The double whammy of being poor – making less and getting charged more(blog.paribus.co)
blog.paribus.co
The double whammy of being poor – making less and getting charged more
https://blog.paribus.co/2015/09/20/the-double-whammy-of-being-poor-making-less-and-getting-charged-more/
15 comments
Hey Marco,
Thanks for the kind words on the service. On your feedback, here's my take:
1. Stepping back, isn't it more absurd that people are, by default, charged more unless they spend significant time dealhunting? The claim is not that the disparity itself is unjust, just that it's time for this to come to an end.
2. For all of the biggest e-Commerce players (Amazon, Walmart, etc.), their biggest business lines (and ones where they're investing the most) are in the sales of basic necessities (food, household goods, etc.). So considering how dynamic pricing will impact people (esp. re: basic necessities) is important. I'm not sure why you're dismissing the key point so quickly -- if we care at all about helping bridge the income divide, we should care about helping the poorest get the most affordable prices.
In any case, I wrote the article because it really did shock us. Joe is a real person and a friend and we hope it does some good to show a small slice of what we're seeing.
Thanks for the kind words on the service. On your feedback, here's my take:
1. Stepping back, isn't it more absurd that people are, by default, charged more unless they spend significant time dealhunting? The claim is not that the disparity itself is unjust, just that it's time for this to come to an end.
2. For all of the biggest e-Commerce players (Amazon, Walmart, etc.), their biggest business lines (and ones where they're investing the most) are in the sales of basic necessities (food, household goods, etc.). So considering how dynamic pricing will impact people (esp. re: basic necessities) is important. I'm not sure why you're dismissing the key point so quickly -- if we care at all about helping bridge the income divide, we should care about helping the poorest get the most affordable prices.
In any case, I wrote the article because it really did shock us. Joe is a real person and a friend and we hope it does some good to show a small slice of what we're seeing.
1. To paraphrase what the fine folks in the US like to say, the world doesn't owe you a deal.
The merchants do deals not for the customers, but for themselves: to maximize profit, increase market share, and maybe achieve some other goals. If you guys are communists, and think corps are evil, and the poor are exploited, that's fine, but how can you hope to successfully operate in any industry without comprehending the basic motivation of the principal actors?
The merchants do deals not for the customers, but for themselves: to maximize profit, increase market share, and maybe achieve some other goals. If you guys are communists, and think corps are evil, and the poor are exploited, that's fine, but how can you hope to successfully operate in any industry without comprehending the basic motivation of the principal actors?
Getting away from the usual capitalist moralizing, Paribus has a time-tested business model I've seen before. Very well-compensated people discover companies overpaying for (say) a utility, and offer to negotiate for them.
> To paraphrase what the fine folks in the US like to say, the world doesn't owe you a deal.
I’m from the US. 40% of us believe the earth was created a few thousand years ago. Be immediately skeptical about anything we commonly say. (http://www.livescience.com/46123-many-americans-creationists...)
(And it even contradicts the whole point of the "US". We’re born into all sorts of bizarre deals, like the so-called social contract I never consented to.)
> To paraphrase what the fine folks in the US like to say, the world doesn't owe you a deal.
I’m from the US. 40% of us believe the earth was created a few thousand years ago. Be immediately skeptical about anything we commonly say. (http://www.livescience.com/46123-many-americans-creationists...)
(And it even contradicts the whole point of the "US". We’re born into all sorts of bizarre deals, like the so-called social contract I never consented to.)
We just have a different view.
In a highly-competitive marketplace, the stores that treat people right will win volume. Those who win volume take the market. So don't rip customers off (or be extremely quick to correct it when you're called out) and you'll gain customer loyalty and all the subsequent transactions.
The world doesn't owe you a deal, but then again, the customer doesn't owe you their next purchase. Life is long. As a store, your job is to keep earning customer trust so they come back.
In a highly-competitive marketplace, the stores that treat people right will win volume. Those who win volume take the market. So don't rip customers off (or be extremely quick to correct it when you're called out) and you'll gain customer loyalty and all the subsequent transactions.
The world doesn't owe you a deal, but then again, the customer doesn't owe you their next purchase. Life is long. As a store, your job is to keep earning customer trust so they come back.
How do you reconcile your view of how you think things are with how they actually are?
ie. if what you're saying were true, why are there still businesses that only give deals to people who hunt for them?
ie. if what you're saying were true, why are there still businesses that only give deals to people who hunt for them?
There are all kinds of players along the spectrum. It's just that the ones that grow to become the largest (Amazon, Walmart, Costco, Jet, etc.) tend to operate this way (and offer Everyday Low Prices).
>> "1. Stepping back, isn't it more absurd that people are, by default, charged more unless they spend significant time dealhunting? The claim is not that the disparity itself is unjust, just that it's time for this to come to an end."
I strongly dislike such tactics since it causes people to waste a ton of time dealhunting, but isn't this usually to the benefit of the poor? These tactics allow companies to price discriminate and charge the rich more -- since they won't spend the time clipping coupons, waiting inline on black friday, or waiting for sales -- and thus theoretically subsidizes the 'discounted' prices for the poor.
On a separate note, what information from my email gets sent to your servers? Do you run a search for "Amazon", "receipts", etc. in GMail's cloud, then only send matching email to your server?
I strongly dislike such tactics since it causes people to waste a ton of time dealhunting, but isn't this usually to the benefit of the poor? These tactics allow companies to price discriminate and charge the rich more -- since they won't spend the time clipping coupons, waiting inline on black friday, or waiting for sales -- and thus theoretically subsidizes the 'discounted' prices for the poor.
On a separate note, what information from my email gets sent to your servers? Do you run a search for "Amazon", "receipts", etc. in GMail's cloud, then only send matching email to your server?
> I strongly dislike such tactics since it causes people to waste a ton of time dealhunting, but isn't this usually to the benefit of the poor? These tactics allow companies to price discriminate and charge the rich more -- since they won't spend the time clipping coupons, waiting inline on black friday, or waiting for sales -- and thus theoretically subsidizes the 'discounted' prices for the poor.
Even without ericglyman's link to corroborating data, I would assume it goes the other way. Coupon-clipping and online deal-hunting requires time and, especially, emotional energy that the poor often don't have; and since the poor generally have to use essential items until they physically fail, and then scrabble frantically for the first available half-decent replacement, they don't have the luxury of waiting for special sales.
Even without ericglyman's link to corroborating data, I would assume it goes the other way. Coupon-clipping and online deal-hunting requires time and, especially, emotional energy that the poor often don't have; and since the poor generally have to use essential items until they physically fail, and then scrabble frantically for the first available half-decent replacement, they don't have the luxury of waiting for special sales.
Me too man! On time spent dealhunting -- data from the Federal Reserve shows that it goes the other way: http://www.frbsf.org/economic-research/publications/working-.... It's counter-intuitive, but the wealthy actually spend more time shopping than the poor, not less.
On the second -- exactly. Paribus is designed to only pull in emails that appear to be from known merchants (Amazon, Bonobos, Best Buy, etc.).
On the second -- exactly. Paribus is designed to only pull in emails that appear to be from known merchants (Amazon, Bonobos, Best Buy, etc.).
Hey Eric,
I think you make a good point here. I'm not sure it always works out one way or the other though. We can talk in generalizations, but there are also very savvy poor shoppers and very careless rich shoppers. My inclination in matters like this is that it's better to arm people with information and encourage them to be savvier. I think what you guys are doing is a great example of this, using technology to empower people over their own finances.
More of a musing: I do wonder if it is ultimately self-defeating. If everyone were to use Paribus, companies would stop offering special deals in the first place. Maybe it's a good thing overall. But the savvy poor shoppers would be hurt by this.
I think you make a good point here. I'm not sure it always works out one way or the other though. We can talk in generalizations, but there are also very savvy poor shoppers and very careless rich shoppers. My inclination in matters like this is that it's better to arm people with information and encourage them to be savvier. I think what you guys are doing is a great example of this, using technology to empower people over their own finances.
More of a musing: I do wonder if it is ultimately self-defeating. If everyone were to use Paribus, companies would stop offering special deals in the first place. Maybe it's a good thing overall. But the savvy poor shoppers would be hurt by this.
> They're trying to take advantage of a narrative that's politically en vogue (that the world is stacked against the poor).
Are you seriously implying that this is a mere matter of opinion? Sociocultural disadvantage is what being poor means, for as long as mankind has measured wealth. Certainly there's disagreement about what should be done about that, if anything, but the fact of the situation is not in doubt.
Are you seriously implying that this is a mere matter of opinion? Sociocultural disadvantage is what being poor means, for as long as mankind has measured wealth. Certainly there's disagreement about what should be done about that, if anything, but the fact of the situation is not in doubt.
A cause can be moral, and right, and successful, and still attract shills attempting to jump on the bandwagon. I'm gay, I'm really happy with how LGBT rights are progressing, but that doesn't mean I have to like it when Frito-Lay rolls out a line of rainbow Doritos. (http://www.csmonitor.com/Business/2015/0918/Doritos-releases...)
There are many examples of this and some even more direct: poor people have to deal with debt collectors more frequently out of necessity and as a result end up paying both their original debt+whatever the debt collectors tack on.
In many cases the added on part is larger than the original debt.
Then there's buying quality products that last longer by the wealthy and crappy products that need to be replaced (far) more frequently by the poor and many more examples like these.
In many cases the added on part is larger than the original debt.
Then there's buying quality products that last longer by the wealthy and crappy products that need to be replaced (far) more frequently by the poor and many more examples like these.
> Then there's buying quality products that last longer by the wealthy and crappy products that need to be replaced (far) more frequently by the poor and many more examples like these.
Yep, to be capital efficient you need capital, and it's one reason having X amount of money today is worth more than having X tomorrow. Unfortunately it's such a fundamental problem that it will exist as long as there are scarce resources.
I remember when I first moved into my poor/gentrifying neighborhood of Manhattan, I went to buy light bulbs at the local pharmacy. I picked out all LEDs, and when I got to the check-out counter the lady working there stopped in disbelief. "Sir, you know these are ten dollars each?" I'm like duh, they have a fifth the electricity cost and last 30 times longer, but looking back I can see how this would seem so bizarre to her.
Yep, to be capital efficient you need capital, and it's one reason having X amount of money today is worth more than having X tomorrow. Unfortunately it's such a fundamental problem that it will exist as long as there are scarce resources.
I remember when I first moved into my poor/gentrifying neighborhood of Manhattan, I went to buy light bulbs at the local pharmacy. I picked out all LEDs, and when I got to the check-out counter the lady working there stopped in disbelief. "Sir, you know these are ten dollars each?" I'm like duh, they have a fifth the electricity cost and last 30 times longer, but looking back I can see how this would seem so bizarre to her.
Debt collectors are a result of using credit or spending being one's means. There are plenty of poor people that don't buy a 60 inch TV from Best Buy and then default on the payment. A huge portion of debt collectors are collecting on things like department and electronic store credit cards. The ability to manage money (even if you don't make much of it) is not unique to just the rich. There's a big difference between being poor and being irresponsible. Most debt collectors are the result of being irresponsible.
My father ran a budget counselling service at the local church. The vast majority of people the church was helping were low income families who were struggling to make ends meet, and were considering things like payday loans in order to simply put food on the table.
They were not irresponsible people: they had smart phones but no landline: Smartphone for $60/month versus landline for $70/month, they were making some smart decisions about where to spend their money.
The issues they did have were not being in contrl of their budgets. For the majority of these families, just learning about the envelope budget system helped them regain control. Also learning how to shop around more carefully and pay attention to whh coupons were useful and which were merely advertising helped.
The catch for low incme families can simply be not knowing how to be ruthlessly disciplined with their budget.
There is a vast gulf between, "being irresponsible," and "not knowing better ways to manage their money."
Poor people are often poor because they do not have access to the same opportunities as you: inadequate education, poor training, naiveté about wealth-building habits, and so on.
You can help make the world a better place by not perpetuating the myth that poor people are popr because they are undisciplined, lazy, stupid, or irresponsible.
Even better, find a local support group for low income families and see how you can provide assistance.
They were not irresponsible people: they had smart phones but no landline: Smartphone for $60/month versus landline for $70/month, they were making some smart decisions about where to spend their money.
The issues they did have were not being in contrl of their budgets. For the majority of these families, just learning about the envelope budget system helped them regain control. Also learning how to shop around more carefully and pay attention to whh coupons were useful and which were merely advertising helped.
The catch for low incme families can simply be not knowing how to be ruthlessly disciplined with their budget.
There is a vast gulf between, "being irresponsible," and "not knowing better ways to manage their money."
Poor people are often poor because they do not have access to the same opportunities as you: inadequate education, poor training, naiveté about wealth-building habits, and so on.
You can help make the world a better place by not perpetuating the myth that poor people are popr because they are undisciplined, lazy, stupid, or irresponsible.
Even better, find a local support group for low income families and see how you can provide assistance.
"200-600 dollar smartphone with a 60/month plan"
If I was so poor as to barely afford food I would be living either without a phone or with a $20 shit-phone on a bare bones prepaid plan. Costs hundreds less and gets the same shit done (person-to-person communication)
If I was so poor as to barely afford food I would be living either without a phone or with a $20 shit-phone on a bare bones prepaid plan. Costs hundreds less and gets the same shit done (person-to-person communication)
No, $60/month is the plan with cost of phone included. Please do not put words in my mouth.
If you were poor and unemployed, would you go without a phone, and access to email, LinkedIn and other services while you were looking for work? How do you edit those Word documents or read PDFs?
A smartphone is cheaper than a landline and desktop computer of any variety.
If you really believe that a person can look for work with just a $20 feature-phone, go try it yourself for a month as an actual experience and not a thought experiment!
If you were poor and unemployed, would you go without a phone, and access to email, LinkedIn and other services while you were looking for work? How do you edit those Word documents or read PDFs?
A smartphone is cheaper than a landline and desktop computer of any variety.
If you really believe that a person can look for work with just a $20 feature-phone, go try it yourself for a month as an actual experience and not a thought experiment!
A smartphone can be a "shit phone." Besides being a landline replacement, it may be a person's only access to the Internet, email, and more in an age where basic jobs often require applying online.
The $60/m plan with meh smartphone is much cheaper than landline + computer + Internet.
The $60/m plan with meh smartphone is much cheaper than landline + computer + Internet.
Great points. Do these people have a computer with internet access or do they generally just rely on their phones for business?
Furthermore, I often see the homeless guys in NYC with cheap Dell laptops and Thinkpads using public Wifi to Skype their buddies. So there's that.
Furthermore, I often see the homeless guys in NYC with cheap Dell laptops and Thinkpads using public Wifi to Skype their buddies. So there's that.
Laptop + free wifi is one option. Relying on phone as only computer is another.
Would you like to back up your statements with facts?
The major point that you're failing to argue against is this: poor people often must use loans to live their day-to-day lives.
It doesn't matter what proportion of bad debt is the result of poor people and what proportion is due to financial ignorance. The point is that poor people suffer by requiring loans.
Do some research on payday loans and car-title loans. These are some extremely exploitative lenders taking advantage of people who aren't able to make ends meet.
The major point that you're failing to argue against is this: poor people often must use loans to live their day-to-day lives.
It doesn't matter what proportion of bad debt is the result of poor people and what proportion is due to financial ignorance. The point is that poor people suffer by requiring loans.
Do some research on payday loans and car-title loans. These are some extremely exploitative lenders taking advantage of people who aren't able to make ends meet.
The last statistics I saw indicate that more than half of all bankruptcies in the U.S. were due to high medical bills. This held true regardless of insurance status. Our medical system is broken and if you have a health problem, you get hit with the double whammy of high medical bills and lowered productivity. In most cases, it has nothing to do with being irresponsible.
What I saw was that half of all bankruptcies involved some medical bills. The number actually caused by high medical bills is a lot lower.
There are things other than irresponsible spending that can result in debt collectors calling. For example, moving frequently can result in bills getting lost. I've had this happen with medical bills a few times (they sometimes don't send the bill for several months...).
Totally agree with you. It was very irresponsible for the department and electronic store to issue credit cards. They obviously didn't manage and evaluate the risks.
I was reasonably poor once (even did a stint homeless living out of a motel).
The basic assertion: you make less and end up being charged more is in a sense "correct".
For example: if you're poor, you'll probably shop at a discount retailer and buy discount or knockoff clothes, which will fall apart and need replacing faster than if you had just bought more expensive clothes. Over time, the replacement costs will add up and you'll "pay more" for clothes.
Another example: if you buy in bulk, you can get some items cheaper, but poor people tend to buy in small quantities (e.g. cigarette and alcohol "singles" are a phenomenon that only exist in poor areas for example)
This all sounds kind of stupid, but there's a rationale for it that makes sense from the inside, here's a scenario:
I just paid rent, I have $100 left in my bank account and payday isn't for 2 weeks. I work a physical labor job and my work boots need replacement. Do I?
a) Buy the $29.99 on sale boots at Walmart and hope they last for a couple months?
b) Buy the $259.99 boots at the high-end boot store and they'll last for a couple years?
c) Buy the $84.99 boots at the discount shoe store and they'll probably last for 6 months to a year?
Of course the answer is a). This leaves me with $50 to eat on for two weeks. I can't afford b) no matter what so it may as well not exist and c) leaves me starving before payday.
You count pennies when you're poor, you know exactly how much small amounts of things cost because you spend all your time buying small amounts of things and balancing out the bottom few rungs of Maslow's Hierarchy of Needs against your daily purchases.
Getting out of this cycle is very hard. It's not like you can save up enough to be worthwhile. Even with $5/mo left over at the end of every month, it takes 52 months to save up to buy the b) boots.
This means also that you live in a constant state of emergency. Literally everything is an emergency -- and this short circuits your ability to prioritize and make what seems like rational decisions. It also means that whatever spare money/time you have you may as well spend on stupid bullshit because you've convinced yourself it won't make any difference anyway.
It really is a vicious cycle.
The basic assertion: you make less and end up being charged more is in a sense "correct".
For example: if you're poor, you'll probably shop at a discount retailer and buy discount or knockoff clothes, which will fall apart and need replacing faster than if you had just bought more expensive clothes. Over time, the replacement costs will add up and you'll "pay more" for clothes.
Another example: if you buy in bulk, you can get some items cheaper, but poor people tend to buy in small quantities (e.g. cigarette and alcohol "singles" are a phenomenon that only exist in poor areas for example)
This all sounds kind of stupid, but there's a rationale for it that makes sense from the inside, here's a scenario:
I just paid rent, I have $100 left in my bank account and payday isn't for 2 weeks. I work a physical labor job and my work boots need replacement. Do I?
a) Buy the $29.99 on sale boots at Walmart and hope they last for a couple months?
b) Buy the $259.99 boots at the high-end boot store and they'll last for a couple years?
c) Buy the $84.99 boots at the discount shoe store and they'll probably last for 6 months to a year?
Of course the answer is a). This leaves me with $50 to eat on for two weeks. I can't afford b) no matter what so it may as well not exist and c) leaves me starving before payday.
You count pennies when you're poor, you know exactly how much small amounts of things cost because you spend all your time buying small amounts of things and balancing out the bottom few rungs of Maslow's Hierarchy of Needs against your daily purchases.
Getting out of this cycle is very hard. It's not like you can save up enough to be worthwhile. Even with $5/mo left over at the end of every month, it takes 52 months to save up to buy the b) boots.
This means also that you live in a constant state of emergency. Literally everything is an emergency -- and this short circuits your ability to prioritize and make what seems like rational decisions. It also means that whatever spare money/time you have you may as well spend on stupid bullshit because you've convinced yourself it won't make any difference anyway.
It really is a vicious cycle.
If this theory is true, then there should be some category of goods where the poor spend more than the non-poor. What category of goods is it?
http://www.bls.gov/cex/2014/combined/income.pdf
http://www.bls.gov/cex/2014/combined/income.pdf
> then there should be some category of goods where the poor spend more than the non-poor. What category of goods is it?
There are many items where poor people pay more for smaller quantities, and end up buying much less of that product over time.
"Sachet marketing" will sell individual servings of shampoo to poor people. A poor person can't afford a cheaper-per-portion bottle, and can't afford to buy a sachet every day, and so will wash their hair once a week (52 sachets a year) instead of buying bottles and washing their hair - with 2 passes ("rinse and repeat").
The total spend is obviously less, but it's not controversial to suggest that poor people spend more for less than wealthy people, but if you compared similar use the poor person would have to spend considerably more.
There are many items where poor people pay more for smaller quantities, and end up buying much less of that product over time.
"Sachet marketing" will sell individual servings of shampoo to poor people. A poor person can't afford a cheaper-per-portion bottle, and can't afford to buy a sachet every day, and so will wash their hair once a week (52 sachets a year) instead of buying bottles and washing their hair - with 2 passes ("rinse and repeat").
The total spend is obviously less, but it's not controversial to suggest that poor people spend more for less than wealthy people, but if you compared similar use the poor person would have to spend considerably more.
This is possible. Do you have evidence that this occurs to any significant degree?
Would you accept the basic notion that items bought in bulk cost less in per/unit or per/volume terms than individually packagaged items as evidence?
It's not really a theory. I've lived on both sides of it and you can see it for yourself in the figures you've linked to.
I don't see it in the figures. Perhaps you can tell me which category to look at? I've skimmed through the categories, and I mostly see flat spending in the $0-20k regime, increasing thereafter.
What you are describing hardly seems like a prevalent phenomenon.
What you are describing hardly seems like a prevalent phenomenon.
So let's pick a staple column, Dairy products:
You'll see that the mean goes from 245-568 as income goes from <$5k to >$70k. The amount spent rises, but the share of income goes down from 1.0 to .6.
Fresh fruits and vegetables on the other hand price out differently, with a share of almost a constant .6.
As I'm sure you know, fresh vegetables from a cheap neighborhood grocer (that may have questionable origin and freshness) are cheaper than hand cared for organic vegetables at Whole Foods, kept in environmentally controlled and frequently moisturized bins. They aren't the same product, and have large price disparity, but a product is available at every income bracket where the price takes up the same share of income.
For milk, this isn't necessarily true. As an example from my local area, a gallon of 2% milk at Walmart is $2.69 while at my local high-end grocery it's $3.39. About a 25% price difference. However, the demographic likely to buy at Walmart vs. likely to buy at my high-end grocer is going to have an income disparity much larger than that percentage. So for poor people, milk costs more because the floor price of milk can't get low enough to make up such a small share of poor people's income.
There's other phenomenon too. Have you ever gone into a Walmart and notice the aisle of nothing but sample/travel sized hygiene products? It's not because Walmart shoppers are more likely to travel, that aisle exists for people who can't afford the percentage of their income to buy the full product -- even if it's far cheaper per use. You'll find these kinds of packaged items more and more as you go down the local income scale.
The equation a poor person is trying to solve is this: do I pay $3 for milk and get calories for a week, or do I pay $3 for a full bottle of shampoo? Food is more important than hair, so milk it is. I've been at income levels where $3 really does matter.
Or have you ever looked at a pack of gum or cigarettes or a six-pack of beer and seen "not for individual resale"? This label exists because of the phenomenon in poor areas of stores breaking up packaged items and selling them individually at a markup. You may have been to a store in a bad part of town where the beer section has six-packs and maybe a couple single bottles/cans. Now imagine a store where everything is single bottles/cans, and the brands are ones you've never even heard of, and because they only sell to the bottom of them market (we're not talking about a craft beer store here). Oh and they also can't call themselves beer because they aren't, their a "malt beverage". And when you go to check out you interact with the clerk behind bullet proof glass.
Here's another one, if you are poor, you are less likely to have good credit, meaning you either won't have a credit card, or will have one with a high interest rate. If you are poor, your credit card will have a low rate, and even better you'll get value back for using it. This means the cost of borrowing, even for a short period, is far lower at higher income levels both because the interest is lower but also because of the value you get back (e.g. I get a check back for a few hundred dollars every year from my American Express card just because I use it, when I was poor I had a credit card that not only had 20% interest, it penalized you for paying it back early, and I had to pay $100/year for the privilege of having the card)
I still have weird habits from that time in my life. When I go to hotels I take all the shampoo and soap home even though I have no problems buying decent shampoo. It drives my wife nuts, but I feel weird leaving behind "free" items knowing that each one would be $1-$1.29 each at the store.
You'll see that the mean goes from 245-568 as income goes from <$5k to >$70k. The amount spent rises, but the share of income goes down from 1.0 to .6.
Fresh fruits and vegetables on the other hand price out differently, with a share of almost a constant .6.
As I'm sure you know, fresh vegetables from a cheap neighborhood grocer (that may have questionable origin and freshness) are cheaper than hand cared for organic vegetables at Whole Foods, kept in environmentally controlled and frequently moisturized bins. They aren't the same product, and have large price disparity, but a product is available at every income bracket where the price takes up the same share of income.
For milk, this isn't necessarily true. As an example from my local area, a gallon of 2% milk at Walmart is $2.69 while at my local high-end grocery it's $3.39. About a 25% price difference. However, the demographic likely to buy at Walmart vs. likely to buy at my high-end grocer is going to have an income disparity much larger than that percentage. So for poor people, milk costs more because the floor price of milk can't get low enough to make up such a small share of poor people's income.
There's other phenomenon too. Have you ever gone into a Walmart and notice the aisle of nothing but sample/travel sized hygiene products? It's not because Walmart shoppers are more likely to travel, that aisle exists for people who can't afford the percentage of their income to buy the full product -- even if it's far cheaper per use. You'll find these kinds of packaged items more and more as you go down the local income scale.
The equation a poor person is trying to solve is this: do I pay $3 for milk and get calories for a week, or do I pay $3 for a full bottle of shampoo? Food is more important than hair, so milk it is. I've been at income levels where $3 really does matter.
Or have you ever looked at a pack of gum or cigarettes or a six-pack of beer and seen "not for individual resale"? This label exists because of the phenomenon in poor areas of stores breaking up packaged items and selling them individually at a markup. You may have been to a store in a bad part of town where the beer section has six-packs and maybe a couple single bottles/cans. Now imagine a store where everything is single bottles/cans, and the brands are ones you've never even heard of, and because they only sell to the bottom of them market (we're not talking about a craft beer store here). Oh and they also can't call themselves beer because they aren't, their a "malt beverage". And when you go to check out you interact with the clerk behind bullet proof glass.
Here's another one, if you are poor, you are less likely to have good credit, meaning you either won't have a credit card, or will have one with a high interest rate. If you are poor, your credit card will have a low rate, and even better you'll get value back for using it. This means the cost of borrowing, even for a short period, is far lower at higher income levels both because the interest is lower but also because of the value you get back (e.g. I get a check back for a few hundred dollars every year from my American Express card just because I use it, when I was poor I had a credit card that not only had 20% interest, it penalized you for paying it back early, and I had to pay $100/year for the privilege of having the card)
I still have weird habits from that time in my life. When I go to hotels I take all the shampoo and soap home even though I have no problems buying decent shampoo. It drives my wife nuts, but I feel weird leaving behind "free" items knowing that each one would be $1-$1.29 each at the store.
I wasn't disputing that the poor might pay more as a fraction of income, merely that they pay more in absolute terms. It would be surprising if that weren't true, given all the people with consumption >> income.
You are probably right about lending, however. The poor tend to not pay their debts and that will drive up the cost of lending to them.
You are probably right about lending, however. The poor tend to not pay their debts and that will drive up the cost of lending to them.
Well of course they pay less in absolute terms, they have less money. They absolutely pay more for an equal amount of equal quality items.
Let's say a pack of cigarettes is $7. In poor areas you can often find "singles" or "loosys" for sale at $.50-$1. They're exactly what they sound like, single cigarettes. Usually the store owner just opens up a pack and sells each cigarette individually. Poor people with little money will buy the singles and thus 20 singles will cost $10-$20.
This isn't something I'm making up, this actually happens in poor areas. Often times there's not even a store owner and it's just an individual trying to make some quick money and turn a profit (this is what Eric Garner was trying to do, sell loosies at a markup).
You can go on endlessly with this kind of thing. If you can imagine a packaged product, it's probably being split up and sold as singles at a higher price with respect to the packaged price, and almost always in poor areas.
I've even seen stores that seem to make a racket out of buying stuff in bulk from Costco, breaking up the package and selling singles for 2-5x the original price. Shelf after shelf of Kirkland signature bottled water, toilet paper, detergent etc. Poor people don't have Costco memberships even if getting the membership and just buying non-perishables in bulk would save them money in aggregate. The store had a whole repackaging operation in back where the singles would be rewrapped in new shrinkwrap, but they didn't bother removing the label.
Let's say a pack of cigarettes is $7. In poor areas you can often find "singles" or "loosys" for sale at $.50-$1. They're exactly what they sound like, single cigarettes. Usually the store owner just opens up a pack and sells each cigarette individually. Poor people with little money will buy the singles and thus 20 singles will cost $10-$20.
This isn't something I'm making up, this actually happens in poor areas. Often times there's not even a store owner and it's just an individual trying to make some quick money and turn a profit (this is what Eric Garner was trying to do, sell loosies at a markup).
You can go on endlessly with this kind of thing. If you can imagine a packaged product, it's probably being split up and sold as singles at a higher price with respect to the packaged price, and almost always in poor areas.
I've even seen stores that seem to make a racket out of buying stuff in bulk from Costco, breaking up the package and selling singles for 2-5x the original price. Shelf after shelf of Kirkland signature bottled water, toilet paper, detergent etc. Poor people don't have Costco memberships even if getting the membership and just buying non-perishables in bulk would save them money in aggregate. The store had a whole repackaging operation in back where the singles would be rewrapped in new shrinkwrap, but they didn't bother removing the label.
The article misrepresents the federal reserve study it uses to make it's case. It claims that the federal reserve study implies rich "have more leisure time so they get to know prices and deals well".
But this is nonsense. The federal reserve study doesn't study rich and poor at all - it studies the unemployed vs employed. Specifically, the article shows that unemployed people spend less time shopping than employed people. Is the article really claiming that unemployed people have less leisure time?
In fact, the article actually claims that reduced working time causes a (small) drop in shopping time.
But this is nonsense. The federal reserve study doesn't study rich and poor at all - it studies the unemployed vs employed. Specifically, the article shows that unemployed people spend less time shopping than employed people. Is the article really claiming that unemployed people have less leisure time?
In fact, the article actually claims that reduced working time causes a (small) drop in shopping time.
You're straight up wrong. Read the piece. Quote below:
"For instance, total shopping time for households with an income between $100,000 and $150,000 (category 5) is 5 to 7 minutes greater (per day) than average shopping time by an individual in a household with income in the $0 to $24,999 bracket (category 1). After controlling for various individual characteristics (column I), this is robust to including both time and state (columns II and III), as well as labor force status dummy variables (column IV)."
"For instance, total shopping time for households with an income between $100,000 and $150,000 (category 5) is 5 to 7 minutes greater (per day) than average shopping time by an individual in a household with income in the $0 to $24,999 bracket (category 1). After controlling for various individual characteristics (column I), this is robust to including both time and state (columns II and III), as well as labor force status dummy variables (column IV)."
He's only half wrong.
He's wrong to say that the study only looks at employment status. It looks at income and a number of other factors as well (mainly, income and time spent working).
However, he is right that the article's conclusion is mis-represented:
"Overall, we don’t find much evidence in favor of a negative correlation between income and shopping time, particularly comparison shopping possibly motivated by locating better prices. As a matter of fact, whereas total time spent purchasing goods and services is about 20 minutes per day, the component of shopping time devoted to comparing prices and products seems to be extremely low in the data. It is about 4 seconds a day on average, given the large number of respondents declaring zero. Moreover, nonparticipants and the employed spent more time than the unemployed in this activity. This may indicate that most of the effort made by consumers in the goods market is unrelated to uncovering better prices."
He's wrong to say that the study only looks at employment status. It looks at income and a number of other factors as well (mainly, income and time spent working).
However, he is right that the article's conclusion is mis-represented:
"Overall, we don’t find much evidence in favor of a negative correlation between income and shopping time, particularly comparison shopping possibly motivated by locating better prices. As a matter of fact, whereas total time spent purchasing goods and services is about 20 minutes per day, the component of shopping time devoted to comparing prices and products seems to be extremely low in the data. It is about 4 seconds a day on average, given the large number of respondents declaring zero. Moreover, nonparticipants and the employed spent more time than the unemployed in this activity. This may indicate that most of the effort made by consumers in the goods market is unrelated to uncovering better prices."
From the article:
"The results indicate that a 1 minute decline in market hours is associated with a 0.04 minute decline in shopping time."
The correlation between income and shopping time is simply not caused by leisure time. This should hardly be surprising - leisure and income are inversely correlated (i.e., the poor have lots of leisure, the rich very little).
"The results indicate that a 1 minute decline in market hours is associated with a 0.04 minute decline in shopping time."
The correlation between income and shopping time is simply not caused by leisure time. This should hardly be surprising - leisure and income are inversely correlated (i.e., the poor have lots of leisure, the rich very little).
> leisure and income are inversely correlated (i.e., the poor have lots of leisure, the rich very little).
Do you have any data for that? I rather doubt that it is very solid if it exists at all. There are a large number of poor people working more than two jobs and more hours than the rest of the "middle-class". Additionally, many of the jobs from the upper end of the middle-class tend to often require longer working hours.
Do you have any data for that? I rather doubt that it is very solid if it exists at all. There are a large number of poor people working more than two jobs and more hours than the rest of the "middle-class". Additionally, many of the jobs from the upper end of the middle-class tend to often require longer working hours.
Most poor people don't work at all, and about half of those who do are only part time.
http://www.bls.gov/opub/reports/cps/a-profile-of-the-working...
Doesn't cover multiple jobs, but it shows most poor folks don't work at all, and a little under half of those who do are part time.
Do you have any data suggesting a significant number of poor people work multiple jobs, or work more than 50 hours/week?
http://www.bls.gov/opub/reports/cps/a-profile-of-the-working...
Doesn't cover multiple jobs, but it shows most poor folks don't work at all, and a little under half of those who do are part time.
Do you have any data suggesting a significant number of poor people work multiple jobs, or work more than 50 hours/week?
> Most poor people don't work at all, and about half of those who do are only part time.
If by "most" you mean ~10% (or were you including children and old people?)
>I can't find any solid statistics, but there is certainly evidence for a 'significant number': http://poverty.ucdavis.edu/policy-brief/low-wage-work-uncert...
I wasn't specifically thinking about people below the poverty line, but was rather intending to include the "working-class" as well.
If by "most" you mean ~10% (or were you including children and old people?)
>I can't find any solid statistics, but there is certainly evidence for a 'significant number': http://poverty.ucdavis.edu/policy-brief/low-wage-work-uncert...
I wasn't specifically thinking about people below the poverty line, but was rather intending to include the "working-class" as well.
Characterising this as "the 1%" is a disservice to the concept. You don't have to be "1%" wealthy to do what's in the article.
Also, I question "The wealthy build a better sense of when prices are low and deals are good." - the poor are very aware of how much their food costs, for example. Wealthier people aren't, because they're not counting pennies. A question illustrating this, taken from Yes Minister: "How much is a pound of margarine?" The really wealthy, the 1%, aren't going to have a good idea. But the poor are aware of the costs of their staple foods.
The underlying point of the article isn't a bad one, but extrapolating "this dude orders clothes sight-unseen from his smartphone every two weeks" into "the poor have it so tough" is a strange path to take.
Also, I question "The wealthy build a better sense of when prices are low and deals are good." - the poor are very aware of how much their food costs, for example. Wealthier people aren't, because they're not counting pennies. A question illustrating this, taken from Yes Minister: "How much is a pound of margarine?" The really wealthy, the 1%, aren't going to have a good idea. But the poor are aware of the costs of their staple foods.
The underlying point of the article isn't a bad one, but extrapolating "this dude orders clothes sight-unseen from his smartphone every two weeks" into "the poor have it so tough" is a strange path to take.
Did I miss something? The deal was only offered via the website and not via mobile. What does that have to do with being poor?
No, I don't think you did. The article is grasping for straws to make this a social/political problem that they're solving, when they're really just trying to promote their (very useful) service.
Lots of poor people are online via smartphones, not desktop computers. That's how.
If they had shown some data to back that up it would have been nice.
I've heard anecdotally that's true, but I've never seen data.
I've also heard about the price discrimination that goes on based on the browser (Safari = user with $$$). Are we sure it wasn't just that?
I've heard anecdotally that's true, but I've never seen data.
I've also heard about the price discrimination that goes on based on the browser (Safari = user with $$$). Are we sure it wasn't just that?
Years ago, I took a college class called Homelessness and Public Policy. I am also currently homeless and have been on the street for more than 3.5 years. I think that is about as poor as you can get in the U.S.
I bought two tablets to go homeless. I currently own a tablet and a laptop. But I assure you I am really weird for a homeless person. Tablets are not normal on the street. Cell phones, including smart phones, are very normal on the street.
I can't give you precise figures and this is not a formal survey. It is firsthand personal observation. I spent six months in downtown San Diego participating in various homeless services programs. This exposed me to dozens or hundreds of other homeless individuals at a time. (The participation at one of the meal sites was upwards of a hundred individuals per day and I participated in that regularly for about six weeks.)
Does that work for you? (Sincere and respectful question.)
I bought two tablets to go homeless. I currently own a tablet and a laptop. But I assure you I am really weird for a homeless person. Tablets are not normal on the street. Cell phones, including smart phones, are very normal on the street.
I can't give you precise figures and this is not a formal survey. It is firsthand personal observation. I spent six months in downtown San Diego participating in various homeless services programs. This exposed me to dozens or hundreds of other homeless individuals at a time. (The participation at one of the meal sites was upwards of a hundred individuals per day and I participated in that regularly for about six weeks.)
Does that work for you? (Sincere and respectful question.)
That was my reaction to the article as well.
In my perspective, the coupon is considered as optional information and is not shown on the mobile site for the obvious reason that it simply wouldn't fit.
To me it reads like a conspiracy theory about something that was really a simple design decision.
In my perspective, the coupon is considered as optional information and is not shown on the mobile site for the obvious reason that it simply wouldn't fit.
To me it reads like a conspiracy theory about something that was really a simple design decision.
The poor only have the single device from which to shop. Those with more devices would notice the discounts offered on, say, their computer and use that discount.
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Paribus: I've never heard of you. I don't know what you do. You have no link to your website on your blog.
Hey -- didn't want to distract from the article. Just added in two hyperlinks to our homepage.
We were part of the YC Summer 2015 Class. Link to our homepage here: https://paribus.co/
We were part of the YC Summer 2015 Class. Link to our homepage here: https://paribus.co/
The example I've noticed is the poor person who doesn't have means for transportation will usually go to the closest source for staple items, like a convenience store. Milk and bread are 50-100% at these stores versus a traditional grocery store and they rarely put things on sale.
Cool to see screenshots of price discrimination in practice
Thanks man!
Was pretty surprising when we first saw it, but have seen since that lots of sites now serve different prices/coupons depending on the device you use to access.
Was pretty surprising when we first saw it, but have seen since that lots of sites now serve different prices/coupons depending on the device you use to access.
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The question is what kind of price discrimination is this? Do we attribute browsing/shopping on the phone to be being poor?
I'll tell you one thing I don't attribute to being poor, and that's buying clothes from Banana Republic.
I wonder how much of their total traffic comes during the work day, from office computers.
I wonder how much of their total traffic comes during the work day, from office computers.
I agree with the point that this article makes and think we should be discussing the questions article tries to raise.
However, the article is a poorly written piece of PR. It makes several mathematical errors, mis-represents the study on shopping time, and fails to provide any evidence to back up it's critical point of "e-commerce today acts like a regressive tax".
Why is this crap on HN?
However, the article is a poorly written piece of PR. It makes several mathematical errors, mis-represents the study on shopping time, and fails to provide any evidence to back up it's critical point of "e-commerce today acts like a regressive tax".
Why is this crap on HN?
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Inflation- the secret tax
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1. The absurd proposition that it's unjust that you will find a better deal if you spend more time looking for one. Of course you will.
2. The claim that e-commerce is a regressive tax on the poor because purchases are bigger percentage of the poor's income. You can say the same thing about any purchase. A burger is a bigger percentage of a poor person's income than a rich person's income.
Paribus is providing a great service, but this is a marketing/PR article pretending to be serious economic commentary and analysis. It's just hopping on the bandwagon of a narrative that's politically en vogue (that the world is stacked against the poor).