It's often because they don't have access to cars, which leads to less search behavior and a greater incidence of local monopoly.
Some of you can access the original article here.
Why do the poor pay more?
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Maybe it’s often because they don’t have access to Walmart, Target, chain supermarkets?
Also, if what you link to is true, that suggest that programs like “cash for clunker” gasoline tax, and car tax end up hurting the poor the most.
Thanks, Tyler. Sounds like we have a progressive reason to oppose carbon trading/taxes and fuel taxes now.
Tomasz
“On Average” is the key word. No reason the poor could not be hurt more as a group by a Carbon tax.
I doubt car-owning is the biggest driver of this effect. Here in New York City, higher income people rarely own cars, yet the effect persists.
There’s an opposite effect that I’ve noticed here that might point to an important variable. Markets in certain ethnic neighborhoods are way cheaper than ones in predominantly American ones. The produce in Chinatown is sometimes half the cost of the produce in a neighborhood with similar price rents, like the lower east side for instance. This would lead me to suspect that price-comparison behavior is heavily influenced by cultural factors; poor people might not have had that behavior passed onto them in their upbringing.
Doc Merlin:
Most carbon tax/trading proposals include rebates to offset the distributional effects. For example, 15% of the allowance value under Waxman-Markey would go directly to low-income individuals.
Whether or not this fully offsets the disproportionally high costs on those individuals is certainly a valid question, but the issue is certainly addressed in the policy proposals.
Marc has an excellent point. Also worth considering is the home storage space necessary to take advantage of mass merchandizers’ volume discounts.
I may be paying slightly more for food and household supplies in my poor inner-city neighborhood, but an offsetting factor is the convenience of having a market within two minutes’ walking distance. I don’t have to fill my cupboard with bulky canned tomatoes in order to anticipate my marinara needs; instead, I can run down to the supermarket whenever I need them.
That’s only in American developed sub-urbanized areas. This is not the case in developing countries, nor I bet in NY City, where cars are actually a problem.
Wagster –
The rest of us don’t have NYC’s public transportation access. I work near one of St. Paul, MN’s immigrant/lower income neighborhoods and used to do my shopping in another one. Those stores have prices five or ten cents a unit higher than the same chain in the first ring suburbs. If a store has easy bus access, the grocery prices tend to be higher. I’ve heard it may be because a larger percent of the population is using food stamps. Before I switched most of my produce and dairy (I don’t buy meat because I’m vegetarian) to the coop or farmers market, I could save five or ten dollars a month on a grocery budget of less than $150/month by driving a couple miles to a suburban store.
@RM: Detroit doesn’t even have any large grocery stores much less a wall-mart, to get to a Wall-mart in Detroit you have to go to a suburb. Lots of big cities try to fight wall-marts.
@libert: “Most carbon tax/trading proposals include rebates to offset the distributional effects. For example, 15% of the allowance value under Waxman-Markey would go directly to low-income individuals.”
Rebates are highly ineffective because of the time difference between paying for the good and getting the money. They if they are for the poor also exacerbate the effect of the “effective marginal tax rate” being high for the poor.
Marc Roston wins the thread.
~sigh~ the naysayers have obviously never been truly poor.
Sure, the poor have more options in larger cities with robust public transportation but most poor people don’t live in big expensive urban centers either. The poor pay more in enclaves where there is reduced competition. A case could be made that operating expenses can be higher (crime etc) so it could end up being what amounts to a pass through cost. Having been forced to shop in places like this, I’d say not. They might have more security but the stores are filthy and run down, doors are broken, displays aren’t repaired etc. And it is no secret (!) that merchandising vendors rotate expiring product from the good part of town to fill in the shelves at the poorer parts of town. So, not only do poor people pay more, they get less for it. And that’s not the only way they pay. Shopping costs more time.
People with cars (and higher incomes) have more shopping options. There are rarely neighborhoods near discount warehouse clubs so you can’t walk or take the bus there to get discounts (assuming you could afford the annual membership fee). The biggest problem with having to shop via public transportation is getting the goods home. You can only buy as much as you can carry from the store to the bus stop and bus stop to your home. This can mean several shopping trips a week, each of which take an inordinate amount of time.
Consider the internet, that’s the lowest cost option but then you’d have to be able to afford a computer, an internet connection and a bank account. Some people don’t even have the latter.
There was a great article about this in the Washington Post about six months ago.
Basically, it’s so hard for stores like CVS to make a profit that they have to charge higher prices.
Hillary and RM: Of course NYC is an exception, but that’s why it’s a useful data point. It let’s us (largely) exclude the car as a variable between wealthy and poor. If the effect perseveres, then we have to think about other drivers.
Lots of big cities try to fight Wal-Marts.
Name one.
“Chicago”
From the “Chicago Tribune” (5/8/09):
Not long ago Wal-Mart had ambitions of operating as many as 20 stores in the city. It opened a 142,000-square-foot discount store in the Austinneighborhood on the West Side in September 2006.
Wal-Mart wanted to open supercenters in the rest of the city, roughly 180,000-square-foot stores that also sell groceries.
But the retailer, which has a non-union workforce, ran into oppositionfrom unions that have been trying to stop the Bentonville, Ark.-basedcompany’s expansion into northern cities.
Both Wal-Mart and the unions say they help everyday working families.Wal-Mart points to its affordable merchandise, willingness to blaze a trailinto the food deserts of inner cities, and the hundreds of workers each storeemploys. Unions point to their campaign to persuade Wal-Mart to pay higher wages and health benefits to workers.
….
Wal-Mart at one time wanted to open up to 20 stores in the city of Chicago – that would have meant lots of jobs and lots of tax money. But the company got so much grief from the unions and their pals in the corrupt municipal government over non-unionization of the workforce and “living wage” legislation that the plans were scaled way back and most of the new stores were located outside Chicago’s city limits. This makes it harder for poor people to shop there. Way to go, Chicago!
There’s hundreds of reasons why the poor pay more. Boiling it down to just a car is lazy analysis.
Part of the reason Wal-Mart wanted to open stores in Chicago proper is because of the number of Chicago residents making the effort to go to a Wal-Mart in the suburbs. So then the question is, if Chicago residents want to shop at WalMart, and WalMart wants to provide a store closer to them, then why is the Chicago government stopping it?
Even after controlling for store size and competition…
Pure laziness. Why not control for taxation, minimum wage laws, theft rates, etc.?
Sir, in Southamerica is different. In the north of this city were most people is middle class or high class we pay twice and three times the amount paid for services like mechanics and home repairs in the south of the city were most people is poor. That is after the main street( de facto) of the city. Of course most of them live in the south but gas is not a factor here. They are price discriminating monopolist
“Name one”
San Diego
Maui
Someone already mentioned Chicago. There’s this new thing called “google”… anyhow, some of this opposition is the anti-corporate crowd, some of it is the competition.
I have always wondered whether the time factor that Kathleen discusses was the worst part about breaking out of poverty.
Also, I am wondering about the effect of Walgreens. I notice that Walgreens has not let up their expansion program in the same time period that Starbucks backed way off, so they seem to be everywhere, and they have basic groceries. If they are expanding into poor neighborhoods, maybe they are an efficient alternative to the crappy stores that serve them (poorly) now.
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