It costs a lot to be poor. Just a few examples:
A recent report released by the Office of the Inspector General (OIG) of the U.S. Postal Service reports that 68 million Americans — more than a quarter of all U.S. households – have no checking or savings accounts.
How do people get along in a society where payments are made by check, or increasingly, electronic transfer? How do the (growing numbers of) people scraping along paycheck to paycheck access short-term loans when they hit a rough spot?
Evidently, by spending a lot more than the rest of us.
According to the report, these households collectively spent about $89 billion in 2012 on interest and fees for non-bank financial services like payday loans and check cashing. That works out to an average of $2,412 per household. The average underserved household spends an astonishing 10 percent of its annual income on interest and fees — about the same amount they spend on food.
As Senator Elizabeth Warren wrote in a column commenting on the report, “The poor pay more, and that’s one of the reasons people get trapped at the bottom of the economic ladder.” Poor people disproportionately rely on the check-cashing stores, pawnshops, payday lenders, and other predatory financial services that took customers for $89 billion in interest and fees in 2012.
But poor people have to contend with more than just predatory lending; they have fewer options across the board.
A few days ago, I wrote about the connection between poverty and marriage; it appears that despite the undeniable correlation between the two, we had the cause and effect backward. Poverty prevents many poor single moms from marrying in the first place. Subsequently, I found research (from professors of psychology and and organizational management) demonstrating that poverty also makes it harder for poor couples who are married to stay that way.
The problem is not that poor people fail to appreciate the importance of marriage, nor is it that poor and wealthy Americans differ in which factors they believe are important in a good marriage. The problem is that the same trends that have exacerbated inequality since 1980 — unemployment, juggling multiple jobs and so on — have also made it increasingly difficult for less wealthy Americans to invest the time and other resources needed to sustain a strong marital bond.
Poor people divorce at a rate that is thirty percent higher than their wealthier peers, with all of the emotional and financial distress that divorce brings in its wake.
Back in 2001, Barbara Ehrenreich wrote Nickeled and Dimed: On (Not) Getting Along in America, in which she documented the difficulties faced by low wage workers– the added costs for shelter (the poor often have to spend much more on “rent by the week” fleabags than they would pay to rent a decent apartment because they can’t afford the security deposit and first-and-last month rent payments) and food (the poor often live in “food deserts” and have to buy food that is both more expensive and less healthy).
Let’s not even get into medical and dental care. That’s a subject for an entirely separate diatribe. (Folks who can’t afford regular, preventive care end up very sick in the ER, costing everyone more money.)
If we really expect poor people to “pull themselves up by their bootstraps,” maybe we should help them afford the bootstraps.
Sheila Suess Kennedy, J.D. is Director of the Center for Civic Literacy and Professor of Law and Public Policy in the School of Public and Environmental Affairs at Indiana University Purdue University at Indianapolis. Her scholarly publications include six books and numerous law review and journal articles. Professor Kennedy is a columnist for the Indianapolis Business Journal and a frequent lecturer, public speaker and contributor to popular periodicals. This post was originally published at sheilakennedy.net on February 19, 2014 and is republished here with the author’s permission.