12 ms·

Why it's expensive to be poor

183 points by tialys 17y ago

swolchok 17y ago
read it, enjoyed it, but had to flag because it's OT. Sorry.
- mattyb 17y ago
  And what exactly is the topic?
  - gamache 17y ago
    Hacker News. I flagged it as well, incidentally.
- tialys 17y ago
  I'll be honest, I thought it was on topic because I enjoy these types of stories on Hacker News, as well as the discussion. I rarely submit stories unless I think they will generate good discussion. If you want to define a 'topic' for this, I'd say it's understanding another market, and getting insight in to a lifestyle you may not fully recognize or understand. That said, I still understand if you flag it.
- madair 17y ago
  Another article goes to #1, and a couple people flag it. Something is wrong with this system.
  - run4yourlives 17y ago
    I think it's more a difference of opinion, which isn't exactly something that needs correction.
- dantheman 17y ago
  What's with the down modding, if you don't like it respond.
lutorm 17y ago
What is it they say, "money rolls uphill"? It's very true that when you don't have funds to make financial investments that pay off over time you end up even deeper. I guess this is why I think progressive taxation is "fair", people with higher incomes can leverage it so it makes more difference than the apparent income difference would indicate.
- noonespecial 17y ago
  This is exactly the arguement I make when people tell me that progressive taxation is some sort of evil and "fair" is when everyone just pays a fixed percent. I usually say "money has its own economies of scale" and a progressive tax is just a way to address these. "Money rolls uphill" is a nice way of saying that. I hadn't heard that before. I think maybe I'll borrow that. Thanks.
  - pg 17y ago
    Rich people pay more taxes if you have a flat tax rate too. How do you know how much progressiveness you need to counteract the vague phenomenon you describe? How can you be sure a mere proportionate increase wouldn't be enough to do it? Or even less?
    - noonespecial 17y ago
      The unfortunate answer is trial and error. If we agree that money does have an economy of scale but that its very difficult to measure, ignoring it because we can't measure it isn't much of a solution. The idea is that money has a decreasing marginal utility as well as a "money makes money" economy of scale. A subtle and well tuned progressive tax would keep the tax (although small) from overwhelming the poor who are right on the edge and also ask more from those who can afford it the most while still not overly dampening their incentives to achieve. Like Terry Pratchet so succinctly said "its the difference between using a feather and using a chicken".
      - pg 17y ago
        Tax rates are determined by something like trial and error now, but the test is not whether they produce equality, but simply how much you can extract from each group without causing social disasters. You can take away about half the money rich people make before you start to break your economy, but if you took half the money poor people made, they wouldn't have enough left to live. Hence you get progressive taxation.
forinti 17y ago
Ok, you save a dollar on a gallon of milk, but how much does it cost to own a car?
- lutorm 17y ago
  That's a very good question, but if you take into account that you can work 2h more per day because you don't have to wait for the bus, it might pay off.
  - sethg 17y ago
    you can work 2h more per day because you don't have to wait for the bus It pays off if you already have the money up front to buy a car with, or if you have enough income before you buy the car that you qualify for a car loan. You can't get a loan by telling the bank "well, I'm living totally hand to mouth now but if you front me a few thousand bucks for a car then I'll surely find enough extra work to pay back your loan, and pay for gas, and pay the insurance, and pay the insurance deductible if my car gets crashed..." Cash flow, cash flow, cash flow.
    - lutorm 17y ago
      Well, yeah. That's their problem. (I'm not sure whether your comment was in disagreement or agreement...)
- akeefer 17y ago
  The point is that the poor pay more for exactly the same (or even inferior) things as people who are better off, not that they somehow spend more in the aggregate. People who already are going to have less than others because of their lower income actually have that small amount of money go less far than exactly that same amount of money would go for someone who was better off. You can view that as just the reality of how the economics work out, or you can view that as fundamentally unfair that people essentially get kicked while they're already down.
  - DanielBMarkham 17y ago
earl 17y ago
Everyone should read this link by John Scalzi, as well, as a companion to this article. Being Poor: http://whatever.scalzi.com/2005/09/03/being-poor/ http://whatever.scalzi.com/2005/09/03/being-poor/
- noonespecial 17y ago
  That's fantastic. They're all brilliant but, "Being poor is having to live with choices you didn’t know you made when you were 14 years old.", just gives me chills.
  - asciilifeform 17y ago
    Search for Ilkka Kokkarinen's comment.
    - earl 17y ago
      Gah. People who think that the poor are lazy and shiftless are scum. Some of the poor maybe be lazy and shiftless, but having middle class / wealthy parents doesn't just give you money and education and health -- it also gives you the very habits and abilities (saving, studying, deferring rewards, working hard, etc) that keep people from being poor or staying poor. Even things like applying to college are different if you have parents who can help guide you through the process -- I read a heartrending account of a (poor) child who got a scholarship to go to a private high school but his parents couldn't afford the transportation and he didn't have the institutional knowledge to know that if they'd told the school that, the school would have helped. So he declined a great education for the lack of $400. Growing up middle or upper class also gives you all the social markers people look for -- whether it's straight, clean teeth, the ability (and skill) to dress appropriately for a variety of social situations, the proper manners to eat in a range of restaurants from a greasy spoon to a 3 star Michelin, a good suit to go to interviews, acne medication so you don't have acne scars, the ability to make small conversation about art, etc. If you read the literature, most Americans drastically overestimate the social mobility of America and are shocked when they hear how very heritable wealth is.
timmaah 17y ago
>>But, Blakeney says: "I don't have time to mail it. You come here and get it done. Then you don't get charged with the late fee." << Huh? So you pay 10% for someone to do it for you..
- JimmyL 17y ago
  To mail it himself would take some long-term planning. He'd have to book off a time when he knows he'll have the bill and the address with him, not put this off until tomorrow, locate and go to a post office/convenience store to buy stamps and an envelope, get the money in his account, and then keep it there for five or six business days until he's sure that it's been cashed. If you're living paycheque-to-paycheque, this is more difficult than you would think - especially the part about having the fifty bucks sitting in his account for five days without touching it.
adatta02 17y ago
It seems like this should be a huge opportunity for someone to come in and optimize things. The "pay day advance" stuff seems particularly wasteful and generally awful. Even my credit card company won't charge me $50 to front me $300 in cash. Hell on a clean card with one of those "0% APR for 6 months" I could probably cut myself a 3k bridge loan and pay almost nothing. (assuming I just pay minimums and then if the 0% APR expires I clear the balance).
- ryanwaggoner 17y ago
  Those 0% intro rates rarely apply to cash advances.
  - sp332 17y ago
    Yeah, but sometimes they do.
    - ijuhytgjh 17y ago
      And the middle class people know how to get around that by buying items and returning them for cash or other tricks to let you borrow $10,000 on various interest-free cards. Then put it into a savings account and use the interest to pay for the holiday.
- chollida1 17y ago
  > Even my credit card company won't charge me $50 to front me $300 in cash. Yes, but the credit car company has allready screened you and determined that you aren't a large risk to default. The people who use payday loan services are statistically much more likely to default on their payments or to try and cash bad cheques.
- JimmyL 17y ago
  If you're the kind of person that needs to go to a payday loan place, you're not going to be eligible for a 0% APR card - if you're lucky, you'd be offered a fully-secured credit card (meaning you have to give them money first before you can use it, and you can only use up to the amount you've given them) with a maximum balance of five hundred bucks, which you wouldn't have lying around anyways. You get those card offers now because you're (presumably) employed to some degree and have a decent credit rating, so the card company thinks you're a pretty good bet to not default. If you need a payday loan, it's unlikely you have anything near a good credit rating, if you have one at all. As for optimizing things, it depends on who you want to optimize for. If you want to optimize it for the credit card and payday loan companies, that's pretty much been done already - they have a very permissive set of regulations they operate under, and aren't short on profit margin. If you want to do it for the customers, that means you need to set up a financing service aimed at high-risk individuals, but you're going to have to mark-up some to make up for the default rate. A good deal of people who frequent payday loan companies can't even get it together (for whatever reasons, both in and out of their immediate control) to get a normal checking account - you think that they'll be offered no-interest unsecured credit cards?
oldgregg 17y ago
I've always really hated vehicle emissions testing. It's evil. The government colludes with the auto industry to force perfectly fine but slightly older vehicles off the road. And 90% of the time it's not even related to emissions--- some damn sensor is just faulty. For the middle class it's a costly expense. But if you own a car that costs $1500 but to pass emissions you have to spend $1000 to get it fixed, you're hosed. So you don't have any option but to drive an unregistered vehicle, and so the cycle continues...
- iron_ball 17y ago
  Well, that varies by state, I think. Wisconsin had specific exemptions for cars over a certain age, or cars that would cost too much to bring in line. You just had to get an estimate from your auto shop demonstrating that compliance would exceed a certain amount, and you'd be waived.
- onedognight 17y ago
  Putting $1000 into a $1500 car still makes it much cheaper than any new car you can buy in the US. As air pollution expert Glen Class used to say (while acknowledging its disproportionate effect one the poor), the most effective thing you can do improve auto emissions is to remove the oldest 10% of cars from the road as they contribute emissions equal to the newer 90%. While I don't know who colludes with whom, new cars really are that much better emissions wise than older ones.
yummyfajitas 17y ago
I call BS on some of the "facts" in this story. ...an economics professor at the University of Massachusetts at Boston [says]. "You have to work a lot of hours and still not make a lot of money...." Just not true. The typical poor family works less than half as much as the typical non-poor family (1000 hours/year vs 2100 hours/year). http://www3.brookings.edu/es/wrb/publications/pb/pb28.pdf http://www3.brookings.edu/es/wrb/publications/pb/pb28.pdf You ask him why he didn't just go to a bank...He says he lost his driver's license and now his regular bank "won't recognize me as a human. A check cashing place requires the same, usually more stringent ID than a bank. ...Jacob Carter finds himself standing in a checkout line at the Giant on Alabama Avenue SE...The clerk suggests that he use his "bonus card" for savings...Carter tells the clerk he has no such card. Bonus cards are so hard to get. You need to walk over to the courtesy counter, ask for one, then fill out phony information on the card to get it.
- randallsquared 17y ago
  You almost never have to walk to the courtesy counter; you can fill it out while standing at the checkout. But people typically don't know this, in my experience, and the cashier is unlikely to enlighten them, since then he'll have to wait for them to fill it out while there are people in line, etc. Things like this are important to know, and if you don't already just know, you have to ask about them constantly. If you don't know that, though, and you're poor, it feels as though you're asking for handouts or special help whenever you aggressively inquire about this sort of thing.
  - jrockway 17y ago
    At most stores I've been in, the cashier will enter the store "bonus card" number if you ask them to. In fact, they often enter the number before I can even get my card out. I'm surprised they don't do this in DC. It must be a Chicago thing.
    - randallsquared 17y ago
      Oh, they do that around here at some stores, too (not the more upscale ones, interestingly). Around the Columbus, GA area, though, where I used to live (in east AL), I don't remember that happening. Of course, I shopped mostly at the super Walmart, then, and they don't have a card.
tomsaffell 17y ago
I had high hopes for this article (based on the title), but was utterly disappointed by it. It seems to serve no purpose other than to provide dinner-party fodder for the middle classes hoping to project a sense of I'm in touch with the poor empathy. It deals with a generality that is stunningly obvious: it's expensive to be poor. In the space of five pages, it struggles to get beyond that generality. There are a handful of anecdotes and equal number of catch-phrase expert opinions that barely scratch the surface. Where is the data: how many people are actually affected by these factors (not merely 'poor'), to what extent, and at what ultimate cost (in dollars). Where is the root-cause analysis: is being poor linked to class / expectations of life / upbringing? Where is the counter story: examples of people who got them selves our of the trap - how did they do that? What made them different. Where is call to action: if this is truly an oh-so-terrible-problem then where is the call to action? What are readers to do? I apologize now if this comes across as a rant. In my opinion this is a real and growing problem for the developed world, and as such a article that merely skims the surface like this one comes across as disingenuous, so I suspect the motives. I'm reminded of the 1984 hit "Feed the world". The final lines of the verse (sung by Bono) always sends a chill through me: There's a world outside your window, and it's a world of dread and fear Where the only water flowing is the bitter sting of tears And the Christmas bells that ring there are the clanging chimes of doom Well tonight thank God it's them instead of you (Bono) This feels like classic 'tonight thank God it's them instead of you' journalism. </rant>
- davidmathers 17y ago
  I apologize now if this comes across as a rant. Actually, I think yours is the best comment of the entire page.
thras 17y ago
The poor tend to be the stupid (plenty of studies to back this up), and hence the poverty. Since they are more stupid, they fall for stupid payday loan schemes, credit card idiocy, etc., at rates greater than the rich do. Please do not reply if you read "tend to" as "always." I'm not going to bother responding.
- run4yourlives 17y ago
  While your comment is a little inflammatory, it's a shame to see it down-modded. That threshold has certainly changed as Hacker News has, and we're losing some good discussion because of it. The thing is, you are in a way correct. Intelligence, ignorance and effort combine into defining a person's success level. We have done a relatively good job at neutralizing all other factors by making them illegal (not that they still don't exist mind you.) Ignorance lessens with experience, as does effort. Intelligence however is the only uncontrollable trait that we still actively discriminate against, and joyfully so. I'm not suggesting this shouldn't be, as I'd hate to imagine that world, but it does mean that a disproportionate amount of the "losers" in life tend to be of below average intelligence.
- deleted 17y ago
  [deleted]
- huherto 17y ago
  But they don't fall for those schemes because they are stupid. They fall because that is the only way they know. Quoting Alan Key."Perspective is worth 80 IQ points." So don't feel that you are way smarter than poor people. We just had a better context to make smarter decisions. Edit: grammar.
- njharman 17y ago
  yep, so? Your implying stupid people aren't equal, they deserve to be poor? That smart people are superior? Perhaps stupid people should have to stay in special stupid areas, go to separate schools, drink at special stupid people only water fountains. I believe stupid people need more not less of a break, more not less assistance, more not less of everything from society and government precisely cause they are stupid.
Dilpil 17y ago
"The effective annual percentage rate is 806 percent" A ridiculous metric for a week long loan.
- gojomo 17y ago
  Unless you take one out (almost) every week.
  - ambition 17y ago
    No, because the 806 number includes compounding.
    - gojomo 17y ago
      It certainly does not include compounding; the 806 figure is derived from the stated weekly cost of $100 -- $15.5 -- times 52 weeks, a simple sum. A calculation of the annual rate based on 15.5% compounded weekly would be much, much worse. The effective annual rate is somewhat worse than 806%, because if you rolled over your $100 principal loan each week, paying just the $15.5 fees, then paid back the principal at the end of the year, you've paid $806 in interest, yes. And if that full interest payment had been made only at the end of the year, your annual rate would have been 806%. But you paid a lot of that early, so your effective rate was higher.
      - ambition 17y ago
        Yikes, you're right. That's obscene. I hope non-profits like Kiva are able to help in this area.
      - mattmcknight 17y ago
        Isn't the problem really that there are fixed costs associated with loans that are exaggerated on smaller ones when consider on a percentage basis? Looking at in terms of interest seems wrong, there should just be a fee.
    - bena 17y ago
gtt 17y ago
For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath. —Matthew 25:29, King James Version.
projectileboy 17y ago
Data point: I once worked on software for very large retail chains which allows those retailers to group stores by "zones" for pricing purposes. One of the commonly defined pricing zones is "inner-city", which consistently get their prices bumped by, say, 5 or 10% for many items. The reasoning behind this was exactly as laid out in the article: inner-city residents lack transportation options, and so retailers can command higher prices.
- jamiequint 17y ago
  I forgot what article I read it in, but there was something a while back about this. It justified the higher costs by describing the extra costs of the stores in these areas. Apparently, many of these stores have higher theft rates and need for security, which drives up prices.
  - bokonist 17y ago
    Here is a great blog post describing the crime problems of an inner city grocery market: http://www.detroitblog.org/?p=604 http://www.detroitblog.org/?p=604 From the post: A day in the life of Tom Boy Super Market consists partly of stopping people from robbing the place blind. "There’s so many days when I don’t do nothing," Jitu says. "My main job is to run the office and I don’t have to be here, but I have to come anyway. You don't want to have, like, one person here, and then half the store is gone. We have to have so many people. They don’t have to do nothing, but they have to be here."
    - wallflower 17y ago
      "Most grocery stores have a razor thin profit margin on the merchandise they sell therefore it is imperative for shrinkage to be kept to a minimum. For example with a profit margin of 5% a store must sell 500 dollars in merchandise just to cover the cost of a 25.00 dollar item. In one year a store with merely twenty five dollars of losses a day must increase sales by 175,000 dollars to break even. Keep in mind that for many supermarkets 5% profit margin is high" http://www.evancarmichael.com/Retail/3869/Grocery-industry-at-high-risk-of-theft.html http://www.evancarmichael.com/Retail/3869/Grocery-industry-a...
patrickg-zill 17y ago
I feel bad for the people mentioned ... however, just by virtue of being in the US/Canada/Western Europe etc. you have already "won life's lottery". Is it also expensive to be a flea-bitten, hungry, malnourished baby in Africa and with only a 50% chance (or whatever the number is) of making it to 25 years old? No matter which country has higher mobility, the reality is, you can in fact improve your lot in life if you are poor and in the USA.
- huherto 17y ago
  ".. however, just by virtue of being in the US/Canada/Western Europe etc. you have already "won life's lottery"." That is true. But you can also "win life's lottery" if you are born in a middle/upper class in a developing country.
hpvic03 17y ago
Print Version: http://www.washingtonpost.com/wp-dyn/content/article/2009/05/17/AR2009051702053_pf.html http://www.washingtonpost.com/wp-dyn/content/article/2009/05...
larrykubin 17y ago
Related video: Comedian Louis CK on the cost of being broke: http://www.youtube.com/watch?v=-Q0dIktwJmw http://www.youtube.com/watch?v=-Q0dIktwJmw
christofd 17y ago
This aligns well with the concept of economic mobility: Team of Brookings Institution researchers publish study - http://www.economicmobility.org/assets/pdfs/EMP_American_Dream.pdf http://www.economicmobility.org/assets/pdfs/EMP_American_Dre... From the PDF: the U.S.A. has fallen behind other western nations, such as Canada, Germany, Norway, Sweden in maintaining the concept of economic or upward mobility... And this is the main reason, as I recall, why the U.S. was always portrayed as more desirable than European nations (and it was true in the 50s; part of my German family immigrated to the U.S. in the 50s). If you take that concept away - why would you want to live in the U.S. anymore: - none of U.S. cities rank in the top 100 most livable places (Mercer Cities Ranking) - high schools and many public schools rank low in comparison to other western nations - education is much more expensive - there is no organized trade school education, like in Germany, Britain etc. - salaries for the lower third are less - health care (don't get me started) - hardly any social safety net - crime, largest per capita prison population in the world - infrastructure - roads, bridges, buildings etc. (don't get me started; it's almost third world country level) - average lasting quality of housing (drywall, cheap wood framing, bad carpentry on windows and doors etc.) - manufacturing quality and capability: look at American made cars or power tools (I always prefer foreign made) - half of the government budget goes towards the military - lack of public transportation (Standard Oil bought up the urban train networks in the 1940's and had them decommissioned: street cars, urban transit etc.) - no functioning Euro-style city cores, urban sprawl, stuffed highways with commuters - and the most important fact of all: the byzantine law system of the U.S. and the huge costs of lawyers and law suits (this affects many areas); lawyers can cost over $ 500/ hour and if you can't afford one you are out of luck; further, judges are not high-end lawyers trained as judges (like in Germany etc.) but can be any random divorce lawyer that got appointed regionally, as I understand Final verdict: the U.S. has been badly managed in the last 30 years, and the poor carry the burden. The final evidence is given in the study of Cliometrics and measuring average body height of nations (an indicator for health/ prosperity): it used to be (up until the 1950s) that U.S. Citizens were taller than Europeans; this trend has been reversed in the last 30 years - now the Euros are taller (especially the Dutch)
- mattmcknight 17y ago
  "half of the government budget goes towards the military" This is some serious misinformation that I see repeated over and over again, propaganda style. It's really under 21%. http://upload.wikimedia.org/wikipedia/en/d/d4/Fy2009spendingbycategory2.png http://upload.wikimedia.org/wikipedia/en/d/d4/Fy2009spending...
c00p3r 17y ago
Yeah, it is expensive for a poor to try to live as middle-class. And it is stupid. Stupidity is always more expensive. The advantage of being poor is that you're detached from all that useless goods, property, stuff and even people. Then you can move. You can live where life is better - some warmer and cheaper place - maybe some buddhist countries, but not California, of course. Take a look at the Indian brahmins, Tibetan or buddhist monks - they are very poor, as poor as possible, but they are happy and healthy because they does not trying to catch some advertised illusion or broadcasted style of life. The rule is very simple - spend less than you got. It means to avoid what you can't afford. If you have only one bag with some absolutely necessary things you can live in almost every place with warm climate and peaceful people.
jodrellblank 17y ago
Read the article, didn't like it. How can I comment that it's stupid to lease a sofa when you have to scrounge food for your family, without getting lynched by the "you don't know what it's like you evil smug lucky middle class brat" crowd? It's a suboptimal choice. Maybe a stupid choice (BUT POOR PEOPLE AREN'T STUPID). You could go on the bus to the cheaper shop and buy two lots of food while your friend does two lots of washing at the laundromat (BUT IT'S EASY FOR YOU TO SAY YOU DON'T KNOW WHAT IT'S LIKE) You could pool your money and get a washing machine between several people and free up a lot of time (BUT THAT'S NOT AN OPTION, DON'T YOU SEE?) You could not spend 25% of your available money on fried chicken instead of food that lasts longer (and is healthier). (What the hell? Fried chicken? Is that paragraph solely there as bait to trap commenters like me?) Isn't it silly for several people to have $800 cars they can't afford to repair, when together they could have a $2000 car and some spare cash? Well isn't it? OK, OK, you can't do any of that. You can't do anything. You're not stupid or lazy you just didn't get a break. Yes I am lucky, yes I don't know what it's like. Yes I see it's probably extremely unpleasant. OK then, there's no way out. At all. So does it help that I now feel guilty about it? Not really. Do you really believe it's possible to have a society almost like ours, but with no poor people? I don't. Not really. No good reasons why not, but it feels impossible. I mean, we can't all be millionaires, can we? Is that different? So there's Bob. Bob is poor. It can't be OK. because that's something "you can't say" (see PG essay). So it's not OK. But it's not Bob's fault. If there's anything that can happen short of a lottery win that would help Bob, then that would be good. But that must include being able to publicly acknowledge bad choices without condemning them or the reasons for making them. So is information the answer? You can't see what available options you have. Well hello the internet - information delivery a specialty. Hello HN - information crunching a specialty. Whoever brought up AKay's quote that "perspective is worth 80 IQ points" in these comments, that rings true. But I also want it to be true that anybody has the chance of happiness. This includes billions of people born in poor countries. It includes the billions and billions of people who were born and lived more than 50 years ago. In order for this to be the case, then the answer has to be in perspective, not money or sofas or cheap rent or abundant food or "lack of opression by the system" or handouts or community centres or lucky breaks. Would it be as bad to be poor if I didn't know anything of any alternatives? There is so much poverty and so little luxury when you consider global population. Global population over all history - is wealth and comfortable living really a possible way forward, or just an aberration? A temporary break from a nasty, brutish and short life, for the lucky few? :(

183 points by tialys 17y ago

swolchok 17y ago

read it, enjoyed it, but had to flag because it's OT. Sorry.

mattyb 17y ago
And what exactly is the topic?
- gamache 17y ago
  Hacker News. I flagged it as well, incidentally.
tialys 17y ago
I'll be honest, I thought it was on topic because I enjoy these types of stories on Hacker News, as well as the discussion. I rarely submit stories unless I think they will generate good discussion. If you want to define a 'topic' for this, I'd say it's understanding another market, and getting insight in to a lifestyle you may not fully recognize or understand. That said, I still understand if you flag it.
madair 17y ago
Another article goes to #1, and a couple people flag it. Something is wrong with this system.
- run4yourlives 17y ago
  I think it's more a difference of opinion, which isn't exactly something that needs correction.
dantheman 17y ago
What's with the down modding, if you don't like it respond.

lutorm 17y ago

What is it they say, "money rolls uphill"? It's very true that when you don't have funds to make financial investments that pay off over time you end up even deeper. I guess this is why I think progressive taxation is "fair", people with higher incomes can leverage it so it makes more difference than the apparent income difference would indicate.

noonespecial 17y ago
This is exactly the arguement I make when people tell me that progressive taxation is some sort of evil and "fair" is when everyone just pays a fixed percent. I usually say "money has its own economies of scale" and a progressive tax is just a way to address these. "Money rolls uphill" is a nice way of saying that. I hadn't heard that before. I think maybe I'll borrow that. Thanks.
- pg 17y ago
  Rich people pay more taxes if you have a flat tax rate too. How do you know how much progressiveness you need to counteract the vague phenomenon you describe? How can you be sure a mere proportionate increase wouldn't be enough to do it? Or even less?
  - noonespecial 17y ago
    The unfortunate answer is trial and error. If we agree that money does have an economy of scale but that its very difficult to measure, ignoring it because we can't measure it isn't much of a solution. The idea is that money has a decreasing marginal utility as well as a "money makes money" economy of scale. A subtle and well tuned progressive tax would keep the tax (although small) from overwhelming the poor who are right on the edge and also ask more from those who can afford it the most while still not overly dampening their incentives to achieve. Like Terry Pratchet so succinctly said "its the difference between using a feather and using a chicken".
    - pg 17y ago
      Tax rates are determined by something like trial and error now, but the test is not whether they produce equality, but simply how much you can extract from each group without causing social disasters. You can take away about half the money rich people make before you start to break your economy, but if you took half the money poor people made, they wouldn't have enough left to live. Hence you get progressive taxation.

forinti 17y ago

Ok, you save a dollar on a gallon of milk, but how much does it cost to own a car?

lutorm 17y ago
That's a very good question, but if you take into account that you can work 2h more per day because you don't have to wait for the bus, it might pay off.
- sethg 17y ago
  you can work 2h more per day because you don't have to wait for the bus It pays off if you already have the money up front to buy a car with, or if you have enough income before you buy the car that you qualify for a car loan. You can't get a loan by telling the bank "well, I'm living totally hand to mouth now but if you front me a few thousand bucks for a car then I'll surely find enough extra work to pay back your loan, and pay for gas, and pay the insurance, and pay the insurance deductible if my car gets crashed..." Cash flow, cash flow, cash flow.
  - lutorm 17y ago
    Well, yeah. That's their problem. (I'm not sure whether your comment was in disagreement or agreement...)
akeefer 17y ago
The point is that the poor pay more for exactly the same (or even inferior) things as people who are better off, not that they somehow spend more in the aggregate. People who already are going to have less than others because of their lower income actually have that small amount of money go less far than exactly that same amount of money would go for someone who was better off. You can view that as just the reality of how the economics work out, or you can view that as fundamentally unfair that people essentially get kicked while they're already down.
- DanielBMarkham 17y ago

earl 17y ago

Everyone should read this link by John Scalzi, as well, as a companion to this article. Being Poor: http://whatever.scalzi.com/2005/09/03/being-poor/ http://whatever.scalzi.com/2005/09/03/being-poor/

noonespecial 17y ago
That's fantastic. They're all brilliant but, "Being poor is having to live with choices you didn’t know you made when you were 14 years old.", just gives me chills.
- asciilifeform 17y ago
  Search for Ilkka Kokkarinen's comment.
  - earl 17y ago
    Gah. People who think that the poor are lazy and shiftless are scum. Some of the poor maybe be lazy and shiftless, but having middle class / wealthy parents doesn't just give you money and education and health -- it also gives you the very habits and abilities (saving, studying, deferring rewards, working hard, etc) that keep people from being poor or staying poor. Even things like applying to college are different if you have parents who can help guide you through the process -- I read a heartrending account of a (poor) child who got a scholarship to go to a private high school but his parents couldn't afford the transportation and he didn't have the institutional knowledge to know that if they'd told the school that, the school would have helped. So he declined a great education for the lack of $400. Growing up middle or upper class also gives you all the social markers people look for -- whether it's straight, clean teeth, the ability (and skill) to dress appropriately for a variety of social situations, the proper manners to eat in a range of restaurants from a greasy spoon to a 3 star Michelin, a good suit to go to interviews, acne medication so you don't have acne scars, the ability to make small conversation about art, etc. If you read the literature, most Americans drastically overestimate the social mobility of America and are shocked when they hear how very heritable wealth is.

timmaah 17y ago

>>But, Blakeney says: "I don't have time to mail it. You come here and get it done. Then you don't get charged with the late fee." << Huh? So you pay 10% for someone to do it for you..

JimmyL 17y ago
To mail it himself would take some long-term planning. He'd have to book off a time when he knows he'll have the bill and the address with him, not put this off until tomorrow, locate and go to a post office/convenience store to buy stamps and an envelope, get the money in his account, and then keep it there for five or six business days until he's sure that it's been cashed. If you're living paycheque-to-paycheque, this is more difficult than you would think - especially the part about having the fifty bucks sitting in his account for five days without touching it.

adatta02 17y ago

It seems like this should be a huge opportunity for someone to come in and optimize things. The "pay day advance" stuff seems particularly wasteful and generally awful. Even my credit card company won't charge me $50 to front me $300 in cash. Hell on a clean card with one of those "0% APR for 6 months" I could probably cut myself a 3k bridge loan and pay almost nothing. (assuming I just pay minimums and then if the 0% APR expires I clear the balance).

ryanwaggoner 17y ago
Those 0% intro rates rarely apply to cash advances.
- sp332 17y ago
  Yeah, but sometimes they do.
  - ijuhytgjh 17y ago
    And the middle class people know how to get around that by buying items and returning them for cash or other tricks to let you borrow $10,000 on various interest-free cards. Then put it into a savings account and use the interest to pay for the holiday.
chollida1 17y ago
> Even my credit card company won't charge me $50 to front me $300 in cash. Yes, but the credit car company has allready screened you and determined that you aren't a large risk to default. The people who use payday loan services are statistically much more likely to default on their payments or to try and cash bad cheques.
JimmyL 17y ago
If you're the kind of person that needs to go to a payday loan place, you're not going to be eligible for a 0% APR card - if you're lucky, you'd be offered a fully-secured credit card (meaning you have to give them money first before you can use it, and you can only use up to the amount you've given them) with a maximum balance of five hundred bucks, which you wouldn't have lying around anyways. You get those card offers now because you're (presumably) employed to some degree and have a decent credit rating, so the card company thinks you're a pretty good bet to not default. If you need a payday loan, it's unlikely you have anything near a good credit rating, if you have one at all. As for optimizing things, it depends on who you want to optimize for. If you want to optimize it for the credit card and payday loan companies, that's pretty much been done already - they have a very permissive set of regulations they operate under, and aren't short on profit margin. If you want to do it for the customers, that means you need to set up a financing service aimed at high-risk individuals, but you're going to have to mark-up some to make up for the default rate. A good deal of people who frequent payday loan companies can't even get it together (for whatever reasons, both in and out of their immediate control) to get a normal checking account - you think that they'll be offered no-interest unsecured credit cards?

oldgregg 17y ago

I've always really hated vehicle emissions testing. It's evil. The government colludes with the auto industry to force perfectly fine but slightly older vehicles off the road. And 90% of the time it's not even related to emissions--- some damn sensor is just faulty. For the middle class it's a costly expense. But if you own a car that costs $1500 but to pass emissions you have to spend $1000 to get it fixed, you're hosed. So you don't have any option but to drive an unregistered vehicle, and so the cycle continues...

iron_ball 17y ago
Well, that varies by state, I think. Wisconsin had specific exemptions for cars over a certain age, or cars that would cost too much to bring in line. You just had to get an estimate from your auto shop demonstrating that compliance would exceed a certain amount, and you'd be waived.
onedognight 17y ago
Putting $1000 into a $1500 car still makes it much cheaper than any new car you can buy in the US. As air pollution expert Glen Class used to say (while acknowledging its disproportionate effect one the poor), the most effective thing you can do improve auto emissions is to remove the oldest 10% of cars from the road as they contribute emissions equal to the newer 90%. While I don't know who colludes with whom, new cars really are that much better emissions wise than older ones.

yummyfajitas 17y ago

I call BS on some of the "facts" in this story. ...an economics professor at the University of Massachusetts at Boston [says]. "You have to work a lot of hours and still not make a lot of money...." Just not true. The typical poor family works less than half as much as the typical non-poor family (1000 hours/year vs 2100 hours/year). http://www3.brookings.edu/es/wrb/publications/pb/pb28.pdf http://www3.brookings.edu/es/wrb/publications/pb/pb28.pdf You ask him why he didn't just go to a bank...He says he lost his driver's license and now his regular bank "won't recognize me as a human. A check cashing place requires the same, usually more stringent ID than a bank. ...Jacob Carter finds himself standing in a checkout line at the Giant on Alabama Avenue SE...The clerk suggests that he use his "bonus card" for savings...Carter tells the clerk he has no such card. Bonus cards are so hard to get. You need to walk over to the courtesy counter, ask for one, then fill out phony information on the card to get it.

randallsquared 17y ago
You almost never have to walk to the courtesy counter; you can fill it out while standing at the checkout. But people typically don't know this, in my experience, and the cashier is unlikely to enlighten them, since then he'll have to wait for them to fill it out while there are people in line, etc. Things like this are important to know, and if you don't already just know, you have to ask about them constantly. If you don't know that, though, and you're poor, it feels as though you're asking for handouts or special help whenever you aggressively inquire about this sort of thing.
- jrockway 17y ago
  At most stores I've been in, the cashier will enter the store "bonus card" number if you ask them to. In fact, they often enter the number before I can even get my card out. I'm surprised they don't do this in DC. It must be a Chicago thing.
  - randallsquared 17y ago
    Oh, they do that around here at some stores, too (not the more upscale ones, interestingly). Around the Columbus, GA area, though, where I used to live (in east AL), I don't remember that happening. Of course, I shopped mostly at the super Walmart, then, and they don't have a card.

tomsaffell 17y ago

I had high hopes for this article (based on the title), but was utterly disappointed by it. It seems to serve no purpose other than to provide dinner-party fodder for the middle classes hoping to project a sense of I'm in touch with the poor empathy. It deals with a generality that is stunningly obvious: it's expensive to be poor. In the space of five pages, it struggles to get beyond that generality. There are a handful of anecdotes and equal number of catch-phrase expert opinions that barely scratch the surface. Where is the data: how many people are actually affected by these factors (not merely 'poor'), to what extent, and at what ultimate cost (in dollars). Where is the root-cause analysis: is being poor linked to class / expectations of life / upbringing? Where is the counter story: examples of people who got them selves our of the trap - how did they do that? What made them different. Where is call to action: if this is truly an oh-so-terrible-problem then where is the call to action? What are readers to do? I apologize now if this comes across as a rant. In my opinion this is a real and growing problem for the developed world, and as such a article that merely skims the surface like this one comes across as disingenuous, so I suspect the motives. I'm reminded of the 1984 hit "Feed the world". The final lines of the verse (sung by Bono) always sends a chill through me: There's a world outside your window, and it's a world of dread and fear Where the only water flowing is the bitter sting of tears And the Christmas bells that ring there are the clanging chimes of doom Well tonight thank God it's them instead of you (Bono) This feels like classic 'tonight thank God it's them instead of you' journalism. </rant>

davidmathers 17y ago
I apologize now if this comes across as a rant. Actually, I think yours is the best comment of the entire page.

thras 17y ago

The poor tend to be the stupid (plenty of studies to back this up), and hence the poverty. Since they are more stupid, they fall for stupid payday loan schemes, credit card idiocy, etc., at rates greater than the rich do. Please do not reply if you read "tend to" as "always." I'm not going to bother responding.

run4yourlives 17y ago
While your comment is a little inflammatory, it's a shame to see it down-modded. That threshold has certainly changed as Hacker News has, and we're losing some good discussion because of it. The thing is, you are in a way correct. Intelligence, ignorance and effort combine into defining a person's success level. We have done a relatively good job at neutralizing all other factors by making them illegal (not that they still don't exist mind you.) Ignorance lessens with experience, as does effort. Intelligence however is the only uncontrollable trait that we still actively discriminate against, and joyfully so. I'm not suggesting this shouldn't be, as I'd hate to imagine that world, but it does mean that a disproportionate amount of the "losers" in life tend to be of below average intelligence.
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huherto 17y ago
But they don't fall for those schemes because they are stupid. They fall because that is the only way they know. Quoting Alan Key."Perspective is worth 80 IQ points." So don't feel that you are way smarter than poor people. We just had a better context to make smarter decisions. Edit: grammar.
njharman 17y ago
yep, so? Your implying stupid people aren't equal, they deserve to be poor? That smart people are superior? Perhaps stupid people should have to stay in special stupid areas, go to separate schools, drink at special stupid people only water fountains. I believe stupid people need more not less of a break, more not less assistance, more not less of everything from society and government precisely cause they are stupid.

Dilpil 17y ago

"The effective annual percentage rate is 806 percent" A ridiculous metric for a week long loan.

gojomo 17y ago
Unless you take one out (almost) every week.
- ambition 17y ago
  No, because the 806 number includes compounding.
  - gojomo 17y ago
    It certainly does not include compounding; the 806 figure is derived from the stated weekly cost of $100 -- $15.5 -- times 52 weeks, a simple sum. A calculation of the annual rate based on 15.5% compounded weekly would be much, much worse. The effective annual rate is somewhat worse than 806%, because if you rolled over your $100 principal loan each week, paying just the $15.5 fees, then paid back the principal at the end of the year, you've paid $806 in interest, yes. And if that full interest payment had been made only at the end of the year, your annual rate would have been 806%. But you paid a lot of that early, so your effective rate was higher.
    - ambition 17y ago
      Yikes, you're right. That's obscene. I hope non-profits like Kiva are able to help in this area.
    - mattmcknight 17y ago
      Isn't the problem really that there are fixed costs associated with loans that are exaggerated on smaller ones when consider on a percentage basis? Looking at in terms of interest seems wrong, there should just be a fee.
  - bena 17y ago

gtt 17y ago

For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath. —Matthew 25:29, King James Version.

projectileboy 17y ago

Data point: I once worked on software for very large retail chains which allows those retailers to group stores by "zones" for pricing purposes. One of the commonly defined pricing zones is "inner-city", which consistently get their prices bumped by, say, 5 or 10% for many items. The reasoning behind this was exactly as laid out in the article: inner-city residents lack transportation options, and so retailers can command higher prices.

jamiequint 17y ago
I forgot what article I read it in, but there was something a while back about this. It justified the higher costs by describing the extra costs of the stores in these areas. Apparently, many of these stores have higher theft rates and need for security, which drives up prices.
- bokonist 17y ago
  Here is a great blog post describing the crime problems of an inner city grocery market: http://www.detroitblog.org/?p=604 http://www.detroitblog.org/?p=604 From the post: A day in the life of Tom Boy Super Market consists partly of stopping people from robbing the place blind. "There’s so many days when I don’t do nothing," Jitu says. "My main job is to run the office and I don’t have to be here, but I have to come anyway. You don't want to have, like, one person here, and then half the store is gone. We have to have so many people. They don’t have to do nothing, but they have to be here."
  - wallflower 17y ago
    "Most grocery stores have a razor thin profit margin on the merchandise they sell therefore it is imperative for shrinkage to be kept to a minimum. For example with a profit margin of 5% a store must sell 500 dollars in merchandise just to cover the cost of a 25.00 dollar item. In one year a store with merely twenty five dollars of losses a day must increase sales by 175,000 dollars to break even. Keep in mind that for many supermarkets 5% profit margin is high" http://www.evancarmichael.com/Retail/3869/Grocery-industry-at-high-risk-of-theft.html http://www.evancarmichael.com/Retail/3869/Grocery-industry-a...

patrickg-zill 17y ago

I feel bad for the people mentioned ... however, just by virtue of being in the US/Canada/Western Europe etc. you have already "won life's lottery". Is it also expensive to be a flea-bitten, hungry, malnourished baby in Africa and with only a 50% chance (or whatever the number is) of making it to 25 years old? No matter which country has higher mobility, the reality is, you can in fact improve your lot in life if you are poor and in the USA.

huherto 17y ago
".. however, just by virtue of being in the US/Canada/Western Europe etc. you have already "won life's lottery"." That is true. But you can also "win life's lottery" if you are born in a middle/upper class in a developing country.

hpvic03 17y ago

Print Version: http://www.washingtonpost.com/wp-dyn/content/article/2009/05/17/AR2009051702053_pf.html http://www.washingtonpost.com/wp-dyn/content/article/2009/05...

larrykubin 17y ago

Related video: Comedian Louis CK on the cost of being broke: http://www.youtube.com/watch?v=-Q0dIktwJmw http://www.youtube.com/watch?v=-Q0dIktwJmw

christofd 17y ago

This aligns well with the concept of economic mobility: Team of Brookings Institution researchers publish study - http://www.economicmobility.org/assets/pdfs/EMP_American_Dream.pdf http://www.economicmobility.org/assets/pdfs/EMP_American_Dre... From the PDF: the U.S.A. has fallen behind other western nations, such as Canada, Germany, Norway, Sweden in maintaining the concept of economic or upward mobility... And this is the main reason, as I recall, why the U.S. was always portrayed as more desirable than European nations (and it was true in the 50s; part of my German family immigrated to the U.S. in the 50s). If you take that concept away - why would you want to live in the U.S. anymore: - none of U.S. cities rank in the top 100 most livable places (Mercer Cities Ranking) - high schools and many public schools rank low in comparison to other western nations - education is much more expensive - there is no organized trade school education, like in Germany, Britain etc. - salaries for the lower third are less - health care (don't get me started) - hardly any social safety net - crime, largest per capita prison population in the world - infrastructure - roads, bridges, buildings etc. (don't get me started; it's almost third world country level) - average lasting quality of housing (drywall, cheap wood framing, bad carpentry on windows and doors etc.) - manufacturing quality and capability: look at American made cars or power tools (I always prefer foreign made) - half of the government budget goes towards the military - lack of public transportation (Standard Oil bought up the urban train networks in the 1940's and had them decommissioned: street cars, urban transit etc.) - no functioning Euro-style city cores, urban sprawl, stuffed highways with commuters - and the most important fact of all: the byzantine law system of the U.S. and the huge costs of lawyers and law suits (this affects many areas); lawyers can cost over $ 500/ hour and if you can't afford one you are out of luck; further, judges are not high-end lawyers trained as judges (like in Germany etc.) but can be any random divorce lawyer that got appointed regionally, as I understand Final verdict: the U.S. has been badly managed in the last 30 years, and the poor carry the burden. The final evidence is given in the study of Cliometrics and measuring average body height of nations (an indicator for health/ prosperity): it used to be (up until the 1950s) that U.S. Citizens were taller than Europeans; this trend has been reversed in the last 30 years - now the Euros are taller (especially the Dutch)

mattmcknight 17y ago
"half of the government budget goes towards the military" This is some serious misinformation that I see repeated over and over again, propaganda style. It's really under 21%. http://upload.wikimedia.org/wikipedia/en/d/d4/Fy2009spendingbycategory2.png http://upload.wikimedia.org/wikipedia/en/d/d4/Fy2009spending...

c00p3r 17y ago

Yeah, it is expensive for a poor to try to live as middle-class. And it is stupid. Stupidity is always more expensive. The advantage of being poor is that you're detached from all that useless goods, property, stuff and even people. Then you can move. You can live where life is better - some warmer and cheaper place - maybe some buddhist countries, but not California, of course. Take a look at the Indian brahmins, Tibetan or buddhist monks - they are very poor, as poor as possible, but they are happy and healthy because they does not trying to catch some advertised illusion or broadcasted style of life. The rule is very simple - spend less than you got. It means to avoid what you can't afford. If you have only one bag with some absolutely necessary things you can live in almost every place with warm climate and peaceful people.

jodrellblank 17y ago

Read the article, didn't like it. How can I comment that it's stupid to lease a sofa when you have to scrounge food for your family, without getting lynched by the "you don't know what it's like you evil smug lucky middle class brat" crowd? It's a suboptimal choice. Maybe a stupid choice (BUT POOR PEOPLE AREN'T STUPID). You could go on the bus to the cheaper shop and buy two lots of food while your friend does two lots of washing at the laundromat (BUT IT'S EASY FOR YOU TO SAY YOU DON'T KNOW WHAT IT'S LIKE) You could pool your money and get a washing machine between several people and free up a lot of time (BUT THAT'S NOT AN OPTION, DON'T YOU SEE?) You could not spend 25% of your available money on fried chicken instead of food that lasts longer (and is healthier). (What the hell? Fried chicken? Is that paragraph solely there as bait to trap commenters like me?) Isn't it silly for several people to have $800 cars they can't afford to repair, when together they could have a $2000 car and some spare cash? Well isn't it? OK, OK, you can't do any of that. You can't do anything. You're not stupid or lazy you just didn't get a break. Yes I am lucky, yes I don't know what it's like. Yes I see it's probably extremely unpleasant. OK then, there's no way out. At all. So does it help that I now feel guilty about it? Not really. Do you really believe it's possible to have a society almost like ours, but with no poor people? I don't. Not really. No good reasons why not, but it feels impossible. I mean, we can't all be millionaires, can we? Is that different? So there's Bob. Bob is poor. It can't be OK. because that's something "you can't say" (see PG essay). So it's not OK. But it's not Bob's fault. If there's anything that can happen short of a lottery win that would help Bob, then that would be good. But that must include being able to publicly acknowledge bad choices without condemning them or the reasons for making them. So is information the answer? You can't see what available options you have. Well hello the internet - information delivery a specialty. Hello HN - information crunching a specialty. Whoever brought up AKay's quote that "perspective is worth 80 IQ points" in these comments, that rings true. But I also want it to be true that anybody has the chance of happiness. This includes billions of people born in poor countries. It includes the billions and billions of people who were born and lived more than 50 years ago. In order for this to be the case, then the answer has to be in perspective, not money or sofas or cheap rent or abundant food or "lack of opression by the system" or handouts or community centres or lucky breaks. Would it be as bad to be poor if I didn't know anything of any alternatives? There is so much poverty and so little luxury when you consider global population. Global population over all history - is wealth and comfortable living really a possible way forward, or just an aberration? A temporary break from a nasty, brutish and short life, for the lucky few? :(