It’s hard not to laugh at how out of touch so many politicians are about affordability. Our president calls it a hoax and isn’t sure what the word “groceries” even means. Senator Cindy Hyde-Smith of Mississippi gained fame for telling Americans to “pick another protein” if beef is too expensive. But even among those who care and possess some basic intelligence, the whole topic of how expensive it is to be poor can be neglected. One might even ask, how can anyone afford to be poor?
I live in an apartment complex. The rent is by no means cheap, and if you take a shorter lease, you pay more per month. When I opened a bank account, the friendly worker told me about the overdraft fee. “Just another way to screw the poor?” I asked. He nodded uncomfortably. Buying in bulk is cheaper—if you can afford to do so and have a place to store all the products. If you buy a crappy car or cheap shoes, you end up spending more in the end on repair and replacement than if you could afford something better. (Well, you’d actually save a fortune if our governments designed cities to be accessible without a car, but that’s a topic for a different blog.)
In his book Poverty, by America, Matthew Desmond devotes a chapter to describing the many ways that individuals and companies in this country exploit the poor. Exploitation includes being paid too little compared to the value of what we produce, and being charged too much compared to the value of what we buy. It is the lack of resources, collateral, and other options, not stupidity or poor decisions, that puts people at the mercy of those happy to cheat them.
John Oliver has done a series of amusing and horrifying videos about some of the ways we exploit the poor and the effects of that exploitation, including people spending years repaying loans and fees that started out small and keep mushrooming over the years. The poor are, in fact, a great source of income for many businesses, hence the entire category of goods and services aimed at the “bottom of the pyramid”.
When I lived in Bangladesh, I learned a bit about the situation of garment workers. They generally walked to work and thus needed to live near the factories that employed them. They paid more per square foot for their dismal little rooms than did the rich. When the factories reluctantly agreed to raise their salaries, their rents immediately went up commensurately. Oh, and they were intimidated and beaten when they tried to start unions.
I would never want to offend our great country by comparing it to Bangladesh, but there is a long history of overcharging the poor to live in filthy tenements. This practice was particularly prolific for Black renters who were forced to live only in certain parts of cities that could thus charge exorbitant rents. Blacks often had to pay twice the rent of whites; even in 1960, in Detroit median rent for Blacks was higher than for whites. Desmond quotes Isabel Wilkerson’s The Warmth of Other Suns: “The least-paid people were forced to pay the highest rents for the most dilapidated housing owned by absentee landlords trying to wring the most money out of a place nobody cared about.”
We have not done well at solving these problems. Desmond explains that: “Rent has more than doubled over the past two decades, rising much faster than renters’ incomes. Median rent rose from $483 In 2000 to $1,216 in 2021.” Ouch. The problem isn’t merely the shortage of housing; rents have gone up even where many apartments sit vacant. The truth, writes Desmond, is that it is possible to exploit the poor, and so that is precisely what landlords do.
Tragically, many of the poor would pay less per month if they bought a house than they do renting. Why, then, don’t they buy? Is this a case of the poor making bad decisions? No…it’s a case of the poor not being able to access mortgages.
Remember my comment about overdraft fees? Banks make a killing exploiting the poor. “…in 2019, the largest banks in America charged customers $11.68 billion in overdraft fees. Just 9 percent of account holders pay 84 percent of these types of fees.” Who were those paying the fees? People with less than $350 on average in their accounts. This is facilitated by banks charging multiple fees in one day, so if someone overdraws their account by just $20, they could pay $200 for it.
That’s the case for those with a bank account. Many of the poor, especially people of color, cannot access the banking system. What then? They are forced to rely on the modern version of moneylenders. It’s always easy to tell you’re in a low-income neighborhood by all the signs for payday loans, check cashing services, and pawn shops—another way to obtain an expensive loan.
Check cashing services charge from one to ten percent of the total; even Walmart, seeing how lucrative a business it is, will cash checks. Desmond again: “In 2020, Americans spent $1.6 billion just to cash checks. If the poor had a costless way to access their own money, over a billion dollars would have remained in their pockets during the pandemic-induced recession.” That’s not asking for a handout; it’s asking for fair treatment.
Here’s something I hadn’t heard of: there are apps (such as Dave and Earnin) that workers can use to access a part of their wages before payday. There are buy-now-pay-later (BNPL) companies such as Afterpay and Klarna that seem on the surface like a good deal. With all these apps and companies, fees can run so high that people end up paying exorbitant sums.
Do any of you remember when Reagan decided it would be great fun to deregulate the banking industry? Trump has of course taken it even farther. We used to have protections against various forms of gambling and exploitation (and could again, when Democrats retake power). In the meantime, banks are free to charge exorbitant fees. “In recent years, seventeen states have brought back strong usury limits, capping interest rates and effectively prohibiting payday lending. But the trade thrives in most places. The APR for a two-week $300 loan can reach 664 percent in Texas, 516 percent in Wisconsin, and 460 percent in California,” according to Desmond.
Adding up some of this exploitation, Desmond writes that each year the poor pay “over $11 billion in overdraft fees, $1.6 billion in check cashing fees, and up to $9.8 billion in payday loan fees. That’s over $61 million in fees collected predominantly from low-income Americans each day.” All that profiting from the poor resembles the many ways that private companies exploit prisoners.
Debra Efroymson
Debra Efroymson
DoorDash spent a lot of money trying to prevent Zohran Mamdani from winning his election. Now Mamdani has won a settlement of $131.5 million against them for wage theft. Just as the real welfare queens are the rich, so the real criminals are the wealthy and corporations that steal from the poor and workers to enrich themselves. With all our attention on police and prisons—despite the fact that they may not make us safer—it’s good to see Mamdani going after some real criminals.
Paige Fernandez
David J. Harding
We should get angry when people call the poor lazy. We should get angry when people claim that the poor simply roll along on government benefits which hard-working Americans are forced to pay for. We should also get angry when they call the poor stupid for relying on overpriced services when, in fact, they have no other options. As Desmond writes, “Poverty isn’t simply the condition of not having enough money. It’s the condition of not having enough choice and being taken advantage of because of that.” It’s not just about raising the minimum wage or expanding tax credits for the poor or ensuring that they have access to healthcare and food. It is also about addressing the many forms of exploitation of the poor.
Let’s hope—and work to ensure—that a future wave of politicians will be far more tuned in to these issues and ready to do the hard work of addressing root causes as well as consequences.
