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Weekend Reading: Poverty is Expensive

When you stop to put gas in your car, do you fill the tank every time? Or do you first consider how much cash is in your checking account or your pocket and decide to fill the tank halfway or even less to get you through the next several days?


Me circa ~1983

I recently realized how different this experience is for me today than it was for my parents when I was growing up. I fill up the tank every time now, usually after doing a bit of research to ensure I’m buying the least expensive fuel in the area. But this was almost never the case for my parents when I was a kid. We’d get $5 or $10 worth and try to make it last for a week or so until the next paycheck. And we’d stop at whatever gas station was most convenient on our route to or from home, only choosing a less expensive option if it was on our way.


I ran across a Washington Post article from 2009 this weekend titled, “The High Cost of Poverty: Why the Poor Pay More.” It offers a glimpse into how difficult – and expensive – it is to be poor in America.

The poorer you are, the more things cost. More in money, time, hassle, exhaustion, menace. This is a fact of life that reality television and magazines don’t often explain.

So we’ll explain it here. Consider this a primer on the economics of poverty.

“The poor pay more for a gallon of milk; they pay more on a capital basis for inferior housing,” says Rep. Earl Blumenauer (D-Ore.). “The poor and 100 million who are struggling for the middle class actually end up paying more for transportation, for housing, for health care, for mortgages. They get steered to subprime lending. . . . The poor pay more for things middle-class America takes for granted.” …

Douglas J. Besharov, resident scholar at the American Enterprise Institute, says: “There are social costs of being poor, though it is not clear where the cause and effect is. We know for a fact that on certain measures, people who are poor are often more depressed than people who are not. I don’t know if poverty made them depressed or the depression made them poor. I think the cause and effect is an open question. Some people are so depressed they are not functional. …

Waiting. That’s another cost of poverty. You wait in lines. You wait at bus stops. You wait on the bus as it makes it way up Georgia Avenue, hitting every stop. No sense in trying to hurry when you are poor.

I’ve thought a lot in recent years about the effects of scarcity on the mind, both short- and long-term. I read an interesting book on the topic last year – Scarcity: The New Science of Having Less and How It Defines Our Lives. Here’s an excerpt of a review in The Economist:

By making people slower witted and weaker willed, scarcity creates a mindset that perpetuates scarcity, the authors argue. In developing countries too many of the poor neglect to weed their crops, vaccinate their children, wash their hands, treat their water, take their pills or eat properly when pregnant. Ingenious schemes to better the lot of the poor fail because the poor themselves often fail to stick to them. The authors describe these shortcomings as the “elephant in the room”—which poverty researchers ignore because it is disrespectful to the people they are trying to help. But if these so-called character flaws are a consequence of poverty, and not just a cause of it, then perhaps they can be faced and redressed.

And here’s a relevant excerpt from the introduction of the book itself:

When we think of the poor, we naturally think of a shortage of money. When we think of the busy, or the lonely, we think of a shortage of time, or of friends. But our results suggest that scarcity of all varieties also leads to a shortage of bandwidth. And because bandwidth affects all aspects of behavior, this shortage has consequences. We saw this with Sendhil and Shawn. The challenges of sticking to a plan, the inability to resist a new leather jacket or a new project, the forgetfulness (the car registration, making a phone call, paying a bill) and the cognitive slips (the misestimated bank account balance, the mishandled invitation) all happen because of a shortage of bandwidth. There is one particularly important consequence: it further perpetuates scarcity. It was not a coincidence that Sendhil and Shawn fell into a trap and stayed there. Scarcity creates its own trap.

Emphasis mine on that last sentence.

This is all good food for thought, especially when politicians (or your friends on Facebook) vilify the poor for being poor and making less-than-ideal choices.

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