Note: I am no economist. This is by no means an economic analysis.
These lockdown days have seen many a battle erupt on Twitter: some silly, some nonsensical, some ideological, and some thought-provoking. The latest (at the point of writing this post) is on income of a middle class household, and the idea of saving and financial management. Thamaru’s tweet (embedded below with his consent) was the spark that set this conversational wildfire off.
Disclaimer: “You” in this post is a general you. I am not addressing the writer of the above tweet.
Although many dunked on the tweep for living in a bubble, this is not the first time such sentiments have been expressed. The idea that poor is poor due to the lack of financial management knowledge, that the (lower) middle class live from hand-to-mouth because they spend on unnecessary luxuries are rhetoric that are quite common. Such thinking is not limited to Sri Lanka, either. It is more a class marker, than a cultural marker.
How reasonable are these assumptions thus made?
“Do people – the middle class, not daily wagers – really live from paycheck to paycheck?”
The short answer, yes.
Many make the assumption that having a “good job” (ie well-paying) is the path to improving the quality of life of people. However, recent studies have debunked this to show that many other factors contribute to this. Simply put, even if you have “good” income, if your environment is not conducive, your quality of life will not improve. Considering the environment in Sri Lanka is not the most conducive, and noting the depth of disparities that exist between different geographical locations (take Nugegoda vs Kelaniya, for example), two people earning the same amount living in two different areas would have very different qualities of life.
According to this study done by the IPS, the median household income in 2016 was around Rs. 40,000.00. The household size is approximately 4. Making allowances for growth, let’s assume it’s 50,000.00. With this income, one has to manage several things: groceries and other essentials, loans (we will explore this later), utility bills, other household expenses like repairs, transport; if there are kids, then school fees, tuition fees, school supplies, items to ensure that your child is accepted as a part of the ingroup (for example, when I was 10, pencil boxes that had buttons on them were all the rage; if you didn’t have one, you felt left out and cornered. No parent would want that for their child). This is assuming that the entire household is healthy, which often is not the case. There are medical bills to foot. There are education expenses for the adults, as adult education is a popular mode of learning in Sri Lanka. The adult children often contribute at least in part to their parents’ welfare. With all these been taken into account, managing a house with Rs 50,000.00 would be a Herculean task.
If you don’t have most of these expenses, you are likely the exception; not the norm.
“People shouldn’t buy a car if they have to take a loan.”
I’m using this as a placeholder for a very popular sentiment on ability. Replace car with “build a house”, “go on vacation”, “buy a new phone”, “send kids to a private school” and the 101 other things that we often hear.
Why shouldn’t they?
What is often forgotten by those who make such demands is that regardless of the income level, we are all human, driven by the same human desires. The will to climb the social ladder, to be at least one rung above what you were born into is a basic desire. Contrary to popular opinion, social status is measured by these external factors than by having a look at the digits on your paycheck.
No matter how brilliant you are, if you take the bus or train to work, you can’t break into the social strata above yours; no matter if you have crippling loans, if you drive a car (with an English number, of course) you have a better chance of being accepted as affluent.
Here’s another example. What do the conversations among the (upper middle class) youth revolve around? TV shows, technology, fashion, etc. In order to have a conversation with this group, then, you need to be fluent in these topics. The only way to be fluent is to have a smartphone, a good data connection, to know what which celebrity is doing. Call this shallow all you want, but someone who does not have a laptop and solid WiFi won’t be able to join your lunchroom discussion on how fast the Winter is coming.
Are these social connections so important that people are willing to go into debt for them? Yes. Firstly, because we are social creatures and we crave connection. Secondly, whether we like it or not, we live in a society where who you know matters more than what you know. And who you know is how you climb the social ladder.
Above all, who are we to say “people shouldn’t buy a car if they have to take a loan”; what right do you or I have to dictate how someone else lives? Who are we to dictate the terms of someone else’s way of living? Why should someone’s income (or lack thereof) preclude them from desiring – and obtaining – something that makes them happy?
If you want a better idea of what I’m on about here, read this piece on “This is why poor people can and should have nice things”.
“They should just learn better financial management, if they are struggling so much”
This is a very popular line, and a sentiment that illustrates how truly disconnected we are from reality. If you do a simple google search on “living from paycheck to paycheck”, almost all results are some variation of “spend less” or “tighten your belt”. What all these gurus seem unable to grasp is that for most of the people, “spending less” is not a possibility. There are structural issues precluding that. As Investopedia says, there is insufficient evidence to say that “higher earners are racking up debt because of poor spending habits”.
The investment opportunities about which many wax lyrical have a minimum amount to spend, which is not within the range of most people. The “saving tips” about which article upon article is written, require you to have money to spend. Our structures are such that without a disposable income, you have no avenue for generating money; thus, you need money to generate money, and most of us don’t have that initial money.
Andrew Young, a man that these financial wizards no doubt adore (unlike the writer of this piece, a middle class brown woman who is rather left-leaning) pointed out another fundamental issue with this thinking: “trying to teach someone financial literacy is very difficult if they don’t have the money”. How do you teach someone to manage something they have never had? Why do you expect people to instinctively know financial management (or even to know to learn financial management) if having money is not something they are accustomed to? Have you stopped to consider the privilege one need have to even begin such an exercise? Have you thought about the assumptions behind your demand?
Next time you want to talk about how Sri Lankans have no clue about financial management, and that is the root of all these problems, remember that 1/5 Americans with a six-figure salary live from paycheck to paycheck. Next time you want to turn up your nose because your colleague says they are broke but has just bought the latest iPhone, remember that there are not just two ways to exist: to be comfortable or to have absolutely nothing. Next time you want to express your surprise and shock and be a little condescending towards someone, remember what Dili said: “It’s so easy to talk about the light when you’ve never fallen in a hole”.
Acknowledging all the replies under the original tweet for the sources, resources, and the sharing of their stories.
Minoli Wijetunga 