Help a family, help a child. This belief — that strong, stable families are good for America’s children — is a prevailing tenet of the Annie E. Casey Foundation’s seminal KIDS COUNT project. It is also the framework for this essay, which explores the unsettling link between poverty and paying more for basic goods and services. Readers will learn how this inequity cripples low-income working households, what is being done to correct this imbalance and details of Casey’s four-part plan to help these families succeed.
Chasing the American dream is unfairly costly for our nation’s working poor
Findings & Stats
The Annie E. Casey Foundation is pushing a 4-part plan to help level the playing field for low-income families. It involves: 1) Arming America’s working poor with the financial tools and know-how to get ahead; 2) Pushing for regulatory reforms; 3) Reinforcing the financial benefits of work; and 4) Promoting the market potential of low-income communities.
Check Out Surcharge
Low-income inner-city families overpay for basic groceries by 22% and rural families by 17.5% relative to the U.S. Department of Agriculture’s recommended budget for these items.
Home Not-So-Sweet Home
One out of four rural families — 5.5 million households nationwide — spends more than 30% of their income on housing. In addition, low-income families devote five times more — or nearly 20% of their annual income — to energy bills compared to their wealthier counterparts.
The difference between a prime and subprime loan is substantial. Consider a loan of $107,500 at a subprime mortgage rate of 13% versus a prime rate of 7%. A homeowner with the subprime rate will pay $514 more each month over the course of the loan — a difference of almost $185,000 for a 30-year mortgage.
A Risky Contract
Consumers with subprime mortgages are eight times more likely to default on their loans relative to consumers with conventional, prime mortgages.
Low-income households have less money to spend on a reliable car. Yet, when these families do purchase a vehicle, they often face excessive fees and interest rates that are double or triple the value paid by wealthier consumers.
Child Care or College?
In all but one state in America, the annual cost of child care for a 4-year-old in an urban area center exceeds the cost of public college tuition. This expense, which is a necessity for single working moms and parents with multiple jobs, can be tough for any family to absorb on modest earnings.
Casey experts advocate for revisions to the Fair Credit Reporting Act since today’s reporting systems turn a blind eye to regular responsible payment and instead focus almost exclusively on financial missteps.
Best Practice: The New York Cold Shoulder
In 2002, New York City passed legislation prohibiting the city from doing business with institutions that engage in predatory lending practices.
One way to help low-income workers get ahead? Expanded subsidies for food, housing and child care — the three areas that tend to take the biggest bite out of already scant paychecks and savings.
Statements & Quotations
Stronger regulatory reforms are required to combat predatory practices that strip wealth and prevent asset development, especially in high poverty communities.
Although mainstream retailers may steer clear of poor neighborhoods for a variety of reasons, exploiters often are quick to jump into the void.
Over the past decade, our nation mustered the will, policies, and resources to move millions of parents into the workforce. Now let’s apply that same level of determination and focus to the challenge of moving them — and their kids — out of poverty and closer to real financial security.