
It’s expensive to be poor - dlubarov
http://www.economist.com/news/united-states/21663262-why-low-income-americans-often-have-pay-more-its-expensive-be-poor
======
lordnacho
I read somewhere that there's also an issue with bulk purchasing. If you've
got no money, you end up having to buy eg single cans of drinks instead of
large bottles, small packets of washing powder, and so on for various ordinary
items. That means you'd end up paying a lot more for a similar amount of stuff
than someone who happened to have the money for the bulk.

The other end where it hurts is your ability to take risk. If someone low
balls you on a job offer, and you're flat broke, you don't have any runway to
find a better offer. You also can't take a short-term mortgage (tends to be
lower at the front of the curve) and will probably have to lock in a higher,
longer term. You can't hold a lot of investments because you'll end up having
to liquidate them at a cost. So you keep your money in cash or cash-like
instruments and inflation eats a bit, too.

"It's expensive to be poor" is actually a well known saying for good reasons.

~~~
jkimmel
>If you've got no money, you end up having to buy eg single cans of drinks
instead of large bottles...you'd end up paying a lot more for a similar amount
of stuff than someone who happened to have the money for the bulk.

As an aside, this effect may be further pronounced if lower-income consumers
don't have the storage space for bulk purchasing.

Even if the differences in price are within someone's budget, they may be
forced to purchase smaller, more expensive per unit items because they don't
have enough shelf/refrigerator/storage space. In San Francisco for example, I
think many people who wouldn't necessarily be considered lower-income
consumers are negatively effected by an inability to purchase in bulk.

~~~
amelius
But poor people could organize via the internet and buy in bulk as a group.

~~~
dalke
Quoting from the article:

> Low smartphone penetration in turn makes life more expensive in other ways.
> The unconnected do not benefit from the cheap communication, education, and
> even transport the app economy provides. A quarter of poor households do not
> use the internet at all, which makes seeking out low prices harder.

------
david-given
The best description of this I've read was by Terry Pratchett:

\---snip---

The reason that the rich were so rich, Vimes reasoned, was because they
managed to spend less money.

Take boots, for example. He earned thirty-eight dollars a month plus
allowances. A really good pair of leather boots cost fifty dollars. But an
affordable pair of boots, which were sort of OK for a season or two and then
leaked like hell when the cardboard gave out, cost about ten dollars. Those
were the kind of boots Vimes always bought, and wore until the soles were so
thin that he could tell where he was in Ankh-Morpork on a foggy night by the
feel of the cobbles.

But the thing was that good boots lasted for years and years. A man who could
afford fifty dollars had a pair of boots that'd still be keeping his feet dry
in ten years' time, while the poor man who could only afford cheap boots would
have spent a hundred dollars on boots in the same time and _would still have
wet feet_.

This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.

\---snip---

~~~
sigma2015
In my (anecdotal) experience the relation between price an quality is not just
not proportional - it seems to be completely spurious after a certain minimum-
price is reached.

You can get very high quality and long lasting stuff for reasonable prices.
People who are poor though tend to not investigate products or reflect on
decisions they make in that area. This leads to buying overpriced and
unnecessary gadgets - often of very low-quality.

The shoe-analogy doesn't really work in my opinion nowadays that manufacturing
is industrialized and automated.

~~~
glomph
Having a lack of money usually means you have a lack of time as well. Buying
(say) boots because your only other pair of boots has broken does not afford
you the same oppertiunity to be picky. Perhaps you will need boots before a
certain time, say to go to work. You probably don't have the disposable income
to buy boots before the point where you need them. This means you don't have
the same freedom to research this long lasting reasonably priced stuff even if
you do happen to have the budget to reach that minimum price you are talking
about.

~~~
sigma2015
Absolutely ... the same principle can be extrapolated to self-confidence,
education, patience, ...

\- self-confidence to not buy an expensive Apple smartphone like your peers
but a reasonable priced one from Huawai

\- education to efficiently think about a products features

\- patience to not buy as soon as possible but take time to observe prices and
wait for meaningful reviews on amazon

At the end of the day it all comes down to your personal biography, upbringing
etc.

~~~
pbhjpbhj
>self-confidence to not buy an expensive Apple smartphone like your peers but
a reasonable priced one from Huawai //

Huawei aren't a cheap brand, they are compared to Apple, for sure, but for me
it's do I buy a name brand product from Acer, LG, Huawei or do I get a no-name
item. My current TV is a Polaroid(!), it's a white-label product with the same
internals as Panasonics, Toshibas and LGs. It's this or nothing. Bought less
than a year ago I've already had to have it opened up for fault-finding. More
expensive products are definitely better, but not the next level up (the
cheaper Toshibas, etc.) but the level above that - which is more by model but
I'd probably include Samsung there. It really is just like the leather boots
analogy.

Another instance of this for me is trousers. I basically have 2 pairs of
trousers for daily wear, one is a pair of jeans. I get supermarket own-brand
(UK) jeans, they all wear out at the crotch, the stitching comes apart after
about 6-9months. £10 a pair (or less if I catch a sale). Now I could buy more
expensive ones that are better made, there's an apparent variation in
longevity even now Sainsburys > Tesco > ASDA. More expensive trousers - in the
past - have never split at the crotch seam. The problem is that the more
expensive ones that are still in my price range seem equally likely to fail
early.

High price doesn't indicate high quality but I've found very few products for
a relatively low price that weren't low quality; often atrocious designs that
could be so much better using the same materials too.

------
IshKebab
A lot of this is specific to the US. For example UK bank accounts are nearly
all free, no matter how much money is in them. 99% of cash machines don't
charge for withdrawal no matter which bank you are with.

~~~
eru
UK banks are the scum of the earth. They charge you for everything. Especially
bad are standing orders when you don't have money in your account.

German banks (as a counter-example) just won't let the transfer go through.
British banks charge you 25 quid.

Weren't British banks even recently ordered by their regulator to be less evil
with their fees?

~~~
venomsnake
Don't use standing orders. Or any kind of direct debit. That is the best,
easiest money saving advice. No one should be able to charge your account
without your approval. And a lot of problems just disappear.

~~~
DanBC
UK utility providers give cheaper rates to people paying by direct debit. If
you can't afford to pay by direct debit you pay more. If you had debts and are
on a card meter you pay even more.

~~~
venomsnake
That is a discrimination lawsuit waiting to happen. In Strasbourg.

~~~
switch007
I disagree, knowing the British mentality. The boat has sailed and direct
debits are considered normal now. The richer people getting the discount (the
majority) are happy getting a discount, and wouldn't understand the
discrimnation if they spent 3 years studying it. The poorer people do not have
the resources to start a law suit. Also, there's very little "banding
together" left in this country. We all sit in our homes in fear of our masters
rocking the boat and drowning us.

------
pfalke
The EU introduced regulation to make bank accounts available to everybody -
even those without a permanent address of residence [0]. The EU's members are
currently passing the corresponding national laws (they have until 2016 to do
so).

[0] [http://www.europarl.europa.eu/news/de/news-
room/content/2014...](http://www.europarl.europa.eu/news/de/news-
room/content/20140411IPR43466/html/Ein-Girokonto-f%C3%BCr-jeden-
EU-B%C3%BCrger)

~~~
mahouse
I have bank accounts with Visa debit cards and I pay 0 for them. It really
shocks me to see that in some less civilised countries people need to pay to
give their banks money to play with.

~~~
justincormack
Well once not paying interest did actually pay for bank accounts, when
interest rates were high. Now they are zero, banks switched to mis-selling
profifitable financial services to pay for it. What they seem incapable of is
actually making cheap bank accounts by significantly reducing costs. Generally
you expect them to have some way to cover their costs, unless the government
is going to provide bank accounts as a basic service.

------
abalashov
Though obviously not as sympathetic due to not being in a state of poverty nor
afflicted with basic problems of survival, this rings very true for those of
us who have bootstrapped companies with poor cash flow and a relatively high
personal expense base.

I've been in business for seven years, gradually shifting from consulting to
product, while paying normal middle-class living expenses in Atlanta the whole
time. While the numbers are a lot bigger than those discussed in the article,
it's the same fundamental problem: bad cash flow burnt my credit to the
ground, and has cost me untold sums in late fees, interest, high cost of
borrowing, tax penalties, bank fees -- the works.

No, can't plausibly cry poor house in good conscience. Nevertheless, the old
NET-30/60/90 day shuffle when one has monthly bills to pay can be quite
demoralising, and stops many small-scale entrepreneurial endeavours dead in
their tracks. It's not poverty, but it's still a question of livelihood and,
ultimately, survival and purpose.

The hard lesson I've learned is: just because one has (e.g.) $100k in gross
revenue does not mean one can live a lifestyle and/or run a company as one
could on a $100k salary. Effectively, it needs to be discounted to something
like $35k to account for lukewarm cash flow, which means making $100k is
really like making $35k.

------
staunch
A few years ago there was a movement to close bank accounts and move to credit
unions (or at least ethical banks). Citizens of the world should reject modern
banks as the evil institutions they are. I predict that they soon will.

~~~
negamax
What happens when credit union fails? Because they do. Also chances of
corruption and mismanagement are higher in them. If you talk about a united
credit union, that's essentially banking system. TBH, I don't understand the
moaning against banks. They are providing a necessary service, how are they
evil?

~~~
ionised
We had a financial crisis recently resulting from banks breaking laws and
rigging the markets.

This isn't the first time economies have gone to complete shit due to the
extreme greed of banks playing fast and loose.

They're destructive entities.

~~~
negamax
Look at the economies with no to shallow banking systems. High and predatory
interest rates, less money available for loans is least of their problems.

No banking, no economy. Bitcoin solves the problem about inflation, access to
money etc. But s booming economy also needs some sort of lending

~~~
ionised
Unfortunately a 'booming' economy built on banking and finacial services
doesn't seem to benefit everyone equally.

------
samdung
Almost all banks in India charge hefty penalties for not maintaining a
'minimum balance' in your accounts. As a hand-to-mouth startup we end up
paying a few thousand rupees every year which makes us even poorer ...

------
erikb
Relationships and education also takes a huge part in how one's life shapes.
If you put a business degree guy from Harvard on minimum wage he'll probably
do a lot better, knowing how to save taxes, how to talk to banks and find good
deals, sleeping at a friend's castle instead of the street.

------
gambiting
Considering the very first example from the article - does America not have
bank transfers? Or accounts which cannot be overdrawn? I've had bank accounts
in multiple different countries and it's usually the same - if you don't apply
for an overdraft, you won't get one. If you were given one, you can cancel it.
If you weren't given one, then there's practically nothing that could actually
overdrawn the account, the only time when that happened to me was when the
currency value changed in between me sending the money and the bank processing
the transaction, at which time it was too late for the bank to reverse it - so
I went like -$2 on my account which wasn't supposed to be overdrawn.

And $7 to send a money order? Really?

~~~
jonathankoren
All checking accounts can be overdrawn. You can pay for "overdraft
protection", but that's more like paying a fee so that you can get a flat
overdraft fee instead of paying multiple fees in a single day. Many people
have been burned by using a debit card in an effort to avoid over drafting,
and getting multiple overdrafts (and their $35 per incident fee) in a single
day. Oh, the protection also comes with a text message that tells you when you
have something like $3.00 left in your account.

My favorite fee is the "maintenance fee" aka "inactivity fee". It's legal for
a bank to take your money $50 a month if you don't spend it. There's no
justification for this. It's not like the bank isn't making money off my
deposit already, and it's not like the bank is polishing my coins.

~~~
gambiting
Again, insane, and I don't understand how this works in US. Here if I try to
pay with my debit card for anything,but don't have enough money in my account,
the transaction gets declined at the till(or I get an error while paying
online) - it doesn't result in any charges, just means I cannot pay. Do US
banks allow debit cards to overdraw accounts? Isn't this against the entire
idea of debit cards??

~~~
DanBC
Different card providers have different rules. There's a big highlighted
warning at the top of this UK page:

[https://www.moneyadviceservice.org.uk/en/articles/debit-
card...](https://www.moneyadviceservice.org.uk/en/articles/debit-cards)

~~~
gambiting
Also from the same page:

" However, Visa Debit and MasterCard Debit cards can now be set up so that
they check whether there’s enough money in your account before a payment is
authorised."

I guess I only ever used Visa Debit/Mastercard Debit cards then :-)

------
perfunctory
> In 2014 nearly half of American households said they could not cover an
> unexpected $400 expense without borrowing or selling something.

Wow!

------
Simulacra
Doesn't even factor in the cost of healthcare, limited choices in housing and
jobs, and the lost opportunity costs...

------
alfapla
One of the reasons why poverty is so difficult to solve is that, in a way,
poverty is a biological niche. Even if you could manage to lift everyone out
of poverty, that niche will still be there, waiting to be filled again.

------
known
Here's How America's Minimum Wage Stacks Up Against Countries Like India,
Russia, Greece, And France

[http://www.businessinsider.in/Heres-How-Americas-Minimum-
Wag...](http://www.businessinsider.in/Heres-How-Americas-Minimum-Wage-Stacks-
Up-Against-Countries-Like-India-Russia-Greece-And-
France/articleshow/21922146.cms)

------
heapcity
Poor people often have a smaller proportion of income available for their 401k
too.

------
cLeEOGPw
Paywall.

~~~
pentestercrab
Paywalls with workarounds are OK; paywall complaints are off topic. Please see
[1].

1:
[https://news.ycombinator.com/item?id=10178989](https://news.ycombinator.com/item?id=10178989)

------
asgard1024
No kidding! Another "insightful" article from The Economist? What's coming
next - it's expensive to be small?

Of course there are savings from scaling things up. If you are richer, you can
get better advice, because you're often better connected. Others are less
inclined to screw you over. And so on..

