Something else that shouldn't get lost in the minutiae of this story is this disturbing news arising from a study out of the Consumer Federation of America, although if you're already poor, this will be old news to you:
A single man, 30, driving since age 16, owning a Ford Taurus, having a perfect driving record and commuting round trip 20 miles a day might pay $558 a year for insurance if he had a Master of Business Administration and lived in an affluent St. Louis suburb. If he were only a high school graduate, his rate rises by $71. If he were to become unemployed, his cost climbs another $84. If he moves to a poorer area, his rates rise by $347.
Yep, the poorer and lower educated you are, the more you pay for car insurance. Doesn't take long to connect those dots: can't afford insurance, can't drive. Can't drive, radius of work access decreases. Less opportunity = higher chance of poverty = even less opportunity. What about public transportation, you say? Ah, yes, good old bus and train travel! If you think this is a viable option for most, you probably reside in a big city like Washington DC, or Boston, or New York, but in the "flyover" states between coasts, public transportation is often lacking, and in some places, can be prohibitively expensive.
In Nashville, TN, a 31-day unlimited access bus pass for an adult is $84, so most likely Ms. Pagan, in the story below, would be unable to afford it. Chances are good too that due to recent route closings, the route she would need to access her employment wouldn't be covered by the bus service anyway. This has been a real issue for many of the poorer folks in Nashville since service routes were cut.
But I digress. There are two main points I'd like to make concerning this insurance conundrum for the poor. First, it's likely that these rates aren't based on driving records but rather established by "risk managers" who have crunched enough statistics (and we all know that statistics can be utilized to support any point of view you'd like them to, with the right skew) to determine that uneducated and poor drivers are dumber than educated and wealthy drivers, otherwise the poor dummies wouldn't be...poor dummies?!? Duh!
So, c'mon, connect the dots with me: if you're poor and "uneducated" (risk managers will spell that d u m b), you are not nearly as intelligent as the educated wealthy, so you are more likely to make stupid driving mistakes, which of course will result in more accidents, which will of course hurt the bottom line in the insurance company's stockholder report. Raise the dummies' rates to offset the almost certain losses these morons will cause us, and viola, we're back in the black again!
Wouldn't you just like to put a foot where the sun don't shine on a risk manager's body?
The second point I'd like to make here is that earning profit off the back of the poor isn't a new plan or isolated to insurance companies. Banks charge higher interest to poor folk because their credit is usually not quite as good. Check-cashing "stores" are worse than loansharks when the poor can't afford to keep a bank account open, or have been denied a bank account at all.
Car companies in impoverished neighborhoods entice with a "buy here, pay here" or "we finance in-house" deal for folks who can't get traditional car loans, and the interest rates and techniques used by them for collections would make mafia enforcer Richard Kuklinski blush. "Rent to Own" ripoffs steal poor folks blind, stores often charge "check cashing fees" when the poor try to turn a paycheck or a disability check into something usable.
Even the grocery stores in impoverished neighborhoods take advantage of the poor; smaller selections of products, prices that aren't often aligned with stores in wealthier areas. If you're wondering why this is, it's because people can drive to other stores in these more affluent areas, and the competition forces stores to keep prices low lest shoppers head over to the store 10 blocks away with lower prices. If you've got a car, no big deal. On foot, or using a bus, it's a huge deal.
Everywhere the poor turn, someone is siphoning off precious pennies that the more affluent wouldn't tolerate.
The lesson here?
The less you have, the more they take.
Number of asset-poor Americans rising
27 percent of households do not have enough money tucked away to cover three months of basic expenses
 Luz Pagan and her son, Marvin Robinson Jr., 12, sit in their small studio apartment. The two have been living there for more than two months, hoping to find a bigger apartment in the near future. (Abel Uribe, Chicago Tribune / January 27, 2012) |
Luz Pagan, 45, has been working as a part-time cashier at a discount store in downtown Chicago for nearly three years, her requests to become a full-time employee with benefits having gone nowhere.
The single mom and her 12-year-old son, Marvin, have been living in a $575-a-month studio apartment on the North Side since November. But with a work schedule averaging 15 to 20 hours a week, in a job paying about $8.75 an hour, Pagan is struggling to cover living expenses and has to scrape together money from friends and family. Her last paycheck netted $64.
"I'm underemployed," said Pagan, who previously lived in a shelter for two months. She has an associate's degree and would love an office job. Marvin's dad helps with expenses, but she said she and her son — a mostly A and B student who wants to be a doctor — are living paycheck to paycheck, with no savings.
Pagan's plight is becoming more commonplace.
Nationwide, 27 percent of households are "asset poor," meaning they don't have enough money tucked away to cover basic expenses for three months in case of a layoff or other emergency that saps income, according to a study to be released Tuesday by the Washington-based Corporation for Enterprise Development. The nonprofit's mission is helping poor families and communities.
Since the nonprofit's 2009-10 survey, the number of asset-poor families has jumped to a little more than 1 in 4 from 1 in 5. Strip out a home, a business or a car — none of which can easily be converted to cash — and the measure of households who are "liquid asset poor" jumps to 43 percent.
In Illinois, 26.4 percent of households are asset poor and 39.8 percent are liquid asset poor.
If that weren't enough bad news for the working poor and for households barely getting by, the Consumer Federation of America on Monday released a report suggesting that the poorer the person is, the more she or he will pay for things like car insurance. Specifically, the report said, many low- and moderate-income drivers pay higher prices for automotive coverage even if they have spotless driving records and drive few miles.
Among the report's statistics: A single man, 30, driving since age 16, owning a Ford Taurus, having a perfect driving record and commuting round trip 20 miles a day might pay $558 a year for insurance if he had a Master of Business Administration and lived in an affluent St. Louis suburb. If he were only a high school graduate, his rate rises by $71. If he were to become unemployed, his cost climbs another $84. If he moves to a poorer area, his rates rise by $347.
"None are directly related to driving," but rather suggest a correlation with income, a Consumer Federation official said during a Monday conference call to discuss the results.
Pagan, who doesn't own a car, said she has begun working with Chicago-based Heartland Alliance — a nonprofit seeking to reduce poverty — to look for housing and secure full-time employment.
She doesn't have a credit card but has a debit card through a TCF Bank checking account that she has had for about six months. She previously banked with a megabank but switched when it curtailed its free checking options. Pagan, who has been on food stamps and who earned about $7,000 last year, said it has been about five years since she had to use payday lenders.
She said she'd like to see the state of Illinois offer additional ways to help needy residents, instead of giving more tax breaks to corporations.
Lucy Mullany, Heartland Alliance senior policy associate and coordinator of its Illinois Asset Building Group, said the study's findings mirror what she's seeing in Illinois — "continued erosion of individual wealth, especially among communities of color."
On her legislative wish list: Increasing what she says is a $2,000 limit on assets for participants in the Temporary Assistance for Needy Families program. TANF provides temporary financial assistance, including for food, shelter and utilities, for pregnant women and for families with dependent children. Pagan doesn't receive TANF funds.
The Corporation for Enterprise Development report found sizable differences between states, with asset poverty rates ranging from a high of more than 45 percent in Nevada to a low of 15.7 percent in Vermont. Liquid asset poverty rates range from 64.5 percent in Alabama to 22.8 percent in Hawaii.
Vermont had the overall No. 1 rank for residents' financial security. Illinois was at No. 32 overall, yet was ranked 17th for the policies it has in place, raising questions about the programs' effectiveness.
The study, however, said states' gaps between policies and outcome could be the result of factors such as high housing costs.
Asset poverty is a problem that requires local, state and federal policy responses, said Tom Feltner, vice president of the Woodstock Institute, a Chicago-based nonprofit research group focused on fair lending issues.
Many Illinoisans with low levels of assets have a large percentage of their assets tied up in their home, he said.
"We need to keep homeowners in their homes, return vacant properties to productive use and ensure the availability of sustainable, prime mortgage credit going forward," he said. "To do so, we need local, state and federal policy responses that restore confidence in the housing market, improve opportunities to save and get people back to work."
In the Chicago area, poorer communities often are hit first by a weakening economy — and hit hard.
Says Feltner: "High-cost lending and low credit scores lock people in low-wealth communities out of a future economic recovery."
As a general rule, saving enough money for three to six months of living expenses is recommended, said David Hinman, senior vice president of retail banking for Fifth Third Bank.
byerak@tribune.com
