The High Cost Of Poverty

Jul 25, 2006

From the Barbara Ehrenreich article on Alternet.org
http://alternet.org/story/39273/

A new study from the Brookings Institute documents the “ghetto tax,” or higher cost of living in low-income urban neighborhoods. It comes at you from every direction, from food prices to auto insurance. A few examples from this study, by Matt Fellowes, that covered 12 American cities:

* Poor people are less likely to have bank accounts, which can be expensive for those with low balances, and so they tend to cash their pay checks at check-cashing businesses, which in the cities surveyed, charged $5 to $50 for a $500 check.

* Nationwide, low-income car buyers, defined as people earning less than $30,000 a year, pay two percentage points more for a car loan than more affluent buyers.

* Low-income drivers pay more for car insurance. In New York, Baltimore and Hartford, they pay an average $400 more a year to insure the exact same car and driver risk than wealthier drivers.

* Poorer people pay an average of one percentage point more in mortgage interest.

* They are more likely to buy their furniture and appliances through pricey rent-to-own businesses. In Wisconsin, the study reports, a $200 rent-to-own TV set can cost $700 with the interest included.

* They are less likely to have access to large supermarkets and hence to rely on the far more expensive, and lower quality offerings, of small grocery and convenience stores.

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Children suffering from Poverty