Why the Rich Get Richer and the Poor Get Poorer

Have you ever wondered why the gap between the rich and the poor keeps widening? Why do some people seem to have it all while others struggle to make ends meet? What are the factors that contribute to this inequality and what can be done to change it?

In this blog post, we will explore some of the reasons why the rich get richer and the poor get poorer, and how this affects our society and economy.

The Rich Invest While the Poor Save

One of the biggest differences between the rich and the poor is how they use their money. The rich understand that working a job is not the best way to get paid, and that they need to make their money work for them by investing it in assets that generate income and appreciate in value. The poor, on the other hand, rely on their jobs as their primary source of income, and often save their money in low-interest accounts or spend it on liabilities that lose value over time.

According to a study by Credit Suisse, the richest 1% of the world's population owns 44% of the global wealth, while the bottom 50% owns only 1%. This shows that wealth is not evenly distributed among people, and that those who have more money can use it to create more money.

It Is Expensive to Be Poor

Another reason why the rich get richer and the poor get poorer is that it costs more to be poor than to be rich. The poor face higher expenses and fees for basic services such as banking, health care, education, transportation, and housing. They also have less access to quality goods and services that can improve their lives and health.

For example, a poor person may have to pay higher interest rates for loans or credit cards, or resort to payday lenders or pawn shops that charge exorbitant fees. A poor person may also have to pay more for groceries or utilities because they cannot afford to buy in bulk or take advantage of discounts. A poor person may also have to live in a substandard or unsafe housing that exposes them to health risks or crime.

The rich, on the other hand, can enjoy lower costs and better quality of life because they have more options and resources. They can take advantage of tax breaks, investment opportunities, and financial advice that can help them grow their wealth. They can also afford to buy quality goods and services that can enhance their well-being and happiness.

Tax Rates Favor the Rich

Another factor that contributes to the inequality between the rich and the poor is the tax system. In many countries, tax rates are progressive, meaning that those who earn more pay a higher percentage of their income in taxes. However, this does not necessarily mean that the rich pay more taxes than the poor. The rich often have ways to reduce their taxable income or avoid taxes altogether by using loopholes, deductions, exemptions, shelters, or offshore accounts.

The poor, on the other hand, may not have access to these tax benefits or may not be aware of them. They may also pay more taxes indirectly through sales taxes, payroll taxes, or property taxes that take a larger share of their income.

According to a report by Oxfam International, the richest 1% of people paid an effective tax rate of 10.4% in 2015, while the poorest 10% paid 17.4%. This shows that the tax system is not fair or progressive enough to redistribute wealth from the rich to the poor.

Poor Financial Literacy

Another reason why the rich get richer and the poor get poorer is that they have different levels of financial literacy. Financial literacy is the ability to understand and manage one's personal finances effectively. It includes skills such as budgeting, saving, investing, borrowing, and planning for retirement.

The rich tend to have higher financial literacy than the poor because they have more exposure and education on financial matters. They also have access to financial advisors or mentors who can guide them on how to make smart financial decisions. The poor tend to have lower financial literacy than the rich because they have less exposure and education on financial matters. They also lack access to financial advisors or mentors who can help them improve their financial situation.

According to a survey by S&P Global FinLit Survey , only 33% of adults worldwide are financially literate. This means that two-thirds of adults do not have basic financial skills that can help them achieve their financial goals and avoid financial problems.

The Poor Spend Like the Rich and the Rich Spend Like the Poor

Another reason why the rich get richer and the poor get poorer is that they have different spending habits. The rich tend to spend less than they earn and invest the difference in assets that generate income or appreciate in value. The poor tend to spend more than they earn and borrow money to finance their lifestyle or emergencies.

The rich also tend to spend money on things that add value to their lives or businesses, such as education, health care, travel, or personal development. The poor tend to spend money on things that do not add value to their lives or businesses, such as entertainment, gambling, alcohol, or cigarettes.

According to a study by Nielsen , households earning less than $20,000 per year spend 9% of their income on lottery tickets , while households earning more than $75,000 per year spend only 1%. This shows that the poor are more likely to gamble away their money than invest it for their future.

The Poor Are Often in Low-Skilled Jobs

Another reason why the rich get richer and the poor get poorer is that they have different types of jobs. The rich tend to have high-skilled jobs that require education, training, experience, or creativity. These jobs pay well and offer opportunities for advancement and growth. The poor tend to have low-skilled jobs that require little education, training, experience, or creativity. These jobs pay poorly and offer few opportunities for advancement and growth.

The rich also tend to have more control over their work environment and schedule. They can choose when , where , how , and with whom they work . They can also take risks , innovate , or start their own businesses . The poor tend to have less control over their work environment and schedule . They have to follow orders , rules , and routines . They also face more stress , insecurity , or exploitation .

According to a report by McKinsey Global Institute , automation could displace up to 375 million workers worldwide by 2030 , especially those in low-skilled jobs such as food service , retail , manufacturing , or transportation . This means that many poor workers could lose their jobs or face increased competition from machines .

Higher Crime Rates Are Associated with Poverty

Another reason why the rich get richer and the poor get poorer is that they live in different social environments . The rich tend to live in safe , clean , and prosperous areas where they can enjoy peace , security , and opportunity . The poor tend to live in unsafe , dirty , and deprived areas where they face violence , crime , and hopelessness .

The rich also tend to have more social capital , which is the network of relationships , trust , and cooperation that can help them achieve their goals . The poor tend to have less social capital , which limits their access to resources , information , and support .

According to a study by World Bank Group , there is a strong correlation between poverty and crime . Poverty increases crime by creating incentives for illegal activities , reducing deterrence effects of law enforcement , weakening social norms against violence , eroding trust in institutions , and undermining social cohesion . Crime increases poverty by destroying human capital , physical capital , social capital , public services , economic growth , and development .

Conclusion

As we have seen, there are many reasons why the rich get richer and the poor get poorer. These reasons include:

- The rich invest while the poor save

- It is expensive to be poor

- Tax rates favor the rich

- Poor financial literacy

- The poor spend like the rich and the rich spend like the poor

- The poor are often in low-skilled jobs

- Higher crime rates are associated with poverty

These reasons create a vicious cycle of inequality that perpetuates itself over time. To break this cycle, we need policies and actions that can address these causes and create a more fair and inclusive society.