Poverty is expensive

Last year, the Working Poor Families project released a report detailing the state of the working poor in the United States, and their findings – as I’m sure you can imagine – weren’t encouraging. The report found that the number of families living below 200 percent of the poverty line (the minimum income necessary to begin moving out of poverty) moved from 9.2 million families, or roughly 27 percent Americans, in 2002 to  9.5 million families, or roughly 28 percent of Americans in 2006.  What’s more, there are similarly significant increases in the number of working families who spend more than a third of their income on housing, and working families which have at least one parent without health insurance.  More depressingly, between 2002 and 2006, the number of jobs which paid below the poverty threshold increased from approximately 25 million – or 19 percent of all jobs – to 29 million or 22 percent of all jobs.

While the report’s message –  escaping poverty is incredibly difficult in the contemporary United States – is thorough and appropriately sobering, the authors miss  the opportunity to expound on one particularly difficult (and sadly ironic) aspect of poverty.  Namely, that it is incredibly expensive to be poor.  Today’s Washington Post actually has a surprisingly good article explaining the added expense which comes with being poor:

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.

[...]

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.”

The list goes on: poor families often have poor credit, which virtually disqualifies them from banks and mainstream loan agencies, and leaves them at the mercy of payday loan companies. There are plenty of government programs to help poor families, but they are A) temporary and B) are flawed in that they help poor families survive but aren’t nearly as effective in helping families move out of poverty.  Part of that is because they don’t provide enough support to help push families and individuals out of the economic Phantom Zone; in which they earn enough to be disqualified for extended federal benefits, but not enough to move out of working poverty and into income security.  A sensible solution might be to expand the EITC into something which provides wage supports at particular income levels (up to say 220% above the poverty line) as well as reduce the tax burden on poor and working class families/individuals.  The advantage in this is that it would provide some support for families as they approach the threshold between working poverty and economic security, while still incentivizing work and responsible behavior