The Jarring Contrast Between iPhone 5 and Poverty News

News on both fronts is breaking almost simultaneously, giving a snapshot of inequality.

iPad and iPhone
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The news is unpredictable, but it's certain that two topics will make a big splash in tomorrow's headlines: the unveiling of the iPhone 5 and the release of Census figures showing high, possibly record, levels of poverty.

[Photos: The Evolution of the iPhone.]

There's more than a little incongruity there: celebrating conspicuous consumption at a time when the plight of the poor is more visible than it has been in over half a century. And while it's a coincidence, the juxtaposition is also one visible sign of the growing inequality in America. The hundreds of dollars that one person might drop on an iPhone could be a small fortune to another living in poverty.

As of 2010, the poverty threshold for a household of one person under the age of 65 was $11,344. An iPhone costing $600—as a J.P. Morgan report this week noted is consistent with earlier launches—would be more than a half month's earnings for someone living right at that threshold.

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That's how the figures stack up on an individual basis. On a national basis, iPhone sales could also have sizable effects. This week's much-cited J.P. Morgan research report estimated that iPhone 5 sales could boost GDP by $3.2 billion in the fourth quarter, adding 0.25 to 0.5 percentage points to annualized growth. The report's author arrived at that figure by assuming that 8 million iPhone 5s will be sold in the fourth quarter, and that $400 of every $600 iPhone sale will contribute to GDP (with the remainder paying for import costs).

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Especially in a sluggish economy, a GDP growth rate boost of even 0.2 percent would be welcome--the most recent reading showed 1.7 percent growth in the second quarter. But compared to what people give to each other, not just what the economy produces, the effect is much larger.

If all of the $600 per phone were given to charity, it would be $4.8 billion donated in the fourth quarter. According to a recent report from the Giving USA Foundation and Indiana University's Center on Philanthropy, organizations that study giving trends, individuals gave nearly $218 billion to charity in 2011, or an average of $54.5 billion per quarter. An additional $4.8 billion would be a boost of nearly 9 percent.

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Of course, there are some caveats to these sorts of calculations. As the J.P. Morgan report noted, customers may pay less for the phone if they buy it as a part of a service plan (as many do).

Another, much bigger caveat is that hypothetical thinking about where all that money could go can be little more than a meaningless thought experiment. Then again, if poverty figures were awaited as breathlessly (and spent on as aggressively) as the iPhone, it could change the economy to a tune greater than 0.5 percent of the GDP.

Danielle Kurtzleben is a business and economics reporter for U.S. News & World Report. Connect with her on Twitter at @titonka or via E-mail at