There are people, concentrated in the Hamptons and Beverly Hills, who still confuse poverty with the simple life. No cable TV, no altercations with the maid, no summer home maintenance issues -- just the basics like family, sunsets and walks in the park. What they don't know is that it's expensive to be poor.
In fact, you, the reader of middling income, could probably not afford it. 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.
- Barbara Ehrenreich