Many families from the lower income group in the USA face unavoidable expenses that keep them in a cycle of poverty. These costs are often higher for them than for middle or upper-class families. Basic needs like housing, transportation, and healthcare become financial burdens. Predatory lending and taxation on essentials add to their struggles. These expenses make it hard to save money and improve their financial situation.
Here are some unavoidable expenses that keep lower-class people poor.
Housing
Safe and affordable housing is a major challenge. A report by Market Watch found that a full-time minimum wage worker would need to work 104 hours per week to afford a two-bedroom rental apartment in most U.S. states.
Another report by Affordable Housing Finance states that “there is a shortage of 7.3 million affordable and available rental homes for extremely low-income renters.” This creates a situation where low-income renters are forced to spend a disproportionate amount of their income on housing, often exceeding 30%, which is considered the standard for affordable housing.
Transportation
Access to reliable transportation is crucial for work, education, and healthcare. However, car ownership can be expensive due to maintenance, insurance, and gas costs. Public transportation may be limited or unreliable in some areas, forcing car dependence even when it’s not ideal.
According to the Center on Budget and Policy Priorities, transportation costs consume more income for low-income families than higher-income ones. The report states, “For the poorest 20 percent of working families, transportation costs account for about 18 percent of their income, compared to 9 percent for the wealthiest 20 percent.”
Healthcare
Even with insurance, healthcare costs can be a burden. Deductibles, copays, and medication costs can add up quickly, especially for those with chronic health conditions. A study by the Kaiser Family Foundation found that in 2021, workers with employer-sponsored health insurance paid an average annual deductible of $1,661 for individual and $3,464 for family coverage. This can be a significant financial hurdle, particularly for low-wage earners whose average yearly income is only $24,000.
Debt
Predatory lending practices and unexpected expenses can lead to high-interest debt. This debt can trap people in a cycle where they struggle to make minimum payments, leaving them with less money for other necessities.
The Federal Reserve reports that in 2022 the average credit card debt per household was over $7,000. While not everyone in the lower class carries credit card debt, those who do are often disproportionately impacted by high interest rates and fees.
Childcare
Childcare costs can be significant, especially for single parents or those with multiple children.
According to the Center for American Progress, the average cost of full-time infant care in the United States is $16,800 per year, exceeding the cost of in-state tuition and fees at most public colleges. For most lower-class couples who need to go to work, childcare becomes necessary. However, with such a high cost of childcare, it also becomes financially draining for this class.
Limited Access to Healthy Food
Fresh fruits, vegetables, and whole grains are essential for good health, but they can also be more expensive than processed foods. This is especially true in “food deserts“—areas with limited access to affordable, healthy groceries. These areas often have a higher concentration of convenience stores and fast-food restaurants, prioritizing profit over nutrition.
While these options may seem cheaper initially, they are typically high in calories, unhealthy fats, and sodium. This lack of access to healthy food choices contributes to a higher prevalence of diet-related health problems like obesity, diabetes, and heart disease among low-income populations.
Predatory Lending and Debt
People living in poverty often have limited access to traditional sources of credit like banks or credit unions. Their lower credit scores or lack of credit history make them high-risk borrowers in the eyes of traditional lenders. This limited access pushes them towards alternative financial services; unfortunately, many of these services are predatory in nature.
Payday loans, for example, are short-term, high-interest loans that can trap borrowers in a cycle of debt.
These loans often have annual percentage rates (APRs) exceeding 400%. So, if someone is borrowing $100 to cover an unexpected expense, they are obligated to repay $400 within a few weeks. These practices make it incredibly difficult for low-income families to save money and build wealth, as any unexpected expense can snowball into a mountain of debt.
Taxation on Essentials
Sales taxes on essential goods and services disproportionately burden low-income families. While everyone pays the same sales tax rate, a larger portion of a low-income household’s budget goes toward necessities like groceries and clothing. For example, consider two families: one making $20,000 a year and another making $100,000 a year. Both pay the same sales tax on a gallon of milk, but for the low-income family, that tax is a more significant part of their budget. This makes it harder for them to afford other necessities. Many states and localities also tax essential items, further straining low-income households.
Unstable or Insufficient Income
Low wages, limited hours, and a lack of benefits can make it nearly impossible for families to make ends meet, and save for emergencies or invest in the future. Minimum wage jobs, while intended to provide a baseline income level, often don’t provide enough income to cover basic necessities like housing, food, and transportation. Many work full-time at minimum-wage jobs and still struggle to afford rent or put healthy food on the table. Many low-wage jobs also lack important benefits like paid sick leave or affordable healthcare. An unexpected illness or injury can devastate a low-income family’s finances, especially if they are forced to miss work or pay for expensive medical bills.
Digital Divide and Technological Inequality
Reliable internet access and digital literacy are increasingly important for everyday life. Job applications, government services, educational resources, and even healthcare information are often accessed online. However, low-income families may struggle to afford internet service or lack access to devices like computers or tablets. This digital divide can limit their ability to find employment, access educational opportunities, and participate fully in society. Furthermore, even with internet access, a lack of digital literacy skills can make it difficult to navigate online resources effectively.
Intergenerational Poverty and Lack of Resources
Poverty often follows families across generations. Children raised in poverty may lack access to quality education, healthcare, and mentorship opportunities. This lack of resources can hinder their ability to develop the skills and knowledge needed to secure higher-paying jobs and break the cycle of poverty. Additionally, low-income families may lack access to social networks or mentorship programs that can provide guidance and support in navigating the job market or accessing educational opportunities.
Hidden Costs of Poverty
Beyond the readily apparent expenses, there are numerous hidden costs associated with poverty. For example, low-income families may be forced to live in older housing with higher utility bills due to poor insulation or inefficient appliances. They may also lack access to bulk discounts or affordable laundry facilities, leading to higher costs for basic necessities. Furthermore, unexpected car repairs damaged clothing that needs replacing more frequently due to lower quality, or the need to rely on payday loan services can all add up and significantly strain already limited budgets.