The Working Poor

by David K. Shipler

  Behind respectable facades, some major institutions also have their way with the poor. Few banks want depositors who keep low balances, so in states where no laws require otherwise, banks set high minimums and charge prohibitive fees. Many impoverished neighborhoods have no branches at all. This forces low-income families into the expensive check-cashing services, whose outlets have multiplied across the country.

  Even where state law requires “lifeline” accounts for the poor, they are rarely advertised because banks tend to lose money on them. Branch officers often don’t know about them, and most potential depositors don’t either. The best-kept financial secret in New York is the state requirement that banks offer accounts with a $25 minimum opening deposit, a one-cent minimum balance, and eight free withdrawals a month for a $3 monthly fee. Most depositors are kept ignorant of such terms, and major banks report few people opening those accounts.9

  One reason may be that many workers prefer to earn under the table and keep their finances unrecorded. Others may believe folklore they’ve heard about unscrupulous banks. “We have our little methods of stashing stuff,” said Wendy Waxler, a single mother who had just moved off welfare to a job. “What I plan on doing is getting a safe. It won’t draw interest. But at the same time, if the bank go bankrupt, I still have money! You know, I know how they do that money exchange with the bank. It’s your money but it’s being bought by somebody. It’s some kind of system they go through, so when you get there and you say I want all my money, you can’t get it right away, you have to wait a certain amount of days so they can get it back. That’s what I was told. It’s some kind of money something exchange of hands.”

  Wendy was wrong about the waiting period, but her suspicions were understandable. At the confluence of private industry and government, American society devises numerous techniques of separating the working poor from their meager cash. State lotteries do a booming business at the corner stores in poor parts of town as people pray for the right number to come up and deliver them from hardship. Businesses large and small practice American consumer culture’s universal deception: the sweet-sounding come-on that doesn’t quite resemble the fine print. Everything is strictly legal; it’s just that you have to listen and read carefully before signing, and you have to be a little savvy about the ways of the commercial world. In Debra Hall’s case, the enticement was a cellular phone that she got for her daughter, who was in her early twenties. It seemed ridiculously cheap. “It was easy to get,” she recalled. “I didn’t have the credit, and they still gave it to me. The contract, she just filled it out and I signed it. I didn’t take time to read it…. The lady made it sound so good. It was gonna be $9 a month. That turned out to be a tale.” Debra had somehow missed a digit. “It was $89 a month. I got tricked into a three-year contract. They give you like two thousand minutes. My calls over the weekend were supposed to be free. They weren’t. It ended up costing me. I done made two payments toward them. They called me, threatened to take me to court, but they accepted I made two payments. I told the man I feel like I got ripped off.”

  By contrast, Ann Brash did read her contract when she took over a lease on a Jeep Cherokee. She knew the terms were unfavorable, but she felt forced into an unwanted choice. Ten years earlier, a divorce had plunged her and her two children into poverty and temporary homelessness. Child support payments plus a pittance as a freelance copy editor brought her about $10,000 a year until she landed a full-time editing job at $23,000. She simply needed a reliable vehicle to get to work through the snows of New Hampshire.

  “I have a Toyota,” she said. “Something’s wrong with the starter, and one front panel in the door is pretty lacy with rust. I don’t think it’s going to pass inspection.… Something’s wrong with the front end at the moment. I know the brakes need to be redone.” She had no savings, no credit, no money to make the repairs. Her teenage children, Sandy and Sally, offered to give up their driver’s licenses for a year to cut the insurance premium, hoping that she could replace the car with the money saved.

  Then, “a car fell into my lap,” she said. “A nice young man in Plainfield wouldn’t continue leasing his Jeep. He got married and had too many expenses. He had put quite a bit down on it, and I think there were fifteen months left on the lease, and the [car dealership’s] chief person called me and said, ‘Would you like to take over his lease for him? It won’t require any down payment or anything like that.’ So that’s what I’ve done. Did it last week. Seems a little silly to be driving this gas-guzzling huge yuppie car.”

  The lease ran $293 a month, which was barely manageable for her, and at the end of the lease loomed a crisis. If she wanted to keep the car, she would have to come up with $17,000; if not, she’d have to pay 15 cents a mile over the 36,000 she was allotted, or $2,500 for the nearly 53,000 miles on the odometer. “So, because I hadn’t $2,500 to pull out of my pocket, I needed to buy the thing,” she said. “My credit is awful.” Having defaulted on $18,000 in student loans and $12,000 in credit card debt, she could get a car loan only by enlisting a couple from her church as co-signers. Even at that, the interest rate would have been 24 percent; it dropped to 19 when the man agreed to put his name first as the owner. Payments were $394.45 a month, and they would last until the Cherokee was likely to collapse into a heap of junk.

  High interest may be the most ubiquitous trap for low-wage workers. Married, Ann was in the middle class, with all the perks of easy credit. Divorced, she sank rapidly, and for a while, the only barriers between her and utter destitution were four thin pieces of plastic: one from Discover, another from Citibank, and two from Sears. As the balances ran up, she restricted the use of her cards to essentials such as car repairs or purchases that she could justify as contributions to her children’s physical health and intellectual well-being: a set of cross-country skis, a computer for Sandy, who later won full financial aid at Dartmouth. “Credit cards went for things like a bicycle,” she insisted, “not for potato chips or little Barbie dolls, but things like books, for things that would make them larger and their lives larger, that would contribute to their growing.”

  The current moment always chafed against the uncertain future. “Christmas was always huge in gift giving,” she confessed, “because I thought there may not be a next year.”

  “Each year you said we can’t do it again,” added Sandy as he stared at his laptop in the living room.

  Ann’s relatives were critical of her. “If we decided to splurge and get a box of raspberries in the middle of the winter, that would be just unforgivable, because we didn’t have the means to do that,” she said. “We shouldn’t have those kinds of choices. And I often hear people say, ‘Well, look at them, I think they’re on welfare. They have food stamps. What are they doing with a television?’ I know from the everyday grind of not knowing what’s going to happen next that people need some way to relieve that pressure and that pain—and it is pain. Some of us can do it in healthy ways, like putting cross-country skis on a credit card—and that’s not very responsible, but it’s pretty healthy.” She laughed, but not merrily.

  The real price was reflected in those bills with the snowballing balances. Since her credit rating was not exactly AAA, she was being charged up to 23.999 percent interest. What’s more, while she was faithfully paying the finance charge and minimum almost every month, she did not always get her salary in time to meet the deadline; as a result, she gradually realized, the card companies were adding late fees to her principal, then charging the exorbitant interest on that ever-growing principal. Long after she stopped using the cards, the balance continued to rise.

  This has become a chronic problem across the country as lenders search credit records for minor delinquencies to label them “subprime.” If you’re in that category you get charged higher fees and interest, but you may not know it, because few states require lenders to reveal the score that determines a consumer’s credit rating, even when the borrower sees his credit report. The score, running from a low
of 375 to a high of 900, is based on five factors: punctuality of payment, the amount of debt, how long credit has been used (the longer the better), how much new credit has been requested (the less the better), and whether the borrower uses a mixture of credit (mortgages and auto loans are preferred over credit cards). Often, the lenders get the facts wrong, of course, and it’s to their advantage. Subprime lending grew from about $37 billion to $370 billion from 1994 to 1999, with major banks among the culprits, according to Consumer Reports. Setting the stage for the 2007-08 wave of foreclosures, lenders “relaxed the old standards of sound lending by luring consumers into debt waters well over their head, but they didn’t relax the old strict standards of loan repayment. The result: Easy-money lenders point fingers at the sub-prime class they helped create, then punish those borrowers with significantly higher interest rates and fees. College students—and now even 16-year-olds—are a new target for subprime lenders.”10

  Sandy Brash, an Ivy League student with no money at all, “gets an offer a day, at least,” said his mother. Because of the aggressive soliciting and the easy credit, even teenagers were declaring bankruptcy, a financial counselor told Ann. She found the notion of bankruptcy abhorrent. She sat one day at the dining room table in her shabby, $40o-a-month apartment, her head in her hands, compiling the modest figures for her tax return and tracking her expenses. On a pad of white lined paper, she had written lists of numbers, none of them very large. “I don’t know,” she said. “I don’t even feel like trying; I feel that hopeless. There’s no way out of this.” Many people get out by declaring bankruptcy, I said. “It sounds like taking welfare, and I don’t want to do it,” she retorted. “I just want to pay what I owe.” Her voice rose onto a high note of anxious melancholy. “But I can’t do it with these kinds of rates. I knew that it was gonna take me about an extra thousand dollars a year to get the kids by over those growing years, but I just couldn’t find a way around it. And so I did it. And I knew I’d have to pay the piper. So. There it is.”

  In one respect, Ann was typical of the low-wage working people I spoke with across the country—in New Hampshire towns, North Carolina fields, and Los Angeles housing projects. They were white and black, Latino and Asian, native-born and newly arrived in America, and they were not gripped by rage. Ann did not point a finger of blame. She did not make sweeping criticisms of society at large. “I got myself into this, I made the choices,” she said plainly. “In spite of the fact that the credit card companies are taking advantage of people, that they’re really awful in charging such awful interest rates, I made the choice of using them. I haven’t used them in a couple of years. And plus I can’t answer the phone.” She did not answer the phone because she hated to hear the bill collectors. “They have all kinds of tones of voices,” she said. They left alarming messages on the answering machine, like, “Call this number immediately.”

  Always when she talked this way she then apologized for “complaining.” But I was an instigator in her complaints, I suppose, for I kept asking questions. What does this feel like? What do you think about? How foreign does the zone along the edge of poverty seem to someone who grew up in middle-class comfort? “Nobody really wants to know that sometimes $2 is a significant amount, and $25 always is tremendous,” she said, as if this condition still amazed her as well. “Tell me it’s not true for ordinary, everyday people. Is it the same? I mean, normal life”—she gave a despairing laugh—“before life was like this. I can’t remember. I can’t remember what it was like. I mean, every day and every night when I’m trying to fall asleep, there’s this worry hanging. Is the car gonna make it through because I haven’t maintained it properly? How am I gonna get this? I know I have to do this. How am I gonna get it done? How am I gonna stretch to get these bills paid? If one extra thing happens—.”

  In May, three months before her car lease expired, her ex-husband’s $100-a-week child support payments were scheduled to end because Sally would turn eighteen. It was a deadline of sorts, and Ann finally conceded that bankruptcy had to be considered. It went against her grain, but she couldn’t make the numbers add up another way. She then discovered that she was too poor to declare bankruptcy; she would need $700 for the lawyer and $200 as a filing fee. She went to a financial counselor instead.

  The counselor was accustomed to working with credit card companies to lower the interest rate to zero if the principal could be paid off in regular installments. But Ann turned out to be too poor for that option as well; looking at her low income, her expenses, and her complete lack of assets, the counselor told her that she would not be able to make the payments. So he advised her to stop paying her credit card bills, pay the rent and electricity first, save the money for bankruptcy, and file when she had enough. Gritting her teeth to “put the moral question aside,” as she described it, she stopped paying the credit card bills in March, took sums out of her food money, saved for seven months, and finally in October had pulled together the $900 required to file. It was no cause for celebration. “I take home about $860 every two weeks,” she explained. “One half of the biweekly check goes to rent, the other half to the car. Then there are utilities and transportation costs to get back and forth to work. I can’t replace underwear. We’re not having Christmas this year, though we will try to have a meal. I’m sorry, I don’t mean to complain.”

  On the surface, it seems odd that an interest rate can be determined by the condition of an apartment, which in turn can generate illness and medical bills, which may then translate into a poor credit rating, which limits the quality of an automobile that can be purchased, which jeopardizes a worker’s reliability in getting to work, which limits promotions and restricts the wage, which confines a family to the dilapidated apartment. Such are the interlocking deficits of poverty, one reinforcing the other until an entire structure of want has been built. Such was the prison of Lisa Brooks.

  She was only twenty-four, but a blemish of weariness tainted her youthful face, and her blond hair was stringy with the carelessness of stress. She worked hard and well as a caretaker at a halfway house for mentally ill adults. She was good with them, kind and firm, but she was paid only $8.21 an hour, which put her and her four children a couple of thousand dollars a year below the federal poverty line.

  She lived in a rough section of Newport, New Hampshire, in the kind of housing shown by recent studies to cause and exacerbate asthma in children. Lisa had never noticed any mold, mites, mouse droppings, or roaches, which have been linked to asthma. But she did notice that her nine-year-old son, Nicholas, got worse after they moved into a damp, drafty apartment in an old wooden house on Beech Street.

  Nicholas, home with his blind grandmother, had sudden trouble breathing on two occasions. She called 911, and each time an ambulance whisked him to a hospital, once to Claremont and once to New London. In each emergency room, he was treated with oxygen and steroids. But the family’s health insurance, for which Lisa paid $97 every two weeks, refused to cover the ambulance charges of $240 and $250, arguing that the doctor had never obtained the proper authorization. Lisa did not understand the insurance rules and procedures and did not know how to appeal. “I fought with the doctor’s office and the insurance company,” she complained, “and they still said no matter what, I had to pay for it.”

  She could not pay immediately or all at once, for she operated close to the edge of insolvency. So the charges went onto her credit report. When she tried to move to decent housing by applying for a loan to buy a mobile home, she was denied because her credit record showed the overdue ambulance bills. When she tried to buy a more reliable car, which she needed to get to work, she was also denied. So when her 1989 Dodge Caravan developed fatal electrical problems, she had no choice but to go to a used-car lot that didn’t do credit checks but charged her 15.747 percent interest. She paid $5,800 for a 1995 Plymouth Neon that had 82,000 miles, a bad alternator, and other troubles that cost $100 to $200 a month to repair.

  On the day Lisa told me about
her high-interest loan, I happened to receive an unsolicited offer from my insurance company of an auto loan at 7.5 percent, less than half of her rate. I didn’t need the loan, and that’s why my rate was so low. In a free market economy, people are like corporations issuing bonds: the less secure they are financially, the more interest they have to pay when they borrow.

  Poor people and investment bankers have one thing in common: They both expend considerable energy thinking about money. They have to juggle, predict, and plan, and every decision has magnitude. “If you are starving, you become interested in food. If you are struggling to pay the bills, money becomes tragically important,” observed Sebastian Junger, who had the experience before his best-seller, The Perfect Storm, suddenly made him a millionaire.11 Many of those for whom money is tragically important make their choices with enormous care, scouring the papers for sales, clipping coupons, perusing secondhand stores with a canny eye for bargains. Others, however, allow their cash to hemorrhage, never knowing the benefits of saving because they have never had enough to save.

  They are caught between America’s hedonism and its dictum that the poor are supposed to sacrifice, suffer, and certainly not purchase any fun for themselves. So Ann Brash gets raised eyebrows when she buys raspberries, and many others come under criticism for such indulgences as cable TV. The monthly cable bills cause acid indigestion in some people who do anti-poverty work, and the harshest critics seem to be those who were once poor themselves.

  If you sit with a group of dedicated men and women who are trying to help impoverished families, you often notice that one or two among them have apparently been licensed to pronounce stern judgment on their clients’ profligate spending. Invariably, the faultfinders display their credentials: a childhood on welfare, an unwed pregnancy, an unhappy intimacy with the culture of hopelessness. Their previous poverty confers an authenticity that commands respect. Having found their way out of the quagmire, they cannot stand to see those left behind, who remind them of themselves, wasting their chance.