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Wednesday, June 01, 2005

Expensive Poverty

John Edwards (remember him?) writes a couple of fascinating posts over here. (Scroll down for the first post). He talks about the relatively high costs of being poor, and gives some great examples.
David Shipler, who recently joined me on a panel at UNC, tells a striking story about a single mother he met while researching his book, The Working Poor. She had no savings and low earnings, so she had to live in a drafty wooden house. This exacerbated her son's asthma. That led to two ambulance rides to the hospital. Those trips led to ambulance charges she couldn't pay. Those charges damaged her credit report. And so then she was denied a loan to buy a mobile home. That meant she had to stay in that drafty house—the house that contributed to her son's asthma attacks. And she had to buy a car from a sleazy dealership that charged her 15 percent interest.

As one little boy David met told his mother, “Being poor is expensive.”

That boy was right on. The Brookings Institution recently released a fascinating study demonstrating how low-income families pay more for all sorts of things. They pay more for groceries and gasoline. They pay more for furniture and appliances. They pay higher prices for insurance and for utilities. And—something that has troubled me for a long time—they pay more for financial services, whether it’s cashing a check or getting a loan.

Here are a couple of examples: In Philadelphia, where the study was conducted, the annual cost of insuring the exact same car and driver, with a perfect driving record, is over $400 more in a neighborhood where the average income is less than $30,000 than it is in a neighborhood with a average income over $70,000.

And even in Pennsylvania, a state with a payday lending ban, providers of short-term loans exploit loopholes to charge annual percentage rates over 450 percent.

I can think of a few examples of my own, like the well off having enough in the bank for overdraft protection, and therefore not having to pay for bounced checks, having new cars that don't need constant repairs, having transportation options to travel to stores with the best prices, and so on.

Interesting reading.


Anonymous Anonymous said...

That is not something I ever thought about. Fascinating. But i still think Edwards is a jerk.

10:55 AM  
Blogger Air Time said...

I heard Edwards speak a few years ago and I thought he was good.

That aside, insurance rates are higher because crime in their neighborhood is higher. Grocery stores don't like to open in low income neighborhoods because of legitimate crime concerns.

There are high costs associated with being poor, but some if it is self inflicted.

11:21 AM  
Blogger DovBear said...

I like Edwards a lot.

12:07 PM  
Blogger Air Time said...

crap. I hate when DB agrees with me.

12:15 PM  
Blogger orthomom said...

I happen to not be a big Edward fan, but I like what he has to say on this topic, and others. Air, i hear what you're saying, but that is not true of every example. In any case, it's a sad state of affairs.

1:32 PM  
Blogger Air Time said...

by the way, you inspired me to my latest creation. If I can ever get it online I will share.

1:49 PM  
Blogger Just Passing Through said...

admit it Mom, you just think he's cute.

1:52 PM  
Blogger orthomom said...

Uh, I guess if you go for that used-car salesman look.

4:30 PM  
Anonymous Anonymous said...

This is priceless. An oily ambulance chaser whining about the high cost of insurance.

12:31 AM  
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