Could You Afford to be Poor?

There are people, concentrated in the Hamptons and Beverly Hills, who still confuse poverty with the simple life. No cable TV, no altercations with the maid, no summer home maintenance issues – just the basics, like family, sunsets, and walks in the park. What they don’t know is that it’s expensive to be poor. In fact, you, the reader of middling income, could probably not afford it.

A new study from the Brookings Institute documents the “ghetto tax,” or higher cost of living in low-income urban neighborhoods. It comes at you from every direction, from food prices to auto insurance. A few examples from this study, by Matt Fellowes, that covered 12 American cities:

• Poor people are less likely to have bank accounts, which can be expensive for those with low balances, and so they tend to cash their pay checks at check-cashing businesses, which in the cities surveyed, charged $5 to $50 for a $500 check.
• Nationwide, low-income car buyers, defined as people earning less than $30,000 a year, pay two percentage points more for a car loan than more affluent buyers.
• Low-income drivers pay more for car insurance. In New York, Baltimore and Hartford, they pay an average $400 more a year to insure the exact same car and driver risk than wealthier drivers.
• Poorer people pay an average of one percentage point more in mortgage interest.
• They are more likely to buy their furniture and appliances through pricey rent-to-own businesses. In Wisconsin, the study reports, a $200 rent-to-own TV set can cost $700 with the interest included.
• They are less likely to have access to large supermarkets and hence to rely on the far more expensive, and lower quality offerings, of small grocery and convenience stores.

I didn’t live in any ghettoes when I worked on Nickle and Dimed—a trailer park, yes, but no ghetto-- and on my average wage of $7 an hour, or about $14,400 a year, I wasn’t in the market for furniture, a house or a car. But the high cost of poverty was brought home to me within a few days of my entry into the low-wage life, when, slipping into social-worker mode, I chastised a co-worker for living in a motel room when it would be so much cheaper to rent an apartment. Her response: Where would she get the first month’s rent and security deposit it takes to pin down an apartment? The lack of that amount of capital – probably well over $1000 – condemned her to paying $40 a night at the Day’s Inn.

Then there was the problem of sustenance. I had gone into the project imagining myself preparing vast quantities of cheap, nutritious, soups and stews, which I would freeze and heat for dinner each day. But surprise: I didn’t have the proverbial pot to pee in, not to mention spices or Tupperware. A scouting trip to K-Mart established that it would take about a $40 capital investment to get my kitchenette up to speed for the low-wage way of life.

The food situation got only more challenging when I, too, found myself living in a motel. Lacking a fridge and microwave, all my food had to come from the nearest convenience store (hardboiled eggs and banana for breakfast) or, for the big meal of the day, Wendy’s or KFC. I have no nutritional complaints; after all, there is a veggie, or flecks of one, in Wendy’s broccoli and cheese baked potato. The problem was financial. A double cheese burger and fries is lot more expensive than that hypothetical home-made lentil stew.

There are other tolls along the road well-traveled by the working poor. If your credit is lousy, which it is likely to be, you’ll pay a higher deposit for a phone. If you don’t have health insurance, you may end taking that feverish child to an emergency room, and please don’t think of ER’s as socialized medicine for the poor. The average cost of a visit is over $1000, which is over ten times more than what a clinic pediatrician would charge. Or you neglect that hypertension, diabetes or mystery lump until you end up with a $100,000 problem on your hands.

So let’s have a little less talk about how the poor should learn to manage their money, and a little more attention to all the ways that money is being systematically siphoned off. Yes, certain kinds of advice would be helpful: skip the pay-day loans and rent-to-pay furniture, for example. But we need laws in more states to stop predatory practices like $50 charges for check-cashing. Also, think what some micro-credit could do to move families from motels and shelters to apartments. And did I mention a living wage?

If you’re rich, you might want to stay that way. It’s a whole lot cheaper than being poor.

Comments

[Al Lehmann]

I read your columns with great interest from Canada. A couple of other inequities I've noticed:
1) Saving for retirement--wealthy are allowed to write off from their taxable income contributions to retirement plans. The poor pay these taxes, and have no ability to save for retirement.
2) Banks offer higher rates of interest on savings accounts that hold high balances (e.g $10 000 +). The poor have no savings, and even if they do, after tax on the interest often wind up with less than they started with.
Keep up the good work, EH?
Al

[Tom]

Some of the poor i've mingled with refuse to pay taxes (for a variety of reasons, but mainly fairness and the inability to pay) and dare the government to come after them for the "chump change" they owe. Since they own nothing of any real worth, they feel pretty safe. If the IRS did come after someone like this, they'd be put on some sort of payment plan anyway - and then it would become clear that there isn't any available cash to pay these unfair taxes.

[Rhea]

Bravo! The points that the Brookings Institute study makes along with the points you made in "Nickel and Dimed" are spot-on! This reminds me of a column written by Ellen Goodman on the 'gender tax' that women pay in this country to stay safe from sexual assault. Women often pay more to live in 'safer' neighborhoods, they take more cabs and so on. Now, if you are poor and a woman -- and let's throw in nonwhite -- the burdens are that much greater.

[Duane Gran]

You may find an essay (http://www.tpmcafe.com/story/2005/5/31/11221/9907) from John Edwards to be of interest. He was writing about a similar report from the Brookings Institute last year which drew similar conclusions.

[Heather]

I am one of those poor people. I make $9.75 an hour, but I also have to support my disabled husband and young children on that $20,000 a year. I pay more in taxes than I'd ever imagined, and with my health insurance running at $160 a month premium (in addition to what my job pays out), I can barely make rent every month. I have no way to better myself, as I can't afford to go to school, I am in debt from medical bills I recieved from before I had insurance, and since my husband has a criminal record, I'm stuck in the only apt complex I could find that would accept us. And it's not like my husband can get a part-time job to help out- most places won't hire someone who has TB (which he caught,ironically, while interning at a hospital to get his EMT certification!) as well as a mental illness and a criminal record. I live in Utah, and I am surrounded by affluence, and people who say, "make your husband work," and "go to school to get a degree," but I'm stuck in this call-center, working customer service. I wish there was more services available for people who are low income who wish to better themselves. The sad thing is that many people who are poor, stay poor, because there literally is NO WAY OUT.

Great post, BTW. *bookmarking it*

[Thrift-shopping working food stamp mom]

Barbara, your heart was in the right place, but part of what made "Nickled and Dimed" so annoying to me was your evident cluelessness about how actual poor people live. For instance, no real poor woman would have bought $40 name brand khakis for a job. She would have gone to Target, Wal-Mart or, more likely, Goodwill, where you can get khakis for $3, sometimes even the same brand you bought. No real poor person would have turned down a $10/hr. job to work for $6.50 instead. If you have no kitchen supplies and little cash, you go to a yard sale or that same Goodwill, or the dollar store.

Car loans? Mortgages? Poor people do not own homes, and if they have a car it's a beater they bought for a few hundred bucks from a private seller, often a relative.

Negelcting health problems--our government forces me to. Medicaid *will not pay* for annual physicals or dental cleanings. I have to wait until I have a cavity or illness to see a doc. I needed a physical to get a job to try to get off welfare and could not get it because I could not pay for it.

Oh, and btw, thank you so much for guilting women who have housekeepers. I clean houses for a living and charge $20/hr. This allows me to set my own schedule, be home when my kids get off the bus, avoid asshole bosses, drug testing, dress codes and all the other indignities of low-wage work. It's a freeing job and I love it. The fact that you couldn't handle getting a little toilet water on your socks just emphasized how divorced from reality America's upper middle class elite are.

[Barbara E]

Hey Thrift Shop Mom --The slacks were $30 (expensive but they needed to survive a daily washing); I never turned down a $10 job for $6.50; and the toilet juice on my shoes didn't slow me down one bit.

[Thrift Shop Mom]

I could swear I remembered a bit in the book about turning down a home improvement store job for Wal-Mart.

[deang]

Thanks for making people aware of this. A couple of years ago, I left a job that provided health insurance for a job that did not. When I started looking into insurance programs, potential providers would tell me that they would either not cover or charge prohibitively more for those health issues for which I most needed health services. So, being low income, I opted to go without insurance for a period of time. On the two times that I did go for minor checkups during that time, I found out that base charges for medical services are substantially more for those without insurance than for those with. I had only heard rumors of this, but it is a real penalty. Also, my job at that time was in a low-income, largely Black neighborhood, and I noticed that the produce in the supermarkets there was of lower quality and substantially higher priced than in my own, more pricey and white neighborhood, even though it was the exact same supermarket chain.

[Sandra]

Hi Barbara! Hooray for you having a blog. I've read your books and look forward to reading your blog from now one.

I'm familiar with microcredit programs in Africa, SE Asia, South America, but somehow never thought it working here. So interesting... It's true that that there's such a disguise around how much it "costs" to be poor, especially in urban areas. On a personal level, I've noticed my expenses going down (or getting subsidized by my employer) as I've "moved up" in my career. It's ironic.

Looking forward to more...

[Blair Hawkins]

Thanks for the article. Here's a few more things to consider.

I support pay-day cash advance banking alternatives. The choice is not between cashing a check free at a bank or paying a fee at a check cashing business. Many banks (in Cleveland for example) charge a fee to cash a check unless you have an account, even if the check is drawn on the bank where you attempt to cash it. The choice is between paying a fee to cash the check or not cashing the check.

Pay-day places don't don't give you the attitude that banks do.

The choice is not between a high interest pay-day loan or a low-interest loan at a bank. The choice is between a high interest loan or no loan at all. That's why I didn't like VP candidate John Edwards speech 2 years ago calling for shutting down check check cashing centers while not calling for any banking reform.

Banks are not a safe place to keep your money. If you have any debt or unpaid medical bills or back taxes, your bank funds will be seized. So if you have a $10,000 medical bill and $500 in the bank to pay this month's rent, guess what? You just became homeless.

And don't get me started on impoverishment programs that masquerade as poverty assistance programs. I have been documenting the programs here in Charlottesville, Va. for 6 years now, and identifying the directors and officials making a tidy living perpetuating poverty while boasting about helping people.

Remember: poverty does not cause crime. Crime causes poverty. Rich people steal way more than poor people.

Just visit my blog for a systematic undressing of the poverty pimps and their propaganda. My latest report is an update on a former urban renewal official who, last year, outlined his bold new "community land trust" idea for maintaining permanent disadvantage for low-income people.

Oh and did I mention: I'm still poor.

[Hattie]

I live in one of the few places in the country where people of all incomes live in close proximity. We shop at the same groceries and at the Wal-Mart and often live in the same neighborhoods.
Therefore, I know quite a number of poor people. I see how they get ground down. They may earn some money, but it is never enough to alter their basic situation. Boyfriends may be in prison. Car payments eat up income. Adult children are forced to move into their parents' homes, because they get evicted from their rent-subsidized apartments, or the owners decide to sell. Jobs vanish as circumstances change, and there is no money and time for retraining. Physical and mental problems may preclude employment. Another baby may be on the way, and isn't abortion a sin?
The woe never ends.
Middle class people like me have other resources, and these could be on Mars for all they are accessible to the poor. Free credit on my credit card is an example. I was able to pay off my mortgage after inheriting a large sum of money. Everything I want is mine, and bargains to boot.I travel and get lots of upgrades and frequent flyer perks.
I am aware of what is out there. My poor friends are limited to what is around them and what they see on television. I could attribute my fortunate circumstances to my superior intelligence and know-how, but seeing how others cope in circumstances that would bring me to despair I can't get away with such notions.
The constant fear of the poor is that they will not be able to provide for themselves and their loved ones. This is not a fear I have hanging over my head. I don't think I could cope with poverty at all, especially now that I am no longer young.

[Janet]

My car got towed and I can't afford to get it back so I take shopping carts out of grocery store parking lots.

[Buffy]

You capture many of the core issues. May I add two more?

Many times electicity is shut off for nonpayment, which means that refrigeration isn't available. Ergo, no fresh vegetables, fruit, dairy and meat. What's left? Prepackaged, heavily processed foodstuffs with little, if any nutritional value. For children, it means a critical lack of calcium, water soluble vitamins, quality protein, and an overabundance of processed sugars, starches and saturated fats.

When brains and bones and muscles are developing, poor children are literally starving for the essential nutrients that their bodies need.

Secondly, many of the poor who are treated in hospital settings do not get the essential care that they need to keep themselves healthy after discharge. No one works with them to develop a plan for meeting their nutritional needs, their activity needs, and their safety needs. Prescriptions are written without any assistance in helping them access required medication, learn how to take it safely, and to help them monitor their own health. For example, an accurate daily weight is critical as a key part in monitoring heart failure.
Almost never are patients worked with to make sure that they even have access to a reliable scale, let alone the ability to read it accurately.

Diabetics who are able to control their nutritional intake - the kinds of foods, preparation methods, and timing - can have wonderful success as diminishing and staving off the effects of the disease. Patients who are poor have little, if any, ability to comply with rigorous dietary requirements. Among patients who develop gangrene and subsequent amputations, the majority are poor.

[realpc]

I think a poor person with some common sense will have a much easier time than you did.

I was poor for over 12 years, while changing careers and getting through graduate school. My income was never over $12k during those years and I lived alone. I did not experience any of the hardships you listed, even though I live in an extremely high cost area.

After gettiing a degree, it still took several years to get up to a middle class income for this area. But I still saved at least $20k every year, because I had learned how to live simply.

Why was my experience so completely different from yours? Well for one thing I was not out to prove that poor people are victims. I was out to prove I could improve my life, without any help. I didn't have any luxuries -- no AC, no TV, old cars, old clothes, tiny apartment -- but it was never terrible. I focused on my goals rather than feeling sorry for myself.

No, I did not have children to support, but you didn't either, during your experiment. A single woman supporting children needs help, I agree. But a healthy adult with no kids just needs some common sense and a lot of self-discipline.

Barbara, all you're doing is trying to make people think they can't do things for themselves, they need government help. You start from your socialist perspective and then twist all the evidence to fit.

[Janet]

Yeah, right on realpc. Barbarah is rich. She charges $14,000 just to speak to kids at schools. The government is good though, I seriously need help because of all the bad choices I made, like having kids when I can't afford them. I think the government has to support me even if I have another 10 kids. Mothers of the world unite!

[n'chee]

I raised a child and paid for his and my university undergrad education on between $14,000 and $18,000 a year, before taxes. I ran a small old car during the summer, walked everywhere in winter (average 20 to 30 below zero). I didn't buy text books for an undergrad degree; wore hand me downs and thrift shop clothing and never had more than three changes of clothing at any time. Two pair of shoes a year. One pair of winter boots. 8 and 10 years between lens changes for glasses. I've never had investments, but always had savings up to 2 to 3 months living in a savings account.

You could have picked up a yard sale slow cooker, as I did 20 years ago (which I still use) for nutritious meals made anywhere. And you could have learned to eat more basically with good nutrition if you bought only in season, long cooking meats, powdered milk. Like that.

Nothing but basic rabbit ears tv, no holidays but with a tent, cutting your own hair.

I really don't get much of your poverty ideas.

[n'chee]

By the way, I still live as above (now alone) but for the single most expensive thing I've ever bought: an internet connection! I need it for work, but it also keeps me connected to the world. I can write it off of my earnings, which are just under $10,000 a year. I don't now and never have taken any money from goverment or had any debts.

[realpc]

I never had any debts or hand-outs either. Being poor taught me how to be practical -- it really is not that hard! I never ate fast food. Food just is not a major expense -- the challenges are housing and transportation. I was able to afford my own apartment (tiny!) and I had a car (old!). But if that had not been possible I could have shared an apartment and moved closer to work and school.

I also biked or walked whenever possible, and still do -- it saves money on gas and you don't have to join a gym.

I also still cut my own hair -- that's easy if its long. And I still shop in discount stores. Basic kitchen utensils do not have to be expensive.

I have a middle class income now, but more than half of it goes into the bank.

Another problem I have with Barbara's research -- she pretended to be a middle-aged women returning to work with no business experience or skills. Why would she expect employers to pay her well? Why does she expect the government to make everything easy for us? I don't think it could if it wanted to.

Regarding single women with children -- I do not think the government should pay them to stay home and have more kids. But there should be some kind of programs to help with daycare.

[Thena in Maine]

It all depends on where you are starting from. Sometimes it only takes $25 to make that electric bill or credit card payment, but the consequences of not doing so can be severe - utilities cut off, high "poverty fees" and increased interest rates, etc. Or maybe you're too poor to have that credit card in the first place, which means that when your fifteen-year-old car needs repairs, you have to scrape up the cash to have it fixed or you won't be able to get to work because there's no public transit in your town. A newer car would get better gas mileage and have fewer repair costs, but to get that newer car you need money up front.

Same with the hotel-vs-apartment lease scenario, or, scaled up an economic class, the rent-vs-own scenario. In many markets it's cheaper to own than to rent, but the worse your credit, the more you'll pay for that mortgage, and you have to have (at very least) down payment and closing costs up front. To get a lease, you need good credit and first/last/deposit. For that matter to get a motel room these days you often need to have a credit card, which someone in very poor economic circumstances might not have.

It's not just strictly about income, either. It has to do with your social support network - whether you have family and friends you can tap for a short-term loan to get that $25 for the light bill that's due three days before payday, or if you have to use a check-cashing place that will charge you a fee for it. Whether there's a basement couch you can sleep on for a few weeks while you find a new apartment, or if you're sleeping under a bridge or in your car.

Starting capital isn't just money. It's things like your grandmother's beat up old cooking pots, which will do until you can afford new ones. It's clothes that fit well enough and have enough wear in them that you can wear to work - tricky, if you are in a job that requires you to buy a uniform up front. If you are starting from scratch - as Barbara was for her Nickel-and-Dimed experiment - you don't have that stuff. And poor people start over from scratch more often than folks in more stable lifestyles may realize.

Got evicted? If you have a support network, you might have friends show up to help you move your stuff. Or your former landlord might just toss it or sell it in lieu of uncollected rent. Or maybe you left voluntarily but couldn't take it with you because you had no way to move it or no place to move it to.

Thrift shops and yard sales are great sources for secondhand household goods, so long as you don't need a specific thing at a specific time and have the time to keep looking until you find something useful at the right price. They're also good sources for clothing if you fit into average sizes, though there's a lot less available for non-average-shaped people. But if you have to have a pair of black PANTS NOT JEANS to wear to work on Sunday night, and you don't own one already, then you either buy them from whoever has them at whatever price they're asking, or you jeopardize that job by showing up out of uniform.

Multiply this kind of BS by a thousand times and you start getting the picture. The details vary depending on what shade of poor you are - not able to work, unemployed, underemployed, formerly middle class, formerly working class, working one job, working multiple jobs, have kids, don't have kids, paying off old debts, whatever - and some people manage to work their way through the maze.

But why should it be a maze to begin with?

[n'chee]

I just don't know where it got to be a maze. My parents generation ALL lived as I described. I live in luxury compared to how they did, and how I grew up.

I don't go with this idea of putting blame here: "paying welfare moms to stay home and have children". We're all indebted to the man; either the one we work for, the one we sleep with, or the government.

The generation before us learned the meaning of these words well.

no

need

want

Don't confuse the last two. And stop making excuses for yourself. Just stop, and begin to do it the honourable way, that is the way that will make you feel honourable, with as little of somebody else telling you what it will be or not. You can't change the system overnight, but while you're working to change it, walk away from it.

I'm Canadian. I put my money where my mouth is and I vote for social assistance programs. But I have yet to NEED to use them. Really, I have yet to WANT to use them so I don't. Just_like_that.

Learn to do without until you can pay for it in cash without taking it out of rent or groceries or children's education or robbing peter to pay paul. Stop using credit.

It can be done. But it takes

will

The last word to learn.

[MB]

You're a good person Barbara Ehrenreich. Good points about needing a system of micro credit for Americans with low-income and bad credit; I usually hear about micro credit in discussions about poverty in developing nations, like the Grameen Bank (www.grameen-info.org), but never about poverty in America. Either our nation is ashamed that the American Dream does not reach downward or there are vested industry interests in maintaining a two-tiered system for rich and poor. I say it's vested interests. But we should also be ashamed and I hope that can motivate us to push forward as a nation of humanity rather than a nation of greed.

[n'chee]

What I, as a member of the nation where American thinks it's going to get the oil, gas, water, softwood lumber and hydro it WANTS, is the good citizens of the United States learning to live a little lower on the food chain. A LOT LOWER.

It seems to me that Americans as a nation have this attitude of just get more. The American Dream. Maybe the American Dream needs to be rethought.

[Thena in Maine]

N'chee -

Some things are different in Canada. Like health care coverage. If I have a major medical emergency, I will be bankrupt, because I don't have private medical insurance, because my employer doesn't offer it to part-time employees and I haven't found a full time job with health benefits yet in this slow economy. (Maine is the "end of the line" for the US, being surrounded on three sides by -- CANADA! Can we secede?)

Our climate down here isn't much different from that in Quebec or New Brunswick. Explain to me how I should avoid buying heating oil when I don't have the cash up front to install a wood stove or a place to get free wood. Explain to me how I'm supposed to get from my home to workplaces 10, 15, 25 miles away (that's miles, not kilometers) without my car, when public transit's not available and I don't work at the same site from day to day or week to week.

And I'm not poor by global standards or even US ones; I'd put my income and standard of living at about the 20th or 25th percentile (US). There are lots of people here poorer than I am and I am well aware of this. I get by. Others are not so lucky.

[n'chee]

I'm not calling anyone out but saying how it may be possible. I have never owned my home and did pay a horrid amount to heat a rental main floor. Income of just over $1100 a month then, rent $560, and heat over $200 a month. One of my kids now says she froze to death all the time. I used to say "put a sweater on". People in the U.K. do it don't they? In other accommodation which I also rented we wore mukluks all day.

We never ate anything that didn't require cooking in the pressure cooker or slow cooker.

Anyway the point I'm trying to make is I wish people would spend more energy trying to find ways to make it work instead of complaing about how it doesn't. Once you decide hey I'm living in poverty anyway, I'm going to do it without the 'system' you walk lighter.

Is is more difficult getting kids to come along. But you do it to the extent you can, and let them know this is it, and when they have their own home/job/life they can do it their way. For now, pick up the shovel (sorry no we don't have a snow blower too bad yes I know your friends do) and you'll come in all warm and toasty I guarantee.

Now, in an apartment, the ways I surive on so little are different. I can choose to wash as much of my laundry by hand, work from home, use my car only when I have to go 10 miles (have to...not choose to), unplug everything that is not in use and other compromises to keep the power bill to the billing minimum, never buy what I can get free (dumpsters, people throwing things out, library) etc.

I would like some options, but I don't have any except I could get exemption from healthcare premium because of my age and circumstances (it is a misunderstanding healthcare here is free) but I refuse to let the government into my life. I also don't use any medications. I have had prescriptions handed to me, including for chronic conditions, but then a bit of time spent on the computer with google and I learn the only profit there is for the pharmaceutical company, not for me. I'll modify diet and exercise and reduce stress. (I nor my children when at home, have NEVER eaten fast food--not McDonalds, or any other).

I stay healthy as possible by making choices for health that come BEFORE a disease is caused (or created by advertising). I just say no thanks when the doctor said for example, here's a prescription for the pain you're going to have after this operation. I can't afford it and turned out, didn't need it. Aspirin and tolerating some pain worked just fine.

I'm somewhat disabled, although I don't like to use that word when I see those who are not just "somewhat".

I get dental care at the university, where they want people for the students to practise on. Same with my kids when they needed it, right to braces for one. The dental professors congratulate me on my superb oral hygiene. There's nothing for them to do.

I would like many things. I can't have them without compromising my principles. So I do without.

That's all I'm saying. You stop playing the consumerist, capitalist game, things are way easier.