezed over time (and I have no doubt that they feel that way), and we're talking about how income has fallen; yet the problems listed are that a couch has a sticker price almost 20 times as much as my couch's and costs even more when financed, and iPads are going for twice their original retail value. Meanwhile "necessities" are accounting for a smaller and smaller share of spending, or at least don't seem to be increasingly crowding other things out.
Low income is definitely a problem, but it's not the problem behind the troubling behavior in the story. I think that conclusion probably implies something about policy, though it's not immediately obvious to me what it is. Regardless, I can think of what the lessons are for me; it's all right there in Garett Jones' Piketty review.
I'm in no position to decide whether the choices being made by the people in the story are wrong for them. My point is only that something else is going on besides just stagnant incomes.