Being poor is expensive (and it’s messed up)
Being poor in the United States is expensive. Along with some of the regressive government tax/transfer measures in place, businesses often charge low-income people more. One of my motivations for founding Sigo Seguros was to help rid the market of usurious fees charged by many insurance brokers (in the states where they aren’t illegal). While higher prices on some services are sometimes inevitable, pricing differentials often appear due to information asymmetry.
Financial service providers are notorious for charging hidden fees. One of the reasons we are seeing a disaggregation of banks is that startups are recognizing how to address specific pain points for consumers at lower costs. However, many of these solutions haven’t reached the 8% of Americans who are unbanked. While most of us can cash a check for free, millions of Americans pay a 3–5% fee to access their hard-earned money. In recent years, we have seen payday lending come under scrutiny for exorbitant rates and fees on small, short-term loans (although that tide may be turning back). Walmart pays its employees on cards, which charge them if they spend money elsewhere (or at least they did). Extra fees for insurance policies and basic banking services are just two ways businesses are failing society. Low-income people often pay more for food and utilities as well. This adds to mental and emotional strife rarely factored into the conversation, but which is front of mind for the 35% of Americans who say they would be unable to make bill payments if faced with a $400 emergency expense.
This is not an indictment of free enterprise, but rather a notion questioning its efficiency. Consider the billions of dollars in play for companies willing to do better. There is a difference between what a company should charge, and what they can charge for a good or service. Long-term shareholder value is created by providing the best service to customers. Companies should win by providing what people need, not by ripping them off when providing it.
