The costs of being poor

The social costs of being poor get a lot of coverage, especially a popular topical issue generally labelled as ‘child poverty’. But there are tangible financial costs of being poor, and these contribute to keeping many people stuck in a poor rut.

David Cormack raises this in Poorness charges interest:

A few jobs ago I had Koru Club membership as part of my remuneration package. I used to sit in Koru Clubs at various airports eating my free scrambled eggs, and drinking my free booze. As I enjoyed the trappings of my corporate bourgeois life, I’d think to myself that those who had more money got free food and drink, while those with much less would have to pay exorbitant airport costs for a soggy sandwich.

Another example I’ve already mentioned is how much cheaper a monthly pass is for public transport. If you can’t afford that then you get stuck on the more expensive daily fare – all because you’re already short of money.

Being poor is compounding. We built a system where so much opportunity is around money. And the opportunity to get more money is dependent on having a lot of money to start with. By design, this system entrenches elitism while if you have the misfortune of being born into a poorer household then you’re odds on to stay poor throughout your life.

Many people do manage to do better financially than their parents during their childhood. I grew up in an at times very poor household but both my parents ended up doing ok financially.

I struggled financially for years when raising a family – we were certainly a ‘poor’ family for periods. But while I’m not ‘rich’ I don’t think I’m what would be regarded as poor either. And all my children and step-children are doing at least reasonably well financially.

But there are many people who seem to get stuck in a generational cycle of poorness poverty.

There are many examples of how you can get stuck in a poorness rut.

You might be short of money and then get a slight toothache. But dentists are expensive so you hold off doing anything about it, hoping it’ll just get better of its own accord. Except it doesn’t. So next year you’re in the can for what could be a thousand dollar root-canal.

Or your power bill is paid by automatic payment, except this month there wasn’t quite enough so your bank charges you a fee for being overdrawn. Who do you think is most likely to fall into overdraft? People who can easily afford overdraft fees, or those struggling?

Got a 20 year old car? It’s probably cheaper to keep doing those $600 repairs than it is to buy a new one that’s less likely to break down.

The same can apply to house maintenance – deferring small repairs that end up growing into big repairs.

And poorer people are more likely to rent accommodation – and that is often older lower quality that costs more to heat than a new house. Unhealthy houses can also lead to higher health costs and lower productivity and earning power.

The way society is structured around money and assets means that your margin for error when you’re poor is tiny, but that same margin for error when you’re wealthy is much bigger. You might be earning enough to just scrape by, but if a surprise medical issue occurs, or a car breaks down, or your washing machine dies, then that can throw your entire budget out.

Even the smell of an oily rag can run out of odour.

We should definitely reward excellence. But let’s also do it at the same time as ensuring that nobody is struggling. Because the person struggling needs our help far more than the person who’s already thriving.

But what can be done about it?

 It’s time to remind them that we are a community of many, and they are a Koru Lounge of few.

A good quote but not likely to tug on the heartstrings and purse strings of many of the better off.

Let’s stop being ruled by a system that constantly rewards the very top while routinely stamps on the bottom. It’s not fair that a booming stock market means the rich get richer but a plummeting one means the poor lose their jobs. It’s time for everyone to get a decent lifestyle. It’s time to not accept a rigged system.

At least it’s not as badly rigged here. My brother recently died in Texas – it appears that he couldn’t afford decent health care there. That can be a vicious circle in the US – illness reduces earnings, which reduces the ability to pay for health care. My youngest brother didn’t survive a difficult predicament.

Perhaps in his next column Cormack will suggest what a non-rigged system in New Zealand might look like to him. And importantly, how that revolutionised system might be achieved. So far there is little sign of major changes from the current Government. Greens talk of wanting major societal and financial restructuring, but Labour and NZ First have shown scant signs of delivering on campaign claims and rhetoric.

I remember a time when the budget was very tight (a large mortgage and high interest rates were tough). We had a mature student boarding with us. I told her once I didn’t think I would ever be rich because making money wasn’t my priority in life.

She said ‘Look around you, look at your children, your family. I see a richness there’. I still have that sort of richness.

Money isn’t everything, but a decent amount sure as hell helps. Financial stress can be hard on relationships, and that’s something that cost me a marriage. Things have worked out since then but it was very tough at the time.

38 Comments

  1. Pink David

     /  11th December 2018

    Is it really a surprise that poor people are bad at managing money?

    • Blazer

       /  11th December 2018

      Fonterra doesn’t seem very capable either!
      Supposedly value added dairy is the future.
      Yet now they sell an iconic brand=Tip Top to recover losses made from their foolish chinese investments.
      Plenty of other examples of ‘rich’ people who are bad at managing money…especially O.P.M.

      • Kitty Catkin

         /  11th December 2018

        Fonterra can’t control world markets, and Chinese is spelt with a C, not c.

  2. david in aus

     /  11th December 2018

    The Poverty mindset can be intractable. Even winning lotto is not a silver bullet, as many are back to where they started a few years after winning. Therefore any attempts to redistribute income alone is unlikely to improve social outcomes.

    Perhaps, it is time to be more paternalistic for those on long-term welfare. They are unable to provide for themselves and it is probably time for society to allocate money for food, housing etc prescriptively. Perhaps a meal plan and recipes with the basics only: vegetables, mince, chicken, flour etc.

    More importantly many are incapable of understanding finance because of limited literacy or intelligence or are unable to resist their impulses. Those on long-term state aid should be banned from any credit facilities or should have strict limits.

    We may not ever solve the Poverty Mindset but we can mitigate its destructive effects.

    • Blazer

       /  11th December 2018

      probably some merit in managing welfare payments regarding food,shelter and the basics.

      The reality of Capitalism is that you cannot have rich people without a whole lot of….poor people.

      Financial structures and instruments are not core subjects…an informed population would not tolerate the chicanery endemic in the present…system.

      • Alan Wilkinson

         /  11th December 2018

        Utter nonsense from start to finish.

        • Blazer

           /  11th December 2018

          your endorsement of the facts is very …encouraging.

          • PDB

             /  11th December 2018

            It is nonsense as after all that whining he offers no solution to the ‘problem’.

      • david in aus

         /  11th December 2018

        All the people of NZ are in the top 1% worldwide. Little old NZ did not do this by exploiting the poor in other countries.

        There was the Rich and Poor before capitalism existed. Even in Communism, no one can say Stalin, Castro or Mao had the material wealth similar to the poor.

        Hierarchies exist in animal kingdoms, some people are better at certain things than others- facts of life.

        • Blazer

           /  11th December 2018

          ‘All the people of NZ are in the top 1% worldwide. Little old NZ did not do this by exploiting the poor in other countries.’

          produce your evidence.

          You appear to believe in Darwins theory.

          • Alan Wilkinson

             /  11th December 2018

            You appear to be in danger from Darwin’s theory.

          • david in aus

             /  11th December 2018

            1. NZ is not a colonial power.
            2. Average income required to be in the top 1% is $US34000
            https://www.dailymail.co.uk/news/article-2082385/We-1–You-need-34k-income-global-elite–half-worlds-richest-live-U-S.html

            I should state most of NZ is in the top 1%. I should have excluded: school kids, prisoners etc. The main thrust of the argument stands.

          • David in aus

             /  11th December 2018

            Origins of Species was a masterpiece. Except for some creationists it is widely accepted. I think the Catholic church made some concessions to Darwinism.

            If you are talking about Social Darwanism as seen in Nazism, you are off base. All humans have value, intelligence or skill is not a measure of human worth. But if you are more intelligent, conscientious and with some luck, you are more likely to have material wealth than others. Any system that encourages effort, intelligence drives the human race forward.

      • Trevors_Elbow

         /  12th December 2018

        Ahhh the old fallacy dressed up as truth fom the mouth of a sage.

        What utter Bollocks. The ‘poor’ in NZ have a lifestyle and opportunities that are unbelievable, yet the envy set – of which you are very much a part of Blazer – just want to burn the whole thing down.

        pathetic

      • Trevors_Elbow

         /  12th December 2018

        nice to see you still practice the upticks form your sock puppets trick..

    • Kitty Catkin

       /  11th December 2018

      A friend worked for Sunbeam, and when it closed everyone was given redundancy money. Some of the lower paid girls decided to blow theirs on a really expensive evening out with a limo etc; they had never had such an amount before, and couldn’t imagine saving it or doing anything useful with it. Their decision, of course, and my friend said nothing to try to stop them.

      The people who blew the money that the government paid for their subsidence area house will be renting forever, and instead of being mortgage free in their retirement will be badly off. Some people just don’t ‘get it’.

  3. Gezza

     /  11th December 2018

    More importantly many are incapable of understanding finance because of limited literacy or intelligence or are unable to resist their impulses. Those on long-term state aid should be banned from any credit facilities or should have strict limits.

    Money management was something I only learned as a child when I started getting pocket money. Pocket money was only possible when our little sister was old enuf for mum to get a low paid job and earn some extra income.

    Pocket money was not simply given. We all received it in return for doing chores every week. it was ours to save or spend as we liked and it was recommended we save as much as possible.

    Interestingly, the sibling who always spent the lot on treats and sweets and had little to show for it at the end of the pay week is the one who is now earning by far the most and still complaining about being short of money.

    How can a child learn money management if there is insufficient money in the household to pay pocket money?

    • PDB

       /  11th December 2018

      The most important lesson one should learn at an early age is the power of compound interest. It takes only a very small amount of money being regularly paid over a period of time to become a substantial amount for the future.

      • Gezza

         /  11th December 2018

        How can you learn about compound interest if you haven’t got any money to compound because you haven’t got any pocket money. Did you give your kids loans?

        • PDB

           /  11th December 2018

          Gezza – I suggest very few households, along with other relatives/friends of family couldn’t afford to pay even a small amount of money to kids for pocket money or money for odd jobs around the place.

      • Alan Wilkinson

         /  11th December 2018

        No, the most important financial and life lesson to learn is the power of making a plan and carrying it through. My strategy with my children when they wanted something was to say “I’ll pay half”. Then they had to make a plan to earn the other half. After school jobs are a prime way for children to learn to do this. Sadly bureaucracy is on a mission to make those as impossible and unattainable as they can.

        • Blazer

           /  11th December 2018

          ‘I’ll pay half”.typical…half arsed,half baked…half wit!

          • Alan Wilkinson

             /  11th December 2018

            Glad you weren’t my parent, B. Sorry for those who had you.

            • Blazer

               /  11th December 2018

              as you stated…you had a priveleged…upbringing…lucky sperm.

            • Alan Wilkinson

               /  11th December 2018

              I did. Decent, intelligent, kind parents even though we were dirt poor compared with the modern generation. Sorry about yours.

            • Kitty Catkin

               /  11th December 2018

              I remember the thrill of being old enough to have a ‘clothing allowance’ and make decisions about my own clothes . I didn’t blow it, because I knew that I’d have to live with that decision until the next instalment came 😀 But I still remember some of the things I bought, like a suede pinafore dress and my first ever high heels.

          • Trevors_Elbow

             /  12th December 2018

            Ha Al served you up nicely and of course you retreat to you typical posture of sneering and name calling. You’re slipping again Bol… maybe you need to go back to touring Asia

    • Trevors_Elbow

       /  12th December 2018

      My mum had zero money as a kid… depression was raging in the UK and then WWII arrived. She learn the value of a dollar and spending wisely by having nothing…..is not rocket science. You can teach value with simple non money examples – like the classic pysch study video of children promised two lollies later IF they don’t eat the one in front of them right now while the adult is out of the room… its all about impulse control…

  4. Blazer

     /  11th December 2018

    ‘dirt poor’=b/s.

  5. Kitty Catkin

     /  11th December 2018

    David Cormack ignores the fact that anyone who’s in the airport waiting for a flight can’t be that poor. And that there’s no need to buy a ‘soggy sandwich’.

    • PDB

       /  11th December 2018

      Cormack ignores actually providing a solution. I suspect ‘socialism’ is again the (wrong) answer.

      • Kitty Catkin

         /  11th December 2018

        Many things are so cheap now that the old idea that poor people had to pay more has been alleviated to some extent. I am too mean to spend more than I have to on boring things like cleaners, and was delighted to discover that the Warehouse’s are as good as any and better than many.

        But some things are still more expensive for poor people.

        The author of A Child of the Jago who said that the slum house where the Perrotts lived was more expensive area for area than a house in an (upmarket) street would be was right, of course. People were mostly renting one room for a family. Boarding houses here would almost certainly bring in as much rent as an expensive whole house.