The Daily Journal

Consumers Learn High Cost Of Being Poor In New Jersey

The Daily Journal — October 15, 2012

Written by
Michael L. Diamond
Gannett New Jersey

NEPTUNE — More than a decade ago, Joanne Jubert made six figures as an art director for a New York advertising agency. She pursued her passion of scuba diving. She joined film societies. She bought a modest home in Little Silver, an upscale Monmouth County town.

After 9/11, though, she began a slow descent on the career ladder — first losing income, then losing her job — and found life without a steady paycheck made her think twice before even buying food.

The spike in food prices at times this year "had such a tremendous impact on me that I didn't eat most of the summer," Jubert, 58, says. "I lost a tremendous amount of weight. My friends were so concerned about my well-being they had me signing up with every single social service."

As Jubert found out, it can be expensive to be poor. Consumers living on tight budgets feel the squeeze of higher gasoline or food prices more than their affluent neighbors.

And in some cases, the lower the income, the higher the costs. Neighborhood convenience stores sell food for more than suburban supermarkets. Auto insurers use the often shaky credit histories of the poor to set higher premiums. And banks levy

pricey service fees on consumers whose balances dip below certain levels.

Collectively, helping the poor touches everyone's life and income. By one estimate, $668 billion a year is spent on anti-poverty and low-income aid programs — from Medicaid to college grants — at an average cost of $6,600 per family that is not in poverty.

But the low-income, high-price paradox is a way of life facing more people. Nationally, 46.2 million people live in poverty — 15 percent of the population — up from 39.3 million in 2008, according to the U.S. Census Bureau. And a new study by the United Way of Northern New Jersey shows more Garden State households who aren't technically considered to be in poverty are struggling just to tread the economic waters.

Advocates for the poor say their constituents don't always know about or take advantage of the help from agencies o r companies that's available. But even with social programs at the ready, the poor still spend extra for things that more affluent households take for granted.

"There's a saying that goes back a while, and it's what people in poverty face," says Mark Rank, a professor of social welfare at Washington University in St. Louis. "It's the 'heat or eat' dilemma. When you're in poverty, you really have to make tough choices."

Jubert can't believe she faces a dilemma as basic as whether to eat. Jubert attended American University in Washington and then the School of Visual Arts in New York before quickly landing a job with a small design firm in Manhattan. She lived on the Upper East Side and took advantage of all of the cultural events that New York offered. And with home prices still reasonable in the late 1990s, she bought a house in North Jersey, allowing her to be closer to her family.

After the 9/11 terrorist attacks and the recession that followed, the opportunities for art directors dried up. She lost her enthusiasm for New York. And she took a government job closer to home, making about the same amount she made when she was 23.

Jubert worked there for 10 years, but lost her job in March after a battle with Lyme disease and what she described as a dispute with management. Since then, she has relied on her savings to pay the bills.

"I didn't think about it almost a day for my birthday. I thought that would be my present; if I could stop ruminating, that would be the best way to celebrate," she says. "I pulled it off, but the next day or two I beat the living hell out of myself for not beating myself up for a day."

As New Jersey struggles with an unemployment rate of 9.9 percent in the aftermath of the recession, more households are in similar straits.

The United Way study released last month found 319,900 households statewide lived in poverty in 2011, and another 829,000 households were employed but not wealthy enough to comfortably afford housing, food, transportation, health care and child care.

That amounts to 36 percent of the population, or 7.7 percent more than 2010, the study found.

"The means to get out of that situation are limited because more than half the jobs pay less than $20 an hour or are part-time without medical coverage," says John Franklin, CEO of United Way of Northern New Jersey. "The ability to dig their way out is limited."

As lower-income residents dig, the hole only seems to fill up. How?

* Inflation. For those on a fixed income or receiving unemployment benefits, inflation can eat away at their limited budget. At first glance, inflation rose in August a tame 1.7 percent nationwide during the past year, according to government statistics. But some commonly-bought items far o utpaced any income gains. Chicken rose 5.3 percent; eggs rose 5.5 percent; ground beef rose 6.8 percent; and apples rose 10.1 percent, according to the U.S. Bureau of Labor Statistics. Meantime, New Jersey gasoline prices last week averaged $3.79 a gallon, 14.7 percent more than a year ago, according to AAA.

* Food. Low-income consumers without a car may shop at the local, more expensive convenience store. But that can cost a lot more. "It's very difficult to get the same deals as stores that buy in bigger bulk," says Jeff Lenard, vice president of the National Association of Convenience Stores.

* Auto insurance. In determining premiums, New Jersey's auto insurers take into account factors such as geography and credit scores, leaving a driver who lives in a urban area and has a poor credit history likely to pay more. Low- and moderate- income households spent $30 billion on auto insurance premiums in 2010, dwarfing what they spent paying off car loans or buying other types of insurance, according to a study by the Consumer Federation of America.

The insurance industry uses more than 20 factors to manage its claims, and it has found that consumers with poor credit scores are less likely to maintain their cars and more likely to take more driving risks, says Loretta Worters, a spokeswoman for the Insurance Institute of America, a New York-based trade group.

* Banks. Lower-income customers, considered riskier bets, long have paid higher interest rates for loans. Now, facing tighter regulations since the financial system nearly crumbled four years ago, some banks have begun charging fees on checking accounts. The fee can be waived if customers get direct deposit or maintain an average balance that can be at least $1,500. "It's just one less meal that they have (money) for," says Phyllis Salowe- Kaye, executive director of New Jersey Citizen Action, a consumer group. "Add it up and it could mean your kids' school supplies."

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