Scott Alexander is someone I’ll probably mention a lot. My reading habits for the past couple years have involved the WSJ opinion section and his site (SlateStarCodex) more than anything else that comes to mind. One of his recent posts was on the superiority of Universal Basic Income over Guaranteed Jobs, which is not a fight I care much about at the moment. However, it had a section titled “Jobs are actually a big cause of poverty.” He’s such a good writer that you almost don’t notice that it’s a very bold claim — and a very wrong one, even by Alexander’s own standards.
How could jobs cause poverty? Alexander:
“Poor people’s two largest expenses are housing and transportation.
Guaranteed jobs have to be somewhere. Most of them will be in big cities….
Living in the big city means tripling your monthly rent. Having a car means car payments, insurance payments, repair payments, gas payments, and incidentals.”
We all need somewhere to live, and we all need a way to get around when we’re out of the house. Having a job doesn’t take away those expenses, so all the job could do in this context — regardless of whether it’s of the “guaranteed” or market-provided variety — is change the size of them.
Alexander has previously lamented that it’s a mistake to be upset by giving people extra choices; those upset by an extra choice are comparing it to an imaginary perfect world, rather than to the one we live in (where choice is beneficial). I detect a bit of that mistake in the jobs-actually-cause-poverty take.
Of course, high housing and travel expenses can cause money problems. But the option of taking the new job with higher associated expenses is an extra choice, regardless of what the status quo is. Presumably people who choose to increase their housing and travel expenses for a job are coming out ahead due to the income that comes from the new job.
This isn’t to say that expenses aren’t a huge problem for people, or that we don’t incur many expenses in connection with our jobs. And he’s obviously put his finger on some big ones. Alexander again:
“When I first started working with poor patients, I was shocked how many of the problems in their lives were car-related. For well-off people like me, having a car is background noise; you buy or lease it for a reasonable price, then never worry about it again. Poor people can’t afford to buy and don’t always have good enough credit to lease. They tend to get older, sketchier cars that constantly break down. A constant complaint I heard: “My car broke, I can’t afford repairs, and I’m going to get fired if I can’t make it to my job”….
Then there are the little things. Your work doesn’t have a break room, so you’ve got to eat out for lunch, and there goes a big part of your food budget. Your work demands a whole new set of business clothes, so there’s double your clothing budget. You can’t attend things during normal business hours, so you have to pay extra for out-of-hours services.
And then there’s all of the problems above. You can’t take care of your children anymore, so you’ve got to pay for daycare or a nanny or an Uber to take them to their grandparents’ house. You can’t take care of your sick parents anymore, so you’ve got to pay for a home health aide to come in and look after them. You get job-related strain or stress, and there’s the cost of a doctor’s appointment.
And then there are the fuzzier things. If you’ve just spent the entire day at work, and you’re really exhausted, and you never get any time to yourself, maybe you don’t have the energy left to drive to the cheaper supermarket on the other end of town. Maybe you don’t have the time to search for the absolute best deal on the new computer you’re getting. Maybe you don’t have the willpower to resist splurging and giving yourself one nice thing in your life of wage slavery. All of this sounds kind of shameful, but they’re all things that my patients have told me and things that I do myself sometimes despite my perfectly nice well-paying job.”
Do you see a theme with these problems? They seem awfully passive to me. Agency-denying even.
Alexander’s defense of the jobs-actually-cause-poverty claim contrasts with another of my favorite bloggers — Mr. Money Mustache — who regularly mocks the excuses that people give him to justify their spending (literally — they seem to email him seeking his approval). Some of his recurring insults show up in his titles (e.g.,”Case Study: Average Everyday Complainypants Seeks Redemption,” “How to Tell if You’re a Complainypants,” and “What is Hedonic Adaptation and How Can it Turn You Into a Sucka?“).
MMM seeks to stop us from becoming whiny consumer suckas. Worthy goals, I think, even if you don’t subscribe to his “Mustachian” philosophy (a summary: “Your current middle-class life is an Exploding Volcano of Wastefulness, and by learning to see the truth in this statement, you will easily be able to cut your expenses in half – leaving you saving half of your income. Or two thirds, or more.”).
The problem with the complaints brought up by Alexander’s patients isn’t the high rent payment, or the cost of the car repair, or of the wardrobe or daycare or luxuries. The problem is the mindset; the assumption that there’s nothing that can be done about these expenses; the complaints about particular situations rather than recognizing the larger theme of which they are examples. MMM offers a solution: to recognize that we all have the ability to take ownership of our decisions, to make choices if we’re unhappy, and seek out better trade-offs.
We shouldn’t expect these trade-offs to be easy. We could mine MMM for gems on nearly all of the specific complaints that Alexander’s patients bring up, but let’s look at how MMM has addressed some of the big ones:
- Housing and car costs
MMM has very strong opinions about these. First, he rejects the premise that we don’t have control over commuting costs:
“the average family’s transportation cost is not some fixed punishment that the cruel world imposes on them.. it’s a measure of the amount of driving that they have designed into their lives, multiplied by the level of inefficiency of the vehicles they have chosen for themselves.”
Related, MMM argues we should logically design our lives to minimize our commutes. From The True Cost of Commuting:
“let’s whip up a couple of quick commuting equations. Let’s assume the average person’s marginal driving cost is halfway between the Ultra-Mustachian driver figure of 17 cents per mile, and Uncle Sam’s generous 51 cent allowance. So, 34 cents. Let’s also assume the value of a person’s time is $25 per hour, since this is close to a median wage for a suburban commuter. (If you don’t think you’d use your newfound leisure time that productively, you need to think more like an Early Retiree. I used mine for plenty of learning and domestic insourcing).
For each mile you drive across two times on your round trip to work daily, it multiplies to 500 miles per year, or a $170 annual fee
For each of these miles, you waste about 6 minutes in the round trip, adding to 25 hours per year ($625 of your time).
So each mile you live from work steals $795 per year from you in commuting costs.
$795 per year will pay the interest on $15,900 of house borrowed at a 5% interest rate.
In other words, a logical person should be willing to pay about $15,900 more for a house that is one mile closer to work, and $477,000 more for a house that is 30 miles closer to work. For a double-commuting couple, these numbers are $31,800 and $954,000…
If these numbers sound ridiculous, it’s because they are. It is ridiculous to commute by car to work if you realize how expensive it is to drive, and if you value your time at anything close to what you get paid… I have never been willing to live anywhere that required me to drive myself to work**. It’s just too expensive, and there is always another option when choosing a job and a house if you make it a priority.
And making that easy choice is probably the biggest single boost that will get the average person from poverty to financial independence over a reasonable period of time. I would say that biking more and driving less was the trigger in my own life that started a chain reaction of savings and happy lifestyle changes that led my wife and I to retirement in our early 30s.”
Play around with the numbers for your situation if you really want to be a logical/calculating efficiency seeker like MMM, but there’s a lot to the short commute ideal. I’ve had a number of different commutes in my career. I could walk to work one summer in law school, did a 45-minute-to-2-hour commute another summer (rush hour could be soul sucking), and tolerated a few years of commutes in the 20-40 minute range. I live 3 miles from work now, and can report that the 7-minute commute is something I am thankful for every day.
MMM also encourages questioning why it is any of us lives in a particular place, noting that moving away from home probably reflects “a bold personal choice you made.” Even better:
“With the increasing number of careers and entrepreneurial businesses that can be done from ANYWHERE through teleworking, and the fact that an ambitious person can carve out a job for themselves in almost any city, I think that moving is often a fantastic idea, and it is mainly fear of the unknown and fear of change that is holding people back….
And let’s not forget the economic argument to moving. For me, the irresistible combination of higher income, lower taxes, and a lower cost of living was the thing that allowed me to retire so early.”
Most of the above focuses on the expenses-of-the-big-city aspect of Alexander’s point. But he also mentioned direct car payments/repair costs. Obviously MMM has much to say about these. See this:
“Make no mistake about it – if you have a good reliable type of old fuel-efficient car, it will always be cheaper to maintain and repair it as necessary, compared to buying a brand new car. If you have found yourself hit with frequent $2,000 repair bills for your own older cars in the past, you are either very unlucky, very hard on your cars, or have been choosing unreliable vehicles. Reliable cars really do go 200,000 miles or more with just routine scheduled maintenance, and seeking out this type of car for yourself in the future will be part of what makes you a true Mustachian….
It’s a bit of a balancing act, because in theory you could get the lowest driving cost by driving around in a very old car. A 1991 Honda Civic that you picked up from a bearded musician for $500, or even a 1984 Nissan Pickup like the one I used as a construction vehicle from 2005-2010. But it takes additional skill and patience to keep vehicles like those running. If you do depend on a car for daily driving, or you’re a single person living in Miami and hoping not to scare off too many potential mates, or you need to carry clients around and look somewhat normal doing so, even a single breakdown could cause more costly side-effects than the old car is saving you. That’s why I am suggesting that busy professionals play in the 5-15-year-old car range, rather than diving right into the 1990s.”
But really, he advises against the whole car-owning exercise in the first place.
- Eating out/food costs
Alexander cites going out to eat because of work not having a break room as busting a food budget. That’s pretty weak sauce (I’m sure Alexander thinks so too, and merely noted it as a patient complaint), but I want to highlight MMM on food in general because of his extreme perspective. From Wealth Advice That Should be Obvious:
“6. You Don’t think of Restaurants as a Source of Food
I love eating out as much as you do. Possibly more, because I appreciate the true amazing decadence of it every time I partake. “Look at me, I am renting this huge venue and paying an army of servants to prepare food for me!“, I marvel every time I do it.
But the world is not your personal buffet. It is a forest filled with bear traps designed to ensnare and impoverish your ass. And thus, you don’t go out on the town with no plan for where you’ll get your next meal.
This summer my wife I disregarded this advice while spending the day in Montreal. After several hours of walking, we ended up getting very hungry and still couldn’t find a reasonable place to eat. Everything was either fried foods, pizza, or closed on Sunday. Finally we found a cafe and gratefully sat down. Two shitty salads and $30 plus tip later, I reminded myself to follow my own rule. Sustenance comes from your backpack. Restaurants are for carefully planned experiences with good friends.
A very similar rule exists for Coffee.”
And beyond restaurant advice, MMM has lots to say about grocery shopping. From Killing your $1000 Grocery Bill:
“When you look it up, the average food cost for a family of four in the US is actually quite high, at $944 per month. But to call it “food cost” makes it sound like it’s out of your control. I would call this the average food spending…
Instead of shooting for the average, you can design your own food cost. Let’s say a family of four wants to spend only $365 per month on groceries, saving them $579 per month over the USDA average family. Investing this savings would compound into about $102,483.00 every ten years, which would obviously make a pretty big improvement in the financial health of the average young family.
To hit a monthly grocery spending target like that, you first have to understand what you are buying. There are four mouths to feed, each consuming three meals a day or 91.25 meals per month. Let’s say they all need adult levels of calories, so about 2000 per day.
To meet this level of grocery spending, each meal needs average out to about $1.00 per person, and provide about 667 calories…
Can it be done? Coincidentally, this is about the level of my own grocery spending when I’m in semi-frugal mode (if you scale it down to 3 people and $273/month), and in the non-frugal mode mode we currently shop in, we spend closer to $365/month for three people, resulting in a cost per meal of $1.33. So the answer is a definite Yes.”
MMM goes on like this for hundreds of posts. It’s a crazy rabbit hole that I’ve had a lot of fun exploring.
No, we can’t possibly incorporate any of this into our lives — why would we want to? We are old and incapable of change.
But maybe we know someone who is in a position to create good habits and would benefit from a unique perspective.
In the spirit of most of the last section, let’s quote MMM, who put it well when advising about moving to a better place:
“Moving is easy when you’re young, fresh out of college, and with no kids. It is mostly in the minds of those people that I am trying to plant these ideas. Considering new cities is like reviewing a broad and exciting variety of new dishes and deciding which one to eat. I highly recommend doing this type of dreaming and strategizing when you are young.”
It is graduation season, which comes with advice. Take what works for you, throw out the rest. Even if you’re old.