Does It Cost More To Be Poor?
MICHEL MARTIN, host:
I'm MICHEL MARTIN, and this is TELL ME MORE from NPR News.
Coming up, we'll talk about the politics of beauty. New figures show that more people of color underwent cosmetic procedures last year even with the economic downturn. Is that because minorities have more money and feel more confident? Or do they feel pressure to nip and tuck away at the features that make them unique? We'll talk about that with two prominent surgeons of color in just a few minutes.
But first, we're going to take a walk on the opposite side of the economic divide and take a look at the cost of being poor in the U.S. For the last few weeks we've been talking about issues like the Obama administration's efforts to make the consumer credit industry more consumer friendly by reigning in arbitrary rate hikes and the like. But what about the fact that many Americans are outside of the credit, banking and other industries that middle class Americans take for granted? According to the Census Bureau, more than 37 million people in this country are living in poverty and for many of these Americans credit cards are out of the question. Not to mention, checking and savings accounts, fresh and inexpensive food and affordable, comfortable and safe housing.
Joining me to talk about why it costs so much to be poor is Bradley Schiller, a visiting professor at the University of Nevada, Reno. He is the author of "The Economics of Poverty and Discrimination." Also with us is Danette Tucker. She is a regular contributor in our weekly Moms segment and she recently lost her job as an office manager at an IT firm and she's been looking for work and living off unemployment. She is here with me in our Washington, D.C. studio. Welcome to you both, thank you for joining us.
Ms. DANETTE TUCKER (Former Office Manager): Thank you, Michel.
Professor BRADLEY SCHILLER (University of Nevada, Reno): Thank you, Michel.
MARTIN: Professor Schiller, let me start with you. Has it always been the case that it costs more to be poor or is that a recent urban phenomenon? And I'm thinking about the fact that for example in my parent's time, their parents would send them down south, for example, in the summer because the cost of living was cheaper. And so I wanted to ask, is it a recent thing that it costs more if you are low income?
Prof. SCHILLER: No, I don't think so. The problem in poor communities is the volume of business is very low and so small retail establishments serve the poor and they typically have higher costs. Higher insurance costs, higher labor costs, no economies of scale. So I think that's been a case in urban areas throughout.
MARTIN: What are the things that cost more if you are poor?
Prof. SCHILLER: Well, what costs more, you already mentioned credit. Credit is a huge issue. A lot of poor people don't have regular bank accounts, much less ATM cards, and so when they do get checks, they have to go to check cashing service which typically charge very high rates. You know, you could go in with a check for $100 and have to pay a $10 check cashing fee and that's a very expensive process. Whereas, typically the middle-class has bank accounts, ATM cards, debit cards and easy access to that kind of retail credit.
MARTIN: Why don't the poor - Danette, haven't forgotten about you, I'm going to bring you in a minute. But why don't a lot of low income people have checking and savings accounts? I mean, are the minimum deposits so high? Or are these banking establishments not available?
Prof. SCHILLER: Well, there's fewer outlets, banking outlets in poor communities. Again, because of the volume of business, it's simply uneconomical. Secondly, a lot of low income people deal more in cash than they do in regular payroll checks and that's why they don't have credit cards. That's one - of the reasons they don't have credit cards.
MARTIN: Danette, let me bring you into the conversation. You lost your job in March and you also had the bad luck of having your car die on you right around the same time. So what have you noticed that's been different for you since both of those things happened?
Ms. TUCKER: Not much. We just make the adjustment. I mean of course what's different is I don't have my salary coming in but I still got to pay the rent and unemployment doesn't, you know, doesn't pay the rent. So I have to hustle, what we call hustle, you know, I guess you guys call it being frugal. But basically we get up everyday and we say, okay, what do I have to pay for, how much money do I have and how do I do it without going to jail?
MARTIN: You hustle. (unintelligible) car but no car - like for example, to buy groceries for example, big difference, car or no car?
Ms. TUCKER: I mean, no, I'm happy to get on the subway, you know, or the bus. When I get a ride, we have riders. Remember at our markets that Mr. Schiller was talking about that are in, you know, the 'hood, they also have riders. There are a lot of things made available to us that they don't talk about in the studies, when they study the poor or quote unquote "the working poor." They're looking at numbers, you know. But nobody comes and knock on the door. I'm telling you the truth, we making it, you know, we're used to making it with that. Yeah, I'd like to have my salary back. And yeah, I'm busting it to get a job but until then I still got to make it.
MARTIN: What about the prices though, I mean the fact - when you need to get a ride for groceries, how much does it cost?
Ms. TUCKER: Five dollars, like I have a little man down the corner. Hey I need a ride or the girl next door. I tutor her kids, she has a car. So I tutor her kid, you see what we do, we hustle. I tutor her kid. Kid makes an A. I get a ride to the grocery store, she has EDT and food stamps. She buy me a pack of chicken. That's what we do, that's what we've always done. But they don't put that in your studies. You know, they give you your numbers and then they go, you know, let's you know, well, this is the poor. We are working people who don't make a lot of money, you know, we don't make enough for our out go, but we still making it with a smile on our face. Most of us don't do credit because we don't want any credit. You know, credit cards will kill you. People go on, oh, they don't do credit because, you know, they can't get credit. Look at this economy right now. Look at what credit has done to many of people. One thing I have not thought about doing is jumping out of no window.
(Soundbite of laughter)
Ms. TUCKER: I'm fine.
MARTIN: If you're just joining us, you're listening to TELL ME MORE from NPR News. We are talking about the cost of being poor with Danette Tucker, who recently lost her job. We're also speaking with Bradley Schiller, he is a professor of economics at the University of Nevada, Reno. Okay, Danette, we take your point. You're fine. You don't want anybody to feel sorry for you. But you're talking about the outflow is greater than the inflow. Talk a little bit more about that.
Ms. TUCKER: But that's the case when we're working, too. You understand me? One thing he is right about, that things cost a lot in our neighborhoods because of the convenience. But one thing they did not mention in the Washington Post article, I didn't hear Mr. Schiller mention is, a lot of the people in my neighborhood are getting public benefits, TANF, temporary assistance for needy families, they're getting WIC checks. These businesses come in, they can charge that, because they know the government is paying it. Most of us that are paying cash, I don't get my milk from the convenience store. Convenient or not I'm going to go to Safeway because they got it on sale and I got a bonus card. Okay, so we are not really handicapped by a lot of what people are saying, you know.
MARTIN: Professor Schiller, this leads to a point that you were making to us when we were talking about this a little earlier. You talk about that people will get the figure, people who are living in poverty at the moment. But you say that that number is fluid. It actually fluctuates and it fluctuates because people move in and out of poverty. Would you talk a little bit more about how that works?
Prof. SCHILLER: Yeah, all the time. I mean, if you look at the government numbers on poverty what you see is that 35-37 million people have been poor every year for the last dozen years. But it's not the same people. And your other guest Danette Tucker there, is an example. I mean when she had a salary at the IT firm she wasn't counted as part of the poverty population. Then she lost her job, along with millions of other Americans this last year and now she is in poverty and she is adapting and getting by, as she says.
But we don't expect Danette to stay unemployed forever. She will find another job and she'll move out of the poverty ranks. And this happens every single year. Literally millions of people who are losing jobs, millions of people who are unemployed and finding jobs. Even in this depressed economy millions of people are moving from unemployment to employment. Unfortunately more people are moving out of jobs into the ranks of the unemployed.
MARTIN: Now we talked about that, we've been talking a lot about this credit card bill that's moving through the Congress and President Obama hopes to sign it by Memorial Day. One of the points the advocates for this bill make is that sort of the structure of that industry works against the consumer with, you know, arbitrary rate hikes. And one of the things they're trying to do is put some sort of brakes on so that the consumer, well in essence to, for example, require the credit card companies to give more notice before changing the rate and things of that sort. But what about - and as we've discussed it a lot of people who live in poverty are outside of that industry. Are there things that in your view from a policy perspective should be discussed to address structural issues that affect this particular part of the population? You talked about you say the high cost of rent in urban areas, which is why sort of goods and services cost more. We talked about including her food and gas and so forth. But is there really anything from a policy perspective that can be done about that?
Prof. SCHILLER: Well, first of all I think I need to point out that the Obama reforms on credit card are only going to hurt the poor. It sounds wonderful to say that the government is going to limit rate increases on credit cards. But those rate increases are not arbitrary. They're related to the credit history of the individual and money market conditions. It's already difficult for poor people to get credit card. It's going to be much more difficult if these reforms pass.
MARTIN: Okay. But to my question…
Prof. SCHILLER: So the Obama reforms actually hurt the poor in a significant way.
MARTIN: Okay, I take your point on that. But what about the question I was asking about some of the structural issues we've talked about, sort of the high cost of services or higher cost of goods and services, particularly in lower income neighborhoods. Is there any policy question there to be…
Prof, SCHILLER: Well there are policy questions. I mean we tried several things over many decades like enterprise zones and so forth, offering tax benefits to businesses that set up in low income areas. But you're still stuck with the fact that land is very valuable in the inner city. You can't build big Safeways in the inner city. So that inevitably you have small establishments as opposed to larger ones to take advantage of the economies of scale.
MARTIN: Danette, what would be the best thing that would, you know, we've talked about, you're kind of moving in and out of different income groups. What would be - of course a job would be the most important thing to kind of helping you sort of stabilize your position. But what else?
Ms. TUCKER: No offence but for specialists to stop analyzing us, that would be the best thing for me. One thing about what he said, the credit, I don't always understand where they get these things from. We have a big gigantic Safeway in the 'hood and a big gigantic Giant in the 'hood, okay. We are not limited to these convenience stores. I not only want a job, yes, okay, and the same thing that you want or middle class America wants. I want people to stop leaving us and, you know - what is he talking about? I don't go to the Safeway for certain things. I don't go to convenience store for certain things. I go to Mervyn's. I go to Discount Mart. In other words, what we have in our neighborhood is tailor fit to us, okay, and it works for us, okay. And that's what we need more of, more things that work for us.
MARTIN: How do you know there isn't something better?
Ms. TUCKER: There may be something better but again…
MARTIN: How do you know?
Ms. TUCKER: (Unintelligible) whole world and that's what, you know, what's good for us right here, okay. I'm sure there may be some things better. I hope I get a good job that pays me a lot better. But I don't particularly want to move, you know, I like where I am because of what I - you know, it's affordable and I have a washer and dryer inside my apartment. But I could still get these things, you know, that I guess he's trying to say the poor don't get. You know, I just say most of us don't have credit cards because we don't want them, you know, so if these things that, you know, we have the dreams, you know, and we pursue them…
MARTIN: All right.
Ms. TUCKER: The way we pursue them…
MARTIN: All right.
Ms. TUCKER: …you know, if that makes sense.
MARTIN: All right.
Prof. SCHILLER: Well if I can…
MARTIN: Very briefly professor, very briefly.
Prof. SCHILLER: Yeah, it makes a lot of sense and every survey done of expectations and aspirations of poor people versus non-poor people show that yes, exactly, poor people have exactly the same aspirations that the middle class does.
MARTIN: Okay, Bradley Schiller, a professor of economics at the University of Nevada, at Reno. He is the author of "The Economics of Poverty and Discrimination." He joined us from his home in Reno. Danette Tucker is a regular on weekly parenting segment, The Moms. She was here with me in our Washington, D.C. studios. Thank you both so much for speaking with us.
Prof. SCHILLER: Thank you Michel.
Ms. TUCKER: Thank you.
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