Being poor is expensive

August 4, 2005

A couple of months ago, John Edwards had a stunning post at the TPM Café about the tragedy that leads poor people to pay more for nearly everything. In the same vein, I found this item from the current issue of The Atlantic disheartening.

It’s a paradoxical fact that being poor frequently results in having to spend more, not less, than other people on goods and services, whether health care (which is costly without comprehensive insurance) or groceries (which are generally overpriced in inner-city supermarkets). Recently the Brookings Institution, in Washington, D.C., studied low-income families in Philadelphia in an effort to quantify these additional costs.

Such families, the researchers found, pay at least $500 more than other families in the city for the same type of car, both because they are less likely to comparison shop and because poor consumers, being likelier to default, are charged higher rates on auto and other loans. And the annual cost of insuring that car and its driver is, on average, $400 higher for families living in the city’s poor neighborhoods, where accident and theft rates are high. The poor often do not have bank accounts and instead must rely on check-cashing establishments, which in Pennsylvania may legally charge up to three percent to cash payroll checks — a fee that amounts to $450 a year for a household earning $15,000. They are less likely to be able to buy furniture and appliances outright, and the markup on installment plans can be staggering: in Philadelphia it averages 90 percent over the purchase price. And the poor are likelier than other people to take out short-term loans, which in Pennsylvania may have an annual interest rate of more than 450 percent.

Those who can afford the least have no choice but to pay the most.

It’s like living in a Dickens novel, isn’t it?

Must-read for every US citizen, Barbara Ehrenreich went undercover as a “poor person” in several states, trying to live on minimum wages. I don’t remember the title of the book, but it’s an eye-opener, folks. The American Dream has turned into an American Nightmare. It’s time to WAKE UP!

  • I first read about this way back in grad school, in David Caplovitz’s “The Poor Pay More: Consumer Practices of Low-Income Families” published by Free Press in 1967 (hey, I said it was “way back”).

    I remember arguing with some other grad students, just after it came out, that no one would ever pay any attention to the book, partly because Marx was right: our ideologies (nominally right and left, Republicand Democrat) don’t want to hear about such disturbing facts. Better to believe, for better or worse, that the wealthy are somehow giving goodies to the unappreciative poor.

    I no longer couch such thought in Marxian terms, but the fact remains true. Reagan could get away with complaining about “welfare queens” in their Cadillacs. Clinton could kick eveyone off welfare, which was good but was counched in some of the same mistaken notions as Reagan’s, that the poor were getting some kind of free ride.

  • As an aside, I don’t know whether to laugh or cry when I hear about some college students deciding to experience what it’s like to be “poor” or “homeless” for a day or a week. A recent Air American campaign wants teenagers to quit eating for 30 hours to share the misery of world’s poor.

    I don’t care what they subject themselves to. If you’ve ever been there (I have) you know, first, that the poor never choose poverty for the experience of it. It’s purely passive and in no way fulfilling. I’d have to except religious vows of poverty in this generalization, but even monks tend to eat well. Poverty is something that most poor people are simply trapped in.

    Much more importantly, poverty isn’t so much the lack of things at the moment – though that’s certainly real – as the sense of utter futility about that lack every changing. Nothing you do or can think of doing will alter your condition. You can get used to hunger. Your body seems designed to turn lack of food into increased sleep and generalized numbness. But the “no light at the end of the tunnel” is the really soul-destroying part of poverty.

    Well-meaning people who want to experience poverty (“slumming” is the old-fashioned term) know when they’re getting out and back to “real life”. All the difference in the world.

  • In the current issue of The Progressive Barbara Ehrenreich has a real good article titled Tiny Labor in which she discusses roles organized labor could play that would actually help America’s working class.

    When I read this post, Ehrenreich’s story immediately came to mind.

  • In the wonderful book RUBBISH! on the archaeology of American garbage, the point is made that the poor have to buy food and household goods in smaller volume given their limited funds, thereby paying more per unit or ounce than those who can go to Costco and buy 10 lbs of peanut butter at a higher overall, but a far lower unit cost.

  • So, what are we going to do about this? I read Nickeled and Dimed and it really opened my eyes. But what do we do when we have a Congress and President so thoroughly disinterested in changing things? The really sad bit is how many people living in these circumstances blindly support the Republicans, who could care less about helping the poor.

  • The really sad bit is how many people living in these circumstances blindly support the Republicans, who could care less about helping the poor.

    Yep, I can’t afford a car, insurance, or a home, but at least that gay guy I saw on TV can’t get married. Makes sense to me.

  • Things aren’t so great in the middle class, either. I read an editorial about a Forbes article on what kind of income it would take to live an upper middle-class lifestyle–it came out to $300,000, depending on where you lived (e.g., as much as $800,000 in NYC or SF). I’ll provide the link to the Forbes story if I can find it, but if one needs $300k to be comfortably well off with nice vacations and transportation, then much of us are going to have to resign ourselves to a lifetime of worrying about money and “want”.

  • Check out Frank’s blog—he has some interesting posts there.

    But what do we do when we have a Congress and President so thoroughly disinterested in changing things?

    First, change the Congress and President. That’s a little large-scale, but grass roots is the future of politics, so with a little effort you can have a positive impact. I have a couple ideas:

    1. Keep learning and talking to people, at work, home, the train, whatever. Most people don’t know this stuff.

    2. Write letters to the editor of your local paper. 200 words or less, reference something from a recent article or letter, send via email. Most people don’t know this stuff.

    3. Buy the book and give it to others. Most people don’t know this stuff.

    4. Write/email your congress persons—let them know what you care about, like raising minimum wages. While they personally will probably not read it, they often have staffers tabulate pro/con feelings on issues, and then set priorities from the results (to a degree).

    5. Run for office, or encourage other people you know and think are high-quality to do so. Most people don’t think about it as an option.

    Any other ideas?

  • I have three things to say about poverty.

    1. As a special ed teacher may I remind everyone that about 15 percent of our school population can be categorized as eligible for special ed services. That means that at least 15 percent of our adults struggle with various debilitating conditions. Now most of you think you’re pretty smart, but don’t you find modern life pretty damn confusing? Wouldn’t you love to have a personal coach, secretary, lawyer or advisor to help you make it through this mess that our society has created? Yes, lots of folks vote for people who will take advantage of them. Lots of smart folks eat food that is bad for them. My question is why do we continue to encourage a system that rewards those who take advantage of others? Why do we cheer on the bullies? Because most of us don’t know any better and change is really difficult.

    2. If we step outside our cultural bubble, we might realize that all the euphimisms we use to talk about the poor (and increasingly the middle class) having to pay more for fewer services is just sweet talking about corruption. It is corrupt for medical practitioners to charge the uninsured more than the insured just because they can get away with it. It is corrupt for food giants to mess around with our food safety, or charge more to certain folks when their costs don’t warrant it. It is corruption. We take the cultural bribe not to care because we all think we are not being hoodwinked and we are getting away with lower prices and greater status.

    3. Our corporate government must be reformed. The problem is that once the gates are opened for change, we know the social predators will jump in to the fray with bigger guns and money. I don’t want to sound like I’m suggesting either passivity or dictatorship, but in order for this to happen, there must be a central force to set limits and reorganize the government to one that truly is concerned about creating a better world and is adept enough to convince the rich folks that by giving up some of their excess, they will be rewarded with a better quality of life. Everyone must be rewarded for change to work. Perhaps a first step would be to exclude corporations from the legal table of personhood. Any comments?

  • Turtle Box

    Our political economy is based on (supposed) free markets. A free market economy dictates that consumers will be taken advantage of by manufacturers.

    As long as maximum profits (revenues?) take precedence over people, we will have poverty, bullies and corrupt manufacturers.

  • Let’s not forget the exacerbating effects of
    local, state and federal taxes, which are
    becoming evermore regressive. Sales
    taxes, excise taxes, real estate taxes are
    obvious examples, but there are also
    increasing tax breaks for the rich, which
    cause a hidden shift down to the middle
    and lower classes. Elimination of the
    estate tax is a prime example. Another
    is the huge break in capital gains taxes –
    a rate of only 15%, on realized gains, for
    billionaires. And the unrealized gains just
    go on accumulating tax free.

    Note how middle class 401(k) plan owners
    don’t get those fancy capital gains tax rates
    when they start drawing down – no, they pay
    at the at the higher earned income tax scale.

    And the Republicans haven’t got close to
    their ultimate objective – yet. That’s to eliminate
    taxes on capital gains and dividends entirely, and
    to replace the graduated earned income tax
    scale with a flat tax, or preferably, a national
    sales tax, because that would reduce the burden
    on the rich even more – how much more consuming
    can a guy who makes a billion a year do than the
    poor soul who draws only 10 million?

    And, as with the elimination of the estate tax, the
    ordinary American is cheering on the arrival
    of that flat or national sales tax, having no
    idea how it’s robbing him/her blind.

    What can we do to reach the people?

  • Here’s my favorite example of the poor paying more: Health Care — especially hospitals and prescription drugs. As with most businesses, the hospitals and pharmaceutical sellers have established “list” or “retail” prices for their goods and services. The thing is, however, that the only ones who pay those inflated prices are uninsured consumers — those least able to afford them. If an X-Ray is list priced at $400, the insurance company only pays a pre-negotiated rate, say $160. The insured patient may pay as much as $100 of that or as little as nothing. But it’s the working poor family that wins the reverse lottery and pays the full $400. More than any other component of the economy, health care profits are extracted from the pockets and purses of those least able to pay.
    . . . jim strain in san diego.

  • Turtle Box asked for comments, so here goes:

    Your Point #1: I think you vastly underestimate the percentage of students who require special ed services, and probably half of those who need it are either not adequately diagnosed or the parents refuse it. Exacerbating this situation is that low-income districts have a significantly higher proportion of all of the special ed kids; with fewer total resources, ALL of the students in the low-income districts get short-changed in their preparation for life.

    Your Point #2: I would agree that many of these practices are the result of “corruption,” but not necessarily in the manner you describe. Our capitalism system has always been one in which individual efforts are rewarded in more or less direct proportion to the value society places on those efforts. Over our country’s history, however, there have been several periods where the balance was out of whack, most “recently” in the 1890’s and the 1920’s — and each time it was because the laws permitted abuses to thrive (primarily by vertical as well as broad monopolies, but also because discrimination was legally sanctioned against vast portions of the population).

    Major blows against rampant out-of-control capitalists were dealt by the New Deal; by the legal sanctioning of labor unions; and by the collective psyche of national “shared values” forged in the crucible of the Great Depression — the “playing field” was leveled as a matter of moral imperative, in a way greater than ever before. Unfortunately, as the “cover of history” slowly takes away from us those who lived through those times, new “shared values” replace those lessons learned in the Great Depression; those who never experienced the collective national terror of widespread and grinding poverty can only read about it in a book or watch a History Channel episode. Today’s generations don’t feel that terror in their bones; it doesn’t filter and shape every aspect of their lives. Most importantly, there is no fundamental understanding of “there but for the Grace of God go I” when we see someone “down on his luck.” Instead, we have Bush and the Rethugs pushing “an ownership society” to force us to think only of ourselves rather than our fellow man; we have the CCCP (Compliant Complicit Corporate Press) bleating about our “great” economy and the rest of the Rethug talking points; and we those who support Bush NOT for the economic agenda — even against their own personal economic interests — but for social issues. Kind of hard to eat those things when the hunger pangs set in.

    As an example, I remember standing in line as a child/teenager for the surplus powdered mild and cheese; eating “poor boy hamburgers” (lots of bread mixed in with a little bit of meat) and salmon patties — because the bread and canned salmon was free. I was one of 12 kids, grew up in a blue collar UAW household and city in the 1950’s and 1960’s. I’ll never have to worry about when my “rich uncle” will die, because I don’t have any and there never has been one. My mentality is fixed by my parents’ joint experiences in the Depression and World War II. There are not enough of us left; today we have kids struggling to keep up, coping with parents still angry and confused over Vietnam and Watergate. Still younger ones went through Iran-Contra and then Monica, and are so focused on self-preservation and turned off to politics, they don’t have the time nor the inclination to look at something (i.e., the “corruption” taken out on the poor) that is not an everyday part of their lives.

    Your Point #3: I heartily agree with most of your thoughts here. Government does need some reform, back towards the social safety net direction. I not sure that the problem is corporations having too much “personhood” (as you put it), but instead that the government’s collective protections for individuals (as provided for the last 50+ years) have been, and are being ,drastically scaled back. Fixed pensions soon to be a part of history; same thing for union organizing; same for workplace safety and wage protections, EPA protections, worker retraining, jobs with benefits, extended unemployment benefits, childcare, Social Security — all going, going, and soon to be gone.

    Government was supposed to — and did for a long time — protect us from those things that we could not, individually or on our own, protect ourselves. Like home and car insurance, the idea is to spread the risk — the risk of a crushing loss — amongst a lot of people so that by paying just a little bit every year (i.e., periodic premiums) we could recover from that loss without being destroyed by it. The same principle used to apply to government services: by paying a little bit every year (i.e., taxes), we could recover if we lost our job, became disabled, had serious health problems. Now, Club for Growth and other groups trying to “starve the beast” by cutting off revenue to the government, all of our “government protections” are being cut away.

    It’s easy to see that corporations have been given a big leg up with the Rethug-controlled Congress, and even more so since Bush was coronated. Further, the go-go 1990’s allowed state governors and legislatures to score lots of political points by reducing their citizen’s tax obligations. With the very uneven condition of the economy since Bush’s huge tax give-aways, his misguided (at best) fiscal policies, and the Iraq debacle, all 50 states are strapped for cash since the same tax-cutting politicians have (with maybe one or two exceptions) refuseds to go for tax increases. So there is no money for people, and corporations that promise jobs get all kinds of sweetheart offers of tax exemptions to locate in a particular state or city (think of the old adage, “in the kingdom of the blind, the one-eyed man is king”).

    That said, the laws ARE there to regulate corporations. What is missing is the political will to enforce them. Consider, for example, Eliot Spitzer in New York. We all rave about his success in rooting out corruption in New York’s boardrooms, and rightly so. But, as an experienced business and tax lawyer, I assure you that New York’s laws on corporate governance, insurance and securities sales and marketing, fraud, etc., are hardly unique; in fact, I would say that since the early to mid 1980’s, virtually every state adopted “modern” laws regarding corporate governance, issuance and marketing of securities, etc. Time was that all Fortune 500 corporations were incorporated in Delaware, as its laws were the most flexible for corporate governance AND the most stringent on protections for shareholders (especially minority shareholders, allowing derivative suits against directors and officers, for instance). Today, EVERY state has these types of laws; New York is no different than Delaware, Michigan, or Colorado.

    So if the laws in New York don’t explain why Spitzer gets great results, that explains how he levels the playing field for the common man, then what is it? Of course, it’s Spitzer himself. He has the political will — and the backing of his superiors — to go after the corporate corruption. We could have that in every state, but we don’t because those in charge have refused to do so. Why? Some because they are too insulated from the citizens (i.e., they will never be kicked out of office — either too blue or too red, or have too much money from their backers to ever be successfully or even meaningfully challenged). Others because of globalization and the lousy economy, they need the corporations to keep their businesses in their state or to relocate there, so states and their officials cater to the corporations (think of the new “golden rule”: he, she, or the business that has the gold makes the rules). Still others because they are indeed corrupt themselves — knowingly so, or just became that way because they have come to accept the perks of office bestowed on them by the business community. Finally, some are just lazy of incompetent, but throw up good smoke screens and therefore stay in office. [On a side note, ALL of these descriptions sound like Bush, huh?]

    In conclusion, until the economy seriously improves (unlikely while Bush is in the White House and the Rethugs control the Congress and most of the state legislatures), or until we have a serious recession bordering on depression (where we will new “shared values,” we are unlikely to see any serious concern for the poor let alone any effective measures designed to address their condition. With the continuing war in Iraq, the disasterous economic policies and foreign debacles practiced by BushCo, I don’t foresee anything except a serious worsening of the poor’s plight — and increasingly so for those now (and soon-to-be formerly) in the middle class.

  • To those generous enough to have responded:

    Frank Martin: Regarding the “free market,” I think that once we leave the face-to-face trading we leave the fabled land of the Free Market. I don’t consider individual consumers purchasing goods from predatory corporations which they have little influence over to be a free market system. There are many shades and layers to our economy, but I would not refer to our macro economy as free market. And I certainly agree with you that as long as we have laws which reinforce maximum profit over all else, we will have increasing corruption.

    hark: The downward spiral of governmental concern for the electors is really troubling. Friends of mine who work for political reform often express dismay at the total ignorance of many currently involved in politics. As a teacher (before special ed I was a social science teacher) I am truly confused and alarmed by this ignorance. I refuse to become cynical or accepting of it. In this area, our educational system has completely failed us. While I agree that the argument regarding evolution v creation is valid and pressing, perhaps we also need to really look at what is being taught in schools regarding our political system and our economy. For those of you unfamiliar with the education biz, the two big states set the tone for curriculum and textbooks. That means that most of our schools are purchasing materials developed for California (which may or may not be bad) and, gasp, Texas–the land of no government is good government.

    President Lindsey: Thanks, but maybe everyone would like to read it, too?

    Jim Strain: The insurance stuff you mention is exactly what I was referring to. It is wrong, unjust and corrupt yet culturally those folks who have the insurance typically feel justified in supporting this system because it is a marker of higher status than the suckers who have to pay the bigger amount. Also, the only alternative currently is to pay the bigger number so those who are covered are holding on tightly to it.

    Analytical Liberal: I agree with all your points regarding special education. Just remember that I mentioned eligibility. Our education system is inhumane and needs to be overhauled. The current No Child Left Behind reforms are exacerbating many of problems and will have very serious consequences for special education especially.

    I, too, am confused by the excesses of consumerism. With all the stuff it is hard to see the poverty like it used to be. Sort of like our health. It is hard to recognize the malnutrition under all the fat. I’m not sure that by making people suffer, they will come to their senses, though.

    I liked your bit on the importance of personality. If we are to implement progressive, human-based reform we must have an individual with good verbal skills, charisma, an enlightened heart, and a collaborating historical setting. It has happened several times throughout human history. Typically the person comes out of seemingly insignificance. It can happen again. We must be on our toes, though. Tyrants also tend to have the same skill sets (except for the heart part, but they are typically very adept at faking that aspect).

  • Wow, I liked ALL the comments here. The only thing I can add is that I’ve felt like I’ve been living in a Dickens novel since the Reagan years.

    I live in a red portion of a blue state (a barely blue one, at that.) The one thing I see that’s common among all my red voting neighbors is what I think is a failure of imagination. I’ve never been grindingly poor, and yet I can imagine how long your day must be if you have to get everywhere you need to go by bus or other public transport, and every small pleasure must be accompanied by a mental reckoning of what NEED you’ll later have to give up. My neighbors are all pretty much solidly lower or middle middle class, have a comfortable life, and the homeless people are all but invisible in our city. These neighbors and colleagues of mine cannot imagine that other people don’t have such a nice life. Most trips they take are to the cottage “up north”, or perhaps to Vegas or Cancun, or perhaps a cruise. They never see a large, metropolitan city, where all sorts of people have to rub elbows with each other, and one can witness firsthand the extremes of poverty and of affluence. If they see the rest of the world at all, it’s through the narrow prism of television, and even then, they view it selectively. (And we all know how TeeVee distorts our world. Poor people have completely disappeared from television; there’s not even a sitcom on one of the networks where you might see them. When was the last time anyone saw one of the big networks do a documentary on any topic, let along a topic about poverty? Well, apart from something on Princess Di, that is. But I’d better get off my soapbox, before I start in on how little our media contributes to the national discourse. I keep wondering where’s our Dickens, who’ll illuminate the dark corners of our society for us while simultaneously entertaining us, and thus fire up the imagination of all the Gradgrind neighbors of mine?)

  • The first episode of Morgan Spurlock’s “30 Days” series dealt with living on minimum wage for thirty days. He and his girlfriend lived for a month working minimum wage jobs after starting out with only one months wages.

    They ended up hundreds of dollars in debt after just that short time because of medical expenses. They lived in a small apartment that had been a crackhouse until the prior week, walked and took the bus everywhere, and Morgan worked three jobs.

    It is definately worth a watch if you can locate a copy of it.

  • You’ve probably all stopped reading this entry by now, but I want to respond to grapeshot who sounds like you are also from Michigan:

    I think that you have hit one of the nails square on. Lack of imagination and real interest in the world is a real problem for many. Perhaps it is due to overload. Perhaps it is due to learned helplessness. Whatever the cause, progressives need to really think about this and if you don’t know what learned helplessness is, please find out and brush up on your general knowledge of behavioralism. Just about every aspect of community life is punishing to those who participate. Think about it. Except for the few cities that have really made a effort to be liveable, think about how punishing it is to take public transportation as an example. We may play the superiority game and say that folks should get rewards intrinsicly. But be real. There are no public incentives for being a GOOD parent. There are no public incentives for not driving SUV’s, etc. This is a dire challenge that progressive must look at.

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