Month: May 2009

This won’t surprise people who have ever been poor, but poor people pay more for things that middle-class people take for granted.

Poverty 101: We’ll start with the basics.

Like food: You don’t have a car to get to a supermarket, much less to Costco or Trader Joe’s, where the middle class goes to save money. You don’t have three hours to take the bus. So you buy groceries at the corner store, where a gallon of milk costs an extra dollar.

A loaf of bread there costs you $2.99 for white. For wheat, it’s $3.79. The clerk behind the counter tells you the gallon of leaking milk in the bottom of the back cooler is $4.99. She holds up four fingers to clarify. The milk is beneath the shelf that holds beef bologna for $3.79. A pound of butter sells for $4.49. In the back of the store are fruits and vegetables. The green peppers are shriveled, the bananas are more brown than yellow, the oranges are picked over.

(At a Safeway on Bradley Boulevard in Bethesda, the wheat bread costs $1.19, and white bread is on sale for $1. A gallon of milk costs $3.49 — $2.99 if you buy two gallons. A pound of butter is $2.49. Beef bologna is on sale, two packages for $5.)

Prices in urban corner stores are almost always higher, economists say. And sometimes, prices in supermarkets in poorer neighborhoods are higher. Many of these stores charge more because the cost of doing business in some neighborhoods is higher. “First, they are probably paying more on goods because they don’t get the low wholesale price that bigger stores get,” says Bradley R. Schiller, a professor emeritus at American University and the 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.”

Of course it’s not just that groceries are more expensive — it’s also that there’s a dearth of fresh fruits and vegetables and healthy food items. Where those items are available, they’re significantly more expensive than frozen foods. If you have a family to feed and a box of frozen fish sticks is the same price as one pear, it’s not a tough calculus.

And food is just the start of it:

When you are poor, you don’t have the luxury of throwing a load into the washing machine and then taking your morning jog while it cycles. You wait until Monday afternoon, when the laundromat is most likely to be empty, and you put all of that laundry from four kids into four heaps, bundle it in sheets, load a cart and drag it to the corner.
…
“When you are poor, you substitute time for money,” says Randy Albelda, an economics professor at the University of Massachusetts at Boston. “You have to work a lot of hours and still not make a lot of money. You get squeezed, and your money is squeezed.”

The poor pay more in hassle: the calls from the bill collectors, the landlord, the utility company. So they spend money to avoid the hassle. The poor pay for caller identification because it gives them peace of mind to weed out calls from bill collectors.

The rich have direct deposit for their paychecks. The poor have check-cashing and payday loan joints, which cost time and money. Payday advance companies say they are providing an essential service to people who most need them. Their critics say they are preying 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 says. “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.”

Read the whole thing.