Published on TheHill.com
You’ve seen them. Maybe you know them. They clean your hotel rooms, landscape your lawn and garden, tend your children, and work in fast food. Most are not working to pay for summer camps. They’re the working poor doing what they have to do to pay the rent for low-end housing, the light bill, and to feed children, many not their own. Yet, they are good people who shun handouts and welfare. They’d rather make it working one, two, or three jobs in their quest just to breathe air above water.
Being poor is not cheap, however. In fact, it costs a lot of money, as a percentage of take home pay, just to avoid being “on the system.” No matter how low their station, how menial their jobs, how bad their English, these are people worthy of our quiet respect—and our thoughtful energy in their cause. Some of my more progressive friends have an easy solution for their plight: encourage them, as did the Obama Administration has done, to grab every taxpayer dollar available to them.
There are better ways to help the working poor that are more respectful of their worth and dignity. One such opportunity grows out of two seemingly separate, unattributed pieces in the September 5th issue of The Economist. One, “It’s expensive to be poor,” details what someone making less than $15,000 per year, must do to transact the bare business of living.
Checking accounts are beyond them because of the minimum fees associated and the requirements for maintaining a certain dollar balance. So first, they have to cash their paychecks at an available outlet, which costs anywhere from 2-5%, and then they have to go to the bank to buy money orders to pay their bills, each of which cost about $7, unless there’s a convenient post office which charges only $1.25. Popular, pre-paid debit cards have their own fees attached, and God forbid a loan is necessary for all the unforeseen maladies of life. According to this article, an advance of $350 for two weeks can have an interest rate of 322%. That percentage is correct.
The other piece, “Costly Cash,” is more sensitive because it enkindles images of illegals draining our economy, but it’s much more complex. By some accounts, there are 30 million legal immigrants in the US who, like other millions around the world, have to spend a fair amount of their paychecks just to help support family back home (as millions of Poles, Germans, Italians, and others did likewise earlier in the 20th Century). The G8 pledged some years ago to reduce the cost of transmitting funds from 10% to 5%, but at this writing, it remains 7.7%, plus the usual exchange rate fees larded on by dealers.
The proposal I imagine is a simple one, perhaps so simple, it must somehow destroy other revenue streams of financial institutions. Just as banks vie for college student accounts with free checking, one has to wonder why a similar offer is not made to the working poor: free checking with perhaps, a limit of ten transactions per month, but little or no interest on balances, and as appropriate, reasonable transmission fees of less than 5% with low or waived exchange fees are reachable.
While such policies certainly impact other revenue sources, the aggregated millions of dollars in flux from hordes of small balance customers should outweigh the risks. Their money should talk, and if it’s a community service an institution could perform, it should be this one. A society that accepts a welfare state of mind so freely, but should not, can take on the much smaller missteps of the poor, and should. The rich can afford the luxury of being rich. The working poor should not have to pay so much for the privilege of being poor.