Why The Poor Pay More For Everything. Often Much More

A customer enters a check-cashing business in Cincinnati, Ohio.

"Being Poor Changes The Way You Think About Everything"

http://paxonbothhouses.blogspot.com/2013/09/being-poor-changes-your-thinking-about.html

This powerful Reddit thread reveals how the poor get by in America

The poor pay more for everything, from rolls of toilet paper to furniture. It's not because they're spendthrifts, either. If you're denied a checking account, there's no way for you to avoid paying a fee to cash a paycheck. If you need to buy a car to get to work, you'll have to accept whatever higher interest rate you're offered. If you don't have a car, the bus fare might eat up the change you'd save shopping at a larger grocery store as opposed to the local corner store.

It's easy to feel that "when you are poor, the 'system' is set up to keep you that way," in the words of one Reddit user, "rugtoad." That comment is at the top of an extraordinary thread full of devastating stories about what it's like to get by with nothing in the United States of 2015.

"Growing up really poor means realizing in your twenties that Mommy was lying when she said she already ate," wrote "deviant_devices," another commenter.

You can buy only a single pack of paper towels at a time, rather than saving on a bundle of 10, as "Meepshesaid" noted:

When you are broke, you can't plan ahead or shop sales or buy in bulk. Poor people wait to buy something until they absolutely need it, so they have to pay whatever the going price is at that moment. If ten-packs of paper towels are on sale for half price, that's great, but you can only afford one roll anyway. In this way, poor people actually pay more than others for common staple goods.

You can't pay for health insurance, and instead buy medicine from pet stores, as "colorcoma" writes:

I buy "fish" antibiotics online because I can't afford health care. … Amoxicillin and such. Mostly for husband who has Lyme's disease. We can't afford our monthly health care rates. We are 30somethings in the US. Really feel like a "bottom feeder".

You can't also buy shoes that will last for more than a few months, according to "DrStephenFalken":

I'm making $150- $200 a week and I need new shoes. So I can buy $60 shoes that will last or $15 walmart shoes. So I buy the walmart shoes and some groceries instead of just the $60 shoes and no groceries. Three months later I'll need new shoes again. But I'll also have to pay rent and my light bill is due. So I'll pay the light bill and buy some "shoe glue" for $4 to fix my shoes for another few weeks until I can buy the $15 ones again.

Economists have documented the "ghetto tax," as the additional costs of living paid by the poor are often known. A Brookings study from 2006 found that someone who is not able to open a checking account will typically pay between $5 and $50 to cash a $500 check, and that people in poor neighborhoods paid several hundred dollars more for homeowner's insurance, or to buy a car of a given make and model, than someone living in a wealthier neighborhood.

A television that costs $200 might cost $700 on one of the payment plans that poor people are obliged to use, the study found.

There are all kinds of reasons why the poor pay more. Maybe they can be summed up this way: The ability to draw on a pool of cash always saves you money down the line. Lenders will give you a better rate on a car. You can avoid relying unscrupulous firms with exorbitant rates to make it to your next paycheck.

As Elise Gould, an economist at the liberal Economic Policy Institute told me, the poor are "liquidity-constrained."

"There's all these vicious cycles that poor people face," she said. "You get a job, but you need a car to get to a job." A guarantee of financial security in the future often costs money now.

This is a problem not just for the very poor, but also for the middle class, Gould noted. Their kids might have to take out loans to go to college, for example, while wealthier parents can pay in cash. And they lose the discounts on fees that financial institutions give to clients with large balances.

Even among the very rich, economist Thomas Piketty's data suggests that those with more money are able to earn higher returns on their investments.

To be sure, however, the problem is most acute at the bottom of the income distribution. The commenter "drink[expletive]fight." whom I'll quote at length, vividly describes a poor upbringing:

Hauling food out of the dumpster at 7-11, because they threw away piles of chip bags that were a day over their expiration. (Manager caught us one day, they apparently told the employees to stab a hole in each chip bag after that. NBD, we just had to sniff each bag to make sure nothing was contaminated). Checking neighbors' trash bins - rescuing half a damn pizza some idiots had ordered the night before, then threw away after a handful of slices. Hauling in furniture from alleyways - my littlest sibling, my sister, received a twin bed mattress that had a grotesque brown stain on it, looked like someone had [expletive] a gallon of wet feces onto it. No [expletive] given, we scrubbed that [expletive] with bleach over and over, and she slept on it for years.

And then there were times when the welfare checks or food stamps didn't arrive, and the trash bins were not producing food. I grew up in a fairly rural area. When that happened?

I know that in winter, Grey Squirrel tastes [expletive] gross. Sure, people from the South can claim that their brown and red squirrels are delicious, but I would rather eat [expletive] out of a pig's ass than eat another bite of goddamn squirrel meat. Or jackrabbit. Or goddamned dandelion greens.

It says a lot about the contemporary U.S. economy is that some people have to stop taking part it in altogether.

Max Ehrenfreund is a blogger on the Financial desk and writes for Know More and Wonkblog.