Why Do Poor People Give More?

Here's an old piece I had saved in my RSS reader that talks about charity in America. I found the following especially interesting:

Those making $20,000 or less a year give away more, as a share of their income, than do higher income groups.

Ok, from a pure math standpoint, you can see why this is the case. After all, a person making $20,000 a year who gives $200 is giving the same amount percentage wise as someone making $100,000 who gives $1,000. It certainly is "easier" to give $200 than it is $1,000 by looking at the numbers. But is it really easier? I don't think so.

Consider the fact that higher income people have much more disposable income -- or at least they should have. The basics of food, clothing and shelter (especially the first two) are somewhat fixed just for being a human. So the person who has 420k has a bunch less left over once he's paid for the basics. The $100k person should have plenty which, one would think, would lead to him giving more as a percentage of his income.

So why doesn't this happen? A few thoughts:

1. My main guess as to why this occurs is that people simply spend more as they make more and they do so at an increasing rate.

2. Maybe part of it is that people who are poorer are more aware of the plight of those less fortunate and are thus more willing to give to help others.

3. Perhaps wealthier people feel they are helping more people through paying taxes and hence they are "giving" more that way (BTW, my take is that you "pay" taxes, you don't "give" them -- any more than you "give" to the phone or utility companies.)

4. Maybe there's an issue with the absolute amount. The rich person says something like, "Well I gave $500, that's more than the other person who only gave $200." Yes, the absolute amount is more, but the percentage is less.

What are your thoughts on this issue? Why don't people get MORE generous as they earn more?

Comments

[maxconfus]

income does not equal wealth? for the 100K people it is probably because of the 105% spending principle where if you make $100K then you spend $105K per year so you have no money left for charity. on the other end of the spectrum it is possible that the $20K income earners are retirees for instance who have other wealth built up so they can afford to give more. although I really don't know because I do not know who the sample population that was surveyed. Also, 5% of $100K is $5K and 5% of $20K is $1K.

[emily]

i thought we were supposed to tithe 10% or more of our income? In that case wouldn't it be $10K for the $100K bread winner and $2K for the $20K bread winner?

[FMF]

Emily --

If these people tithe, yes, those would be the correct numbers. But the issue I'm trying to get at in this post is that it seems like poorer people are more generous. Why is that? Is it even true?

[Anitra]

Personally, it's the amount issue for me. I tithe, so that amount changes with my income - but any other charity has become a smaller and smaller percentage as I make more money.

When I was in highschool, I used to give $10-$20 when the local public TV/radio station had a fund drive. That was a big sacrifice for me, as my income from doing odd jobs was less than $20/week.

Nowadays, if I even decide give to a public radio station, I usually give $50 or less. Maybe it's because I value it less than I used to; or maybe it's just that I can't envision giving up an entire week's income anymore (now that I need to pay for clothes, food, shelter, etc.)

[beastlike]

I like maxconfus's comment; maybe it's retirees that already have built up wealth giving?

However, like you said, I think the tax factor and the poor more aware of the less fortunate are big ones too.

I need to give more, but I have an issue with most of the poor in this country looking for freebees instead of working hard. I don't think there is a good excuse to be poor in the US. The gov. gives out free scholarships to colleges (especially to minorities), jobs like Walmart or Starbucks pay fairly well for people w/out degrees, etc. I read an article that said how illegals working here have more $ saved up then most Americans and they make barely min. wage.

Oh well, I realize that I should put that aside and give more though........

[Marlon J. Broussard]

Reminds me of the story of the widow with the two mites. Her small amount was a more generous gift than that of the rich.

I believe most poor people (if there is such a thing) grow up with teachings about tithing and charity, and most tend to be more religiously affiliated than their well-to-do counterparts.

Thus in my opinion they tend to be more accommodating with what they have. On the other hand, those of us who have worked hard for our fortune tend to have the attitude of, "I got mine, now you can get yours."

I come from a very unfortunate background, yet I have always remained true to the ideals of generosity and charity.

[Mrs. Micah]

I'll go with #2.

[emily]

When one is poorer one is possibly more generous and when richer more greedy (?) keeping material things and money more to themselves.

[kitty]

It is the issue of the absolute amount for me. Even thought I earn slightly over 100K now, I still have more or less the similar views of what absolute amount is "high" and what absolute amount is "low". It is the perception rather than reality. Sure if I look in terms of how much money I have left after bills each month, $1000 now shall be much less to me than $200 was 15 years ago. Yet I still perceive $1000 as "a lot" and $200 as much less. This applies to everything - purchases as well as charitable donations - my perceptions of what is "cheap" and what is "expensive" haven't changed that much. I do think I give to more charitable causes now than in the past, but each individual amount is small. I certainly give less than 10% of my salary because I still look at 10K as a really large amount.

In addition, I have a really poor cousins in Russia, and every time I visit I bring them $500 in cash; occasionally I send the same amount with friends. It doesn't count as "charitable donation", but I feel like I'd much rather give to them (my cousin only earns $500 a month, so this amount is large to her) than to some organization that will spend most of it on soliciting.

[Brad]

It's tricky. On the one hand (spending), you tell people NOT to spend more as your income increases . . . that you can live on the same amount even as you bring in more income. On the other (giving), you tell them not to think this way, that having more income means having more to give. It's a mixed message and people have trouble reconciling the two (though most people really listen to neither message).

[FMF]

Brad --

Actually, I say you can spend more as your income increases, just don't spend ALL of the increase. For example:

*You get a $10,000 raise.
*You spend $3,000 (more spending) of it.
*You save $5,000 of it.
*You give $2,000 of it.

Kitty --

Personally, I'm ok with someone who gives to help out needy relatives (or people in general) but don't get a tax break for it. I'd still call that giving.

[JACK]

From personal experience, I think #3 has a lot to do with it. I know many "rich" people (by most people's standards) and I can tell you that that charitable giving is horribly low as a percentage of income (and frankly in absolute dollars). I see a lot of what I would dub "guilty liberals" who support wealth redistribution government programs out of guilt that they are wealthy and aren't doing anything directly about the poor themselves. (And this isn't meant to be a critique of political persuasion, it's just I can count the number of colleagues who are conservative on one finger.)

I also do think #2 is also at work. People with money often deceive themselves about their true needy and dependent nature on God/Mystery/Infinite, whatever you've come to recognize is this other that is outside of you. After all, they can afford that BMW and boat, etc. When your need is in front of you more dramatically, you both are more likely to sympathize with the human need of others and have a solidarity with them but to also recognize what you have as gift and not really yours in the first place.

[Anthony Martin]

As a gross (not net) generalization, the rich trust in their riches and the poor trust in God. It always appears to me that the better off things are going, the less we tend to seek God, but when things go badly we start looking for help.

[Mike H]

This is why my wife and I have chosen to base our total giving on a percentage of our combined gross income. It prevents us from "falling behind" in giving.

As our income increases (we're both still relatively young, so it likely will), we also hope to increase that percentage. With more income beyond what we need for essentials, we should be able to do this. I trust and hope that God will keep us faithful in this plan.

However, we've been basing our giving to specific charities (other than church, which we use a percentage for) on dollar amounts. We've adjusted upwards some, but it hasn't been in a systematic way. I'm not sure if it makes sense to move to a percentage here also or not, as we could also use the increase to support new/other charities as well. Of course, you can't support EVERY good cause... there's simply too many.

[Aimee]

I haven't a clue why it is that way. Interesting though, you would think it would be the other way around because you hear that the very wealthy give a lot.

[plonkee]

Controversial maybe, but perhaps not giving their money away is how they became rich?

[Creative Investor]

The more read the comments, the more theories of my own were popping into my head. :) So here we go:
- Wealthier people tend to be better educated, and before donating to any cause they often research to make sure their money going to a good cause instead of administrators' salary. Some of them may keep delaying and not commit until they're convinced, while others may not trust any of the charities. Others will go into debate that its poor people's fault or that it's not their responsibility to support the poor, that's what social programs are for, etc.
- Pragmatic people that are well-versed in finance may calculate that their contributions to the society will me more significant after their investing/earning career is over. Best example of this would probably be Warren Buffett, who will make much more difference in the world by donating untold billions once he passes, then if he would have donated his several millions 40 years ago and he knows it.
- Some people simply become cheaper as they become wealthier, I don't know why, but it's a fact of life.
- Some people derive no satisfaction from helping others, while buying a new bag for $2,000 is no problem.
- Some people simply work too hard for their money (obviously if you're wealth is into millions this cannot be an excuse anyway) and don't want to just give it away.
- And I'm sure there is a handful of people who instead of making donations are holding on to their money to eventually create a philanthropic foundation of their own.

I also agree with plonkee that a number of people really did become wealthy by counting every penny they spend, including spending on charity.

[Dantheman]

Also interesting because, for tax reasons, the rich should actually be giving more.

Consider a person in the top tax bracket who has to decide whether to keep or give $100 in extra income. If she keeps it, she is taxed at a %35 rate so she only keeps $65. Thus by giving to charity she foregoes $65 in income.

On the other hand, a person making $20,000 gets to keep $85 of that $100 if she keeps it instead of giving to charity. So by giving it to charity she is foregoing $85 in income.

So while rich people might feel they've already done their part by paying more in taxes, the tax code is really structured to push rich people to give more, not less.

Very strange. Retirees may be part of the story, but probably not all of it.

[mysticaltyger]

Interestingly enough, all the surveys I've read say that the rich are generally pretty generous in terms of the % of income they give away. The poor are also generous. From what I've read, it's the middle income people who give less as a % of their income than any other group.

I don't know what's really true....just based on various things I've read.

[Chad]

I think income not equaling wealth has a large factor on these statistics. And, giving as a percentage of income is probably not a good measure of generosity.

But, consider two things that may be fairly constant for most people regardless of income or wealth. 1) number of donations solicited 2) average propensity to give.

If on average, you are solicited 200 times/year, you decline 90% of them, and when you write checks they tend to be for $50. At the end of the year you donated $1000.

Since people don't consider "how much is this donation as a percentage of my annual income?" they just write $50 checks 10% of the time; the end result is that people with less income donate a higher percent of it.

[dan]

Well I think it has something to do with poor people are more apt to spend than their rich counterparts on anything. So if poor people are in church or some setting, the likely hood of them giving money is higher than the richer people, in a higher percentage of their income. Basically its allot easier to give 100 than a 1000 and I think thats true regardless of how much money a person makes. It's just harder to do, not to mention less educated folks care less about money, so of course they aren't going to mind giving it. For them their mind is only on today cause tomorrow they can just go to work and make more the following week. But for educated folks and people who know a little about money things are different and I think a person's perspective on money changes. It just depends who you grew up with too. If you grew up with a rich family the likely hood of becoming rich again is higher than is you grew up with a poor family. But of course education changes these trivial ideas but they are something to think about. For the most part school doesn't teach people about money and how to hold on to it and invest wisely. So that also may be a problem for them. There's many things that factor into it. But personally I believe its that poor people are more apt to be wasteful of money and spend it like water, rather than save 10% of their incomes or higher if it can be managed.

[Darvus]

People are only out for themselves. I dont care if that person been poor all there life, when money come most people get that green eyed monster in them. The bible says, "that the love of money is the root of all evil."