The poorer you are, the more things cost. More in money, time, hassle, exhaustion, menace. This is a fact of life that reality television and magazines don't often explain.
You have to be rich to be poor.
The poorer you are, the more things cost. More in money, time, hassle, exhaustion, menace. This is a fact of life that reality television and magazines don’t often explain.
So consider this a primer on the economics of poverty.
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“The poor pay more for a gallon of milk; they pay more on a capital basis for inferior housing,” said Rep. Earl Blumenauer, D-Ore. “The poor and 100 million who are struggling for the middle class actually end up paying more for transportation, for housing, for health care, for mortgages. They get steered to subprime lending. … The poor pay more for things middle-class America takes for granted.”
Like food: You don’t have a car to get to a supermarket, much less to Costco, where the middle class goes to save money. You don’t have three hours to take the bus. So you shop at the corner store, where prices can be double what you’ll find at Safeway.
Sometimes, prices in supermarkets in poorer neighborhoods are higher, too.
“First, they are probably paying more on goods because they don’t get the low wholesale price that bigger stores get,” said Bradley Schiller, a professor emeritus at American University and author of “The Economics of Poverty and Discrimination.”
“The real estate is higher. The fact that volume is low means fewer sales per worker. They make fewer dollars of revenue per square foot of space. They don’t end up making more money. Every corner grocery store wishes they had profits their customers think they have.”
37 million officially poor
According to the U.S. Census Bureau, more than 37 million people live below the poverty line. The poor know these facts of life. These facts become their lives.
Time is money, they say, and the poor pay more in time, too.
If you are poor, you don’t have the luxury of throwing a load into the washer and then taking your morning jog. You wait until Monday, when the laundromat is most likely to be empty, and you load a cart with laundry from four children and drag it to the corner.
“If I had my choice, I would have a washer and a dryer,” Nya Oti, 37, said at a Washington, D.C., laundromat. The four loads will take the food-service worker about two hours.
The poor also pay more in hassle: calls from bill collectors, the landlord, the utility company. So they spend money on caller identification because it gives them peace of mind.
The rich have direct deposit for their paychecks. The poor have check-cashing and payday-loan joints, which cost time and money. Payday-loan companies say they are providing an essential service. Critics say these companies prey on people who are the most “economically vulnerable.”
“As you’ve seen with the financial-services industry, if people can cut a profit, they do it,” Blumenauer said. “The poor pay more for financial services. A lot of people who are ‘unbanked’ pay $3 for a money order to pay their electric bill. They pay a 2 percent check-cashing fee because they don’t have bank services. The reasons? Part of it is lack of education. But part of it is because people target them. There is evidence that credit-card mills have recently started trolling for the poor. They are targeting the recently bankrupt.”
An angry Lenwood Brooks walks out of a check-cashing place in Washington, D.C. “They charged me $15 to cash a $300 check,” he says.
Why didn’t he go to a bank? He says he lost his driver’s license and now his regular bank “won’t recognize me as a human. That’s why I had to come here. It’s a rip-off, but it’s like a convenience store. You pay for the convenience.”
Then there’s credit. The poor don’t have it. What they had was a place like First Cash Advance in Washington. Through bulletproof glass, a cashier explained what you needed to get an advance on your paycheck — a pay stub, a legitimate ID, a checkbook. This meant you’re doing well enough to have a checking account, but you’re still poor.
If you qualify, the fee for borrowing $300 is $46.50.
That was not for a year — it’s for seven days, although terms can vary. In effect, the annual percentage rate on your $300 payday loan is 806 percent.
You write First Cash Advance a check for $345.50, plus a $1 fee, and it will give you $300 in cash upfront. The company holds the check until payday. Then you bring in $346.50 and it returns your check. Or it cashes the check and keeps your $346.50, or you can extend the loan with additional fees. You’ll be out $46.50, which you’d rather have for the late fee on the rent you didn’t pay on time.
But now the payday-advance place has closed. After the D.C. government passed a law requiring payday lenders to abide by a 24 percent limit on the annual percentage rate charged on a loan, many such stores closed. Advocates for the poor now say they are concerned about other businesses that prey on poor people by extending loans in exchange for car titles. If the loan isn’t paid back, the business becomes the owner of the car.
Poverty and depression
All these costs can lead the poor to a collective depression.
“There are social costs of being poor, though it is not clear where the cause and effect is,” said Douglas Besharov, resident scholar at the American Enterprise Institute. “We know for a fact that on certain measures, people who are poor are often more depressed than people who are not. I don’t know if poverty made them depressed or the depression made them poor. … Some people are so depressed they are not functional. ‘I live in a crummy neighborhood. My kids go to a crummy school.’ That is not the kind of scenario that would make them happy.”
Another effect, he said: “Would you want to hire someone like that?”
The poor pay in other ways you might never imagine. “I had no other source to get money,” says Jeanette Reed of Washington, who is retired and lives on a fixed income. “I went to the blood bank. And they gave me $30.”
The poor know the special economics of housing, too.
“You pay rent that might be more than a mortgage,” Reed says. “But you don’t have the credit or the down payment to buy a house. Apartments are not going down. They are going up. They say houses are better, cheaper. But how are you going to get in a house if you don’t have any money for a down payment?”
There is also an economic cost to living in low-income neighborhoods.
“The cheaper housing is in more dangerous areas,” Reed says. “I moved out of my old apartment. … Couldn’t take the dog out at night because of strangers walking up and down the street. They will knock on your door. Either they rob you, kill or ask for money. If you’re not there, they will steal air conditioners and copper. They will sell your copper [pipes] for money.”
Then there is the particular unpleasantness when you make too much money to fall below the poverty line, but not enough to move up and away from it.
Sometimes it pays, too
For our final lecturer on poverty, we take you to a D.C. thrift store where Marie Nicholas, 35, who is what economists call the working poor, is picking through the racks.
“People working who don’t make a lot of money go to the system for help, and they deny them,” Nicholas says. “They say I make too much. It almost helps if you don’t work.”
She says she makes $15 an hour as a certified nursing assistant. She pays $850 for rent for a one-bedroom that she shares with her boyfriend and child. She pays $300 a month for child care for her developmentally delayed 11-year-old son. She was told she makes too much money to put him in a subsidized child-care facility.
“My son was not chosen for Head Start because I wasn’t in a shelter or on welfare,” she says. “People’s kids who do go don’t do nothing but sit at home.”
Money and time. “I ride the bus to get to work,” Nicholas says. It takes an hour. “If I could drive, it would take me 10 minutes.”
What could you accomplish with the lost minutes standing in the rain? Waiting. That’s another cost of poverty. You wait in lines. You wait at bus stops. You wait as the bus makes it way up the street, hitting every stop. No sense in trying to hurry.
When you are poor, you wait.