Friday, May 22, 2009

High Cost Exploitation

"All these costs can lead the poor to a collective depression."

DeNeen L. Brown, "Poor? Pay Up. Having Little Money Often Means No Car, No Washing Machine, No Checking Account And No Break From Fees and High Prices," The Washington Post, May 18, 2009.

It's well worth beating the drum to raise awareness that the poor pay more for the basics. This absolute poverty premium can add up to several thousand dollars a year. One explanation the article offers for this state of affairs is that things cost more in poor neighborhoods because the costs of doing business are higher. Another expert says the poor may be "targeted" or lack "education." There's no mention that mainstream institutions have fled inner-city neighborhoods and have been replaced, in many cases, by predatory businesses that prey on the limited resources of the poor.

The article suggests few remedies. And it points out that the DC ban on payday loans may encourage high cost, underground alternatives. Are the high costs of being poor unchangeable?

What if free tax prep was expanded and the IRS guaranteed fast payment for EITC and other tax credits? That might save save hundred dollars.

What if government regulation limited what check cashers could charge?

What if emergency loans were made more available through credit unions?

What if local and state governments provided adequate incentives to build inner-city supermarkets? Some places have done this.

Unfortunately, the incentives for ripping off the poor seem to be higher than the incentives to level the playing field. I wish this article had spent a paragraph or two on what we can do in addition to its important documentation of high costs. We've known about these unfair, high costs for too long.

1 comment:

Anonymous said...

Lest you think no one cares:

http://www.reddit.com/r/Economics/comments/8mguu/unfortunately_the_incentives_for_ripping_off_the/