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The “Poverty Tax” and America's Low-Income Households
Abstract
Although low-income U.S. households account for more than $650 billion a year in buying power, they still pay more for basic goods and services than high-income households. A 2006 Brookings Institution study found that if essential goods and services were reduced for the working poor by just 1%, it would put an additional $6.5 billion—more than one-third of the benefit these families earn from the Earned Income Tax Credit—into their pockets (Fellowes, 2006).
... In addition to these direct impacts, there is evidence that CIM may compound broader economic disadvantage, which has implications for housing security. Scholars have long recognised that poverty is expensive, with low-income households typically paying more for items such as vehicles, insurance, food and mortgages (Karger 2007). This phenomenon has been referred to as the "poverty premium" (Hirsch 2013) or a "poverty tax" (Karger 2007). ...
... Scholars have long recognised that poverty is expensive, with low-income households typically paying more for items such as vehicles, insurance, food and mortgages (Karger 2007). This phenomenon has been referred to as the "poverty premium" (Hirsch 2013) or a "poverty tax" (Karger 2007). As Bielefeld (2016:864) observes, CIM appears to be contributing to this premium as "many of Australia's poorest people are facing increased costs of living under income management". ...
Compulsory Income Management (CIM) is a form of conditional welfare that involves the mandatory quarantining of a portion of welfare recipients’ social security payments. Quarantined funds are accessible via a government‐issued debit card, with restrictions surrounding where and on what funds can be spent. Official justifications of CIM have framed these policies as attempts to combat substance abuse and gambling problems, and to thus secure better outcomes for welfare recipients and their families. Central to this narrative has been the argument that welfare quarantining will ensure more money is spent on ‘essentials’, including accommodation. No existing studies, however, have specifically interrogated the impacts of CIM on housing security. This article responds to this gap in the literature by reviewing existing research concerning CIM's impacts and locating this research within broader debates regarding the causes of homelessness and the efficacy of individualised policy interventions. In doing so, it highlights CIM's potential to exacerbate housing insecurity not only through technical issues such as rental transfer failures, but also by contributing to underlying stressors such as economic disadvantage; relationship difficulties, poor health and addiction; and social stigma. The article concludes that – far from addressing the structural causes of homelessness – CIM has enflamed them.
... The AFS industry grew rapidly in the 1990s and 2000s amidst gaps in regulations, financial institution consolidation and divestment in disadvantaged neighborhoods, increases in immigration, technological innovations, and the financing from large banks (Apgar and Herbert 2006;Bianchi 2012;Graves 2003;Karger 2007;Negro et al. 2014). Payday lending, in particular, grew rapidly in the 1990s and 2000s (Caskey 2005), increasing by tenfold from 1996 to 2003 (Bianchi 2012). ...
... AFS are criticized as harmful to consumers because of exorbitant interest rates, high service fees, and repeated loan rollovers that trap consumers into a cycle of debt and re-borrowing (Caskey 2005;Fox 2007;Karger 2007;Skiba and Tobacman 2009). The AFS industry claims it serves the financial service needs of customers who eschew or are unserved by mainstream financial institutions and charges high interest rates and fees to reflect the high-risk nature of the business (Bianchi 2012;Edmiston 2011;Elliehausen and Lawrence 2001;Lewison 1999). ...
Alternative financial services (AFS) such as check cashing and payday loans may help unbanked households meet transaction and credit needs, yet often at a very high price. Saving tax refunds can help low- and moderate-income (LMI) households build emergency savings as a way to reduce dependence on AFS and cope effectively with irregular cash flows and financial shocks. This study examined the impact on AFS use of message-based interventions encouraging LMI households to save their refunds when they electronically filed their federal income tax returns. We found that 3 out of 18 interventions resulted in statistically significant reductions in credit-related AFS use with small effect sizes. None of the interventions resulted in reduced transaction-related AFS use. Other factors—especially prior AFS use and financial shocks—were strong predictors of AFS. Financially vulnerable households may need additional opportunities and protections to reduce dependence on AFS.
... High-cost alternative financial service providers offer a wide variety of products and services including short-term loans (including payday, refund anticipation, pawnshop, and title loans), check-cashing, bill payment, tax preparation, money transmitting services, and rent-to-own products (Barr & Blank, 2009;Karger, 2007). Although these businesses provide needed products and services unavailable to many families and communities from traditional financial institutions, the costs are very high. ...
... The following examples illustrate this point: (a) Check cashing fees at a retail check-cashing store typically range from 1.5% to 3.5% of face value of the check (Barr, 2004), and can range as high as 4% to 5%; (b) low-income families paid almost $1.75 billion in fees and interest charges for refund anticipation loans (i.e., a type of short-term loan for tax refunds; Karger, 2005); and (c) a household with a net income of $20,000 that cashes a biweekly payroll check and purchases about six money orders each month may pay as much as $1,200 annually for alternative service fees, which is substantially more than the expense of a monthly checking account fee (Beard, 2010). The profits from these industries are high and most are owned by large, publically-held corporations (Karger, 2007;Rivlin, 2010). In 2008, the profits were: payday lending, $7 billion; rent-to-own stores, $7 billion; pawnbrokers, $4 billion; and the check-cashing industry, $3 billion. ...
In the wake of the recent economic challenges, it is clear that social workers must be educated about the financial opportunities for low-income households. Encouraging low-income households to have a bank account at an insured depository institution, or become banked, is increasingly emphasized in policy and practice. Becoming banked offers the opportunity to avoid high-cost alternative financial services. Social workers can facilitate relationships between low-income households and the mainstream financial services industry to help families advance their long-term financial interest. Understanding the structure of all types of banks and credit unions is imperative. Implications for social work practice are explored.
... The racial links to poverty and material hardship also determine the energy cost burdens disproportionately borne by African Americans who earn less, have less accumulated wealth, and, in many cases, pay more for basic services in what is known as a Bpoverty tax ( Karger 2007). African Americans have been repeatedly shown to contribute a higher percentage of their household income to energy bills than other racial and ethnic groups (Driebhol and Ross 2016;U.S. ...
Structural racism in the form of racial residential segregation and the series of laws, policies, and practices that continue to reinforce it have robbed generations of African Americans of socioeconomic opportunity, wealth accumulation, safe, secure or energy-efficient housing, and full societal inclusion. Research indicates that African Americans are more likely to live in older, energy-inefficient homes with structural deficiencies, outdated appliances, and faulty energy systems. These conditions lead to a disproportionate burden of energy insecurity, defined as “the inability to adequately meet household energy needs” among African Americans across the economic spectrum. This, in turn, generates increased costs and decreased comfort, conditions closely linked to adverse physical and mental health outcomes. Persistent income inequality, wealth gaps, and entrenched racial residential segregation have disenfranchised African Americans and reduced their ability to escape this pernicious cycle. Weatherization, which is the practice of protecting a building’s interior from the elements while enhancing its energy efficiency and reducing costs, could be a catalyst for reducing the disproportionate energy burden affecting low-income individuals and ultimately improve health and social outcomes among African Americans. We argue for investing in policies that provide energy efficiency and weatherization assistance—and not only energy bill assistance—to provide a long-term and equitable solution to energy insecurity that is also a critical step toward restorative justice.
... In contrast, the informal economy has been described as "a process of income-generation … unregulated by the institutions of society, in a legal and social environment in which similar activities are regulated" (Castells & Portes, 1989, p. 12). However, the distinction between fringe economy and informal economy is not relevant to this study, because the fringe and informal economies share some of the same customers (people with low incomes) and geographies in an economically developed nation like the United States (Karger, 2007;Mann, 2012;McMillian, 2012). ...
This paper is a meta-ethnography of four low-income communities in order to explore fringe economic behaviors. Rejecting the interpretation of fringe economic behaviors as irrational, we affirm these behaviors as viable alternatives for people marginalized in the mainstream economy. Using a meta-ethnographic method and employing the concepts of sociologist Pierre Bourdieu, we identify the habitus and social capital values of each community as distinct Bourdieusian fields and conclude that an awareness of the localized
development of a fringe economic cluster with distinct goals and rules undermines one-size-fits-all social welfare programs.
... poverty), advertising access to goods through low weekly payments. However, these businesses often levy a 'poverty tax' or 'a hidden tax paid by the poor because they are poor' (Karger, 2007, p. 413; Rivlin, 2011) through staggeringly high interest rates. While positioning vulnerable consumers as deserving and agentic, these discourses are used to detrimental effect. ...
In this article, we consider the representations of poverty within consumer culture. We focus on four main themes – social exclusion, vulnerability, pleasure and contentment – that capture some of the associations that contemporary understandings have made with poverty. For each theme, we consider the portrayals of poverty from the perspective of key agents (such as marketers, media, politicians) and then relate this to more emic representations of poverty by drawing on a range of contemporary poverty alleviating projects from around the world. We conclude with a set of guidelines for relevant stakeholders to bear in mind when elaborating their representations of poverty. These guidelines may act as a platform to transform marginalising representations of poverty into more empowering representations.
... Other factors beyond the control of individuals and families that may increase their risk for financial problems include unemployment, lack of health insurance, jobs that fail to pay a living wage, and limited options for affordable child care and housing. At the policy level, the absence of adequate consumer protection laws (Willis, 2008) places individuals and families at risk for abusive lending and financial services practices (Barr, 2004; The causes and current state of the financial crisis, 2010; Grunstein Bocian, Li, & Ernst, 2010;Karger, 2007). ...
Social workers have opportunities to help clients address their financial problems through a variety of practice settings, yet little is known about how they do so. Using qualitative methods and descriptive statistics, we analyzed responses from a survey of social workers and other human service professionals (N = 56). Participants primarily characterized their clients’ financial problems as the result of making poor financial decisions and mostly used financial education techniques in response. Most participants said they faced workplace barriers to helping their clients with financial problems, including lack of expertise and time and inability to bill for services. Social workers who want to address clients’ financial problems should recognize that financial problems stem not just from difficulties in managing money, but in the need for increased income, resources, and assets and an understanding of financial services. Future research with a larger sample of social workers is needed to assess how intervention methods vary by client population and to conduct pilot efficacy evaluations of well-conceptualized interventions to promote financial well-being.
... Social workers are trained to recognize and ameliorate various forms of oppression and understand human behavior in relation to the social environment. Therefore, with collaborative work with AFCs and CFP® professionals, social workers can integrate financial education, counseling, and planning efforts with a perspective of environmental risk (Barr, 2004;Karger, 2007) and protective factors. ...
Social workers have many opportunities to integrate a focus on personal finance into their practice with mostly lower-income and vulnerable client populations. However, little is known about social workers’ interest in personal finance. Results of a survey of social workers (N = 56) interested in integrating personal finance content into their practice are reported in this paper. Ways in which social workers might further develop knowledge and skills in personal finance are discussed. Professional perspectives that social workers may lend to inform financial education and counseling and the emerging field of financial therapy are also explored. Social workers can offer an understanding of the environmental risks that affect the financial health of low-income individuals and families and resources that can help build financial capability.
Low-wage workers have borne the brunt of the changing labor market, including wage stagnation, growing income inequality, and increasingly unstable work environments. Most research on low-wage workers focuses on precarious minimum wage employment; however, some low-wage workers hold jobs earning more than minimum wage with consistent, full-time hours. This study explores strategies parents in these “good” low-wage jobs use to provide for their children, using data from in-depth interviews with hospital workers. We find workers use multiple strategies, which we categorized as scarcity, maintenance, and investment strategies to highlight the distinct types of resources and varying amount of stress associated with them. Finally, we compare the types and number of strategies parents use by hourly wage versus net household income.
Objective
To characterize geographic variability of generic benign prostatic hyperplasia (BPH) medications in order to improve drug price transparency and improve patient access to affordable medication sources. This is of interest because BPH is one of the most common chronic diseases in men and contributes to individual healthcare cost. Medical therapy is the main treatment modality for BPH, burdening patients with lifelong medication expenses which may impact adherence and subsequent outcomes. With an aging population, this is compounded by many older individuals requiring multiple daily medications.
Methods
All pharmacies within a 25-mile radius of our institution were identified and classified as chain, wholesale or independent. The out-of-pocket price for a 30-day supply of tamsulosin (0.4 mg), finasteride (5 mg), oxybutynin (5 mg TID), and oxybutynin 10 mg XL were obtained using a scripted telephone survey. Multivariable linear regression assessed the association between census-tract level demographic and socioeconomic factors and disparate generic out-of-pocket drug-pricing.
Results
The response rate was 93% with 255 pharmacies across 173 census tracts providing data. By pharmacy type, there was up to 5.5-fold variation in median out-of-pocket drug prices for the most common BPH medications. Demographic and socioeconomic factors were not significantly associated with generic BPH drug price variation.
Conclusion
The out-of-pocket price of generic medications for BPH varies significantly between pharmacies in a geographically-confined area. This study highlights the need for quality improvement initiatives that empower patients to price-compare and improve drug price transparency.
http://csd.wustl.edu/Publications/Documents/RB15-57.pdf
As the United States' economy continues to experience challenges, more families at or near the poverty level fall prey to
predatory financial practices. Their vulnerability to these operations is increased by a lack of knowledge of asset-building
resources and alternative financial services. This article focuses on Volunteer Income Tax Assistance (VITA)—a free income
tax preparation program, which is a vital resource available to low-income families. Unfortunately, VITA is largely underused
and often unknown to economically strained families and to the social workers and other professionals to whom these families
turn for assistance. This article concludes with policy and practice implications for social workers and other professionals
engaged in providing services to financially vulnerable families.
Many tumours undergo disregulation of polyamine homeostasis and upregulation of ornithine decarboxylase (ODC) activity, which can promote carcinogenesis. In animal models of colon carcinogenesis, inhibition of ODC activity by difluoromethylornithine (DFMO) has been shown to reduce the number and size of colon adenomas and carcinomas. Indole-3-carbinol (I3C) has shown promising chemopreventive activity against a range of human tumour cell types, but little is known about the effect of this agent on colon cell lines. Here, we investigated whether inhibition of ODC by I3C could contribute to a chemopreventive effect in colon cell lines.
Cell cycle progression and induction of apoptosis were assessed by flow cytometry. Ornithine decarboxylase activity was determined by liberation of CO2 from 14C-labelled substrate, and polyamine levels were measured by HPLC.
I3C inhibited proliferation of the human colon tumour cell lines HT29 and SW480, and of the normal tissue-derived HCEC line, and at higher concentrations induced apoptosis in SW480 cells. The agent also caused a decrease in ODC activity in a dose-dependent manner. While administration of exogenous putrescine reversed the growth-inhibitory effect of DFMO, it did not reverse the growth-inhibition following an I3C treatment, and in the case of the SW480 cell line, the effect was actually enhanced. In this cell line, combination treatment caused a slight increase in the proportion of cells in the G2/M phase of the cell cycle, and increased the proportion of cells undergoing necrosis, but did not predispose cells to apoptosis. Indole-3-carbinol also caused an increase in intracellular spermine levels, which was not modulated by putrescine co-administration.
While indole-3-carbinol decreased ornithine decarboxylase activity in the colon cell lines, it appears unlikely that this constitutes a major mechanism by which the agent exerts its antiproliferative effect, although accumulation of spermine may cause cytotoxicity and contribute to cell death. The precise mechanism by which putrescine enhances the growth inhibitory effect of the agent remains to be elucidated, but does result in cells undergoing necrosis, possibly following accumulation in the G2/M phase of the cell cycle.
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