Saturday, September 1, 2007

Economics of being poor

Unix-Jedi sent me this article: The Poverty Business: Inside U.S. companies' audacious drive to extract more profits from the nation's working poor. In reading it I was reminded of a guy I worked with while I was in college. I'll call him Dan.

I was 21 and working in a flower shop while I was going to a major university to get a degree in Horticulture. (I have a bachelor's degree in Horticulture, too.) One slow Saturday those of us working were talking about movies. Dan starting talking about the new VCR he had just gotten from a Rent-to-Own store. Yes, I said VCR, I'm old.

"Why would you rent-to-own a VCR?"

"Well, my wife is home all day with the baby and she wanted something to do, and we can't afford to buy a VCR. So I went to the place where we are renting all our furniture and got one."

"So, how much are you paying for the VCR?"

"Oh, only $7 a week."

"For how long?"

"Only a year."

"So, at the end of a year you will have paid $364 for a $100 VCR. Why don't you just save the $7 a week for 3 and a half months and go to Wallyworld and buy a VCR?"

"Well, we need one now. Plus, if my wife finds out I'm saving money she'll spend it."

Another conversation later that day:

"Did you get the phone turned back on at your house?"

"No, I decided not to have it turned back on because if I do the wife just talks to her mom all day long distance and then I can't afford to pay the bill."

"Have you explained to her that she can only use the phone for local calls and the occasional call to her mom?"

"Yes, but if the phone is on she'll just call her mom anyway."

"So, your wife and kid are at home all day in a house without a way to call 911 if there is an emergency because your wife can't understand that she can't call long distance and run the bill up?"


I just shook my head and went back to work.

These people aren't poor because companies are taking advantage of them. They are poor because they have a need for instant gratification, consequences be damned.


Denny said...

Yannow I would really like to make some intelligent comment about why poor people are poor but I cannot write sumpin' better than what you just wrote. Go figger.

Quasimodo said...

As demonstrated by copious data, in a remarkably accessible way for what could otherwise be a very dry discourse, The Bell Curve shows that the strongest factor affecting not only wealth but a host of other behaviors is IQ.

I'm betting Dan wasn't the sharpest knife in the drawer.

pdb said...

Being poor isn't noble or an unfortunate set of circumstances. It's a mental disease.

DixieLaurel said...

You would be correct in your assessment of Dan, Quasi. There will be other stories about him in the future. Stay tuned.

Jim - PRS said...

I'm with Denny.

Atomic Fungus said...

well! you people are a bunch of neo-con nazi jerks! how dare you blame the victims of capitalism for their situation?


Oh. /radical

Unfortunately, though, there are plenty of people who seriously believe my tongue-in-cheek comments, above.

I made note of that "Rent-to-Own" scam years ago. It's an easy way to buy something but the interest rate is usurious and the merchandise isn't worth it.

I'm really looking forward to hearing more stories about "Dan". But it's actually not "Dan" who is the problem; it's his wife. She sounds like a real rocket scientist, all right.

Ed Hering
"Atomic Fungus"

Teresa said...

Oooh Denny knows the best people. *grin* You are, of course, absolutely correct. Which is why, when my husband and I were young with a family and broke... we had nothing at all. It took years and years for us to save enough to live well. For now (one never knows what the future holds) we don't do too badly.

Even my daughter said to me one day... "you know mom, I was driving through this one apartment complex, all the people are really really poor... but they ALL have a satellite dish!!! How dumb is that!"

I guess my kids did learn a thing or 2 about money from their parents. ;-)

Rick C said...

I was talking to a friend just last week, who was saying he wanted to get a computer...and was talking about rent-to-own. I pointed out he'd pay a lot less by waiting for it, saving up, and buying it when he had the money to get it outright, but I'm not sure it took.

I'm trying to teach my kids fiscal responsibility so they don't wind up like this, but it's not easy stuff.

Art said...

Quasimodo: It’s not a low IQ it’s an the absence of self discipline. Duckworth & Seligman, 2005 indicates that self discipline is twice the indicator of scholastic success as IQ. It’s obvious from the above exchange that there is a total lack of self discipline.

Symph said...

I went with a RTO many years ago to get a TV. Luckily I was able to find a place that didn't penalize you for an early payoff.

Ended up paying the same as if I'd gotten it on a credit card what with interest and such.

Never would do it again. They'll eat you alive.

My father compared them to the 'company store' and he was SO right.

Quasimodo said...


There is a strong positive correlation between IQ and impulse control, also called self-discipline. In general, smarter people are better able to plan for the future, and therefore to take into consideration the (possible) consequences of their actions.

This does not mean there aren't any geniuses who mess up and indebt themselves so they can be gratified now rather than later. It just means that fewer smart people than not-so-smart ones make such mistakes.

I'm looking forward to more Tales of Dan.