Low income families face not only the problem of economic survival, but also the social and psychological consequences of poor employment and discrimination. Unable to attain socio-economic success, they feel unsuccessful in family role performances. Emasculation and family disorganization are very basic weaknesses.
There is no way that even the best consumer practices can solve the problems of poverty which some families endure. However, good consumer practices are important in alleviating some of the worst aspects of it.
My unit will examine the research findings on the consumer practices of low income families in order to provide the teacher with an understanding of the spending patterns of the majority of our students. From these findings and from the findings of a survey of my own students, I have developed a sequence of lessons designed to enable students to improve their financial management in areas where such management has been found to be inefficient. In addition, the lessons will provide exercises to sharpen the computational skills needed for successful income management. The unit is intended to be used with high school students enrolled in Consumer or Proficiency Math, usually taken in the tenth grade. It can also be adapted for use in Consumer Law, Distributive Education, Home Economics, and Family Life classes.
In reviewing the research findings, the teacher will be able to perceive areas in which education would be most effective, and also gain new insights as to the best teaching techniques to use. Since the subjects covered in the lesson plans are highly pertinent to the students’ everyday lives, their interest should be quite high. They will understand that learning the needed computational skills is far less painful than the grim experience of being thoroughly exploited in the marketplace.
Unless a teacher has risen from among the poor, it is difficult for him or her to have a clear understanding of what the life of poor families is like. Even the socially mobile professional needs to be reminded of how life was in the low income milieu he knew as a child, for in order to be successful, he has had to “unlearn” much of what his background taught him.
By way of background for the teacher, I will discuss the participation of husbands and wives in financial planning, the decision making process, the sources of consumers’ knowledge, the manipulation of the poor in the marketplace, and the unethical and illegal practices engaged in by merchants against poor families.
I will then examine the research findings in the framework of the following five rules for good income management:
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1. Buy necessities first and luxuries last.
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2. Take advantage of benefits available to low-income families, eg. surplus food, Food Stamps, day care centers, scholarships, Legal Aid, etc.
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3. Budget carefully and plan in advance.
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4. Get the best quality for the lowest price.
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5. Try to get what is needed without spending money or spend only for raw materials.
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The study will reveal that poor families score low on each of the above rules for many reasons: sociological, economic, and psychological, as well as educational. I have chosen the areas of budgeting, shopping, and home production as areas of concentration for developing my lesson plans. Before proceeding with those lessons, however, I have included activities for students to examine their own expenditure patterns and those of their families. This should enable them to have a better appreciation of how their families cope economically. It also will give the teacher a clearer idea of what the students, educational needs are.
Poverty in this country is quite different from what it used to be. The old poverty was that of immigrants who had high hopes of achieving economic success in an expanding economy filled with plenty of unskilled and semi-skilled jobs. Today’s poor are aliens in an affluent society. They are the people driven off farmlands, workers replaced by automation, women raising children alone, and unemployed teenage high school dropouts. It is a poverty that could be “hereditary” unless steps are taken to break its cycle.
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In examining the structure of a poor family, it is common to find a depressed husband. Sometimes he actually abandons the family, thus making them eligible to receive welfare. Sometimes he remains nearby and contributes what he can economically, while maintaining an interest in his wife and children. Some women live with “boyfriends” who help with family expenses. Whether or not a man remains with his family and whether or not he is indeed married to the woman, his life is almost totally unpredictable, and there is very little stability.
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Work is usually transitory. Although he provides some economic support for the family, he participates only to a minimal degree in the exchange of affection and emotional support. Thus the wife assumes a greater share of the family responsibilities than does her middle-class counterpart. This is certainly true in the area of family financial management.
In his study of working-class wives, Lee Rainwater found that the wife is the “accountant” and “purchasing agent”, although she does discuss matters with her husband.
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She regularly relieves him of his paycheck, thus freeing him of household worries. In middle-class families, there is usually a sharing of the management and shared responsibility. In the purchase of an automobile, however, most working-class wives leave the decision entirely to their husbands.
Many working-class wives practice a certain efficiency which may not be the best in the long run. Rainwater describes this efficiency as the old “sugar bowl” method, where the wife controls her spending by doling out amounts until her supply is gone.
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Low-income families do not do very well in managing to stay solvent. Many of them even have negative net worth, that is their debts exceed their assets. In some sub-cultures, solvency as a moral obligation is stronger than in others. Therefore, there is a variation among ethnic groups in the tightness of control over family finances.
In general, poor families save very little and are often not covered by insurance. Their patterns of saving and investing are less “modern” and their views on the value of life insurance are more traditional.
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The kind of saving preferred most often is the low-risk, non-investment type that can be easily liquidated, such as savings accounts. Those interested in further investing think more of real estate, farms or businesses of their own, rather than stocks, bonds or insurance. Insurance is thought of mainly as a source of funds for burial expenses and support of surviving dependents.
About planning expenditures and efficiency in decision making, a Minneapolis study showed that education proved to by more important than income level.
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Certain attitudes also entered in here. Those persons who were more material, traditional, fatalistic, impulsive, and pessimistic in viewpoint were less efficient.
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Among the families surveyed, good family agreement on roles and good communication had much to do with good consumer practices.
Most poor families live in city public housing projects where rent is cheaper. However, few public housing units can accommodate large families who must turn to private housing and of course higher rents. A strategy used to relieve the problem of housing is to pool living arrangements.
If a poor family pays more than twenty percent of its gross income for housing, the result is increased deprivation in other areas, particularly in nutrition. Usually costs that are fixed and regular are met and those which can be stretched or postponed such as food, clothing, recreation, and medical care are not met.
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Actually, twenty percent should be regarded as a maximum rather than an average expenditure for housing. Home ownership usually amounts to the family’s exceeding this limit, thereby reducing the flexibility for meeting other contingencies.
Those poor families who aspire to home ownership dream of a modest house of adequate size for the family, attractive, and in reasonably good condition. Working-class families are more concerned with the house itself and with living in a neighborhood where they can feel safe both socially and physically. They are not as concerned with the social contacts the neighborhood can provide as are middle-class families.
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A large proportion of working-class income goes for appliances. In fact, in this area, expenditures differ less than in other areas from middle-class families. A working-class wife is willing to sacrifice a more expensive house as long as it has the appliances she wants.
In
Workingman’s Wife
, Rainwater suggests that the working class wife sees household durables as an end in themselves.
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Her life revolves around the house and housework, and she dreams of a home that symbolizes the role of the modern housewife. The middle-class wife, on the other hand, sees household durables as a means to other ends: they free her to enjoy social, intellectual, and aesthetic pleasures.
Surveys show that many black women overspend in the area of “high fashion”. Black families also report buying high priced Scotch whiskey twice as often as white families.
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Such over-expenditures can probably also be attributed to the desire to achieve status.
Food for low-income families is usually inadequate. The federal government has been disposing of surplus food accumulated under the farm subsidy program for some time now by giving it to local relief agencies for distribution to the poor.
The Special Supplemental Food Program for Women, Infants and Children, usually referred to as WIC, is available to all pregnant and breast-feeding women and all children until age five. Through this program, families receive vouchers which can be redeemed for infant formula, milk, cheese, eggs, juice, and fortified cereals. Twice every six months, participants are also given some nutritional education. Administrators of this program say that it is very successful in meeting the nutritional needs of its participants but that many eligible people fail to take advantage of the program, probably because of lack of awareness. Families who think they might be eligible should be made aware that they should contact the WIC nutritionist at their local hospital or clinic.
The Food Stamp Program was established in 1964, and is administered by the Food and Nutrition Service of the Department of Agriculture through state and local welfare and public assistance agencies. Although many poor families are eligible to buy food stamps, only about half do so. Some do not take advantage of the program because the stamps restrict their purchase selection: non-food items and imported food cannot be bought with the stamps. Families receiving welfare are given their stamps free. Other low-income families may purchase a certain amount of stamps. If they are unable to buy the full amount for which they are eligible, they may buy half. Failure to buy stamps even for one month results in decertification, and the family must go through the application procedure again. If the family is very irregular in purchasing stamps, it is penalized by losing its eligibility for a while. Those who most need the additional food-buying power thus have the most difficulty getting it.
Vacations and recreational experiences have a very low priority in the expenditures of working-class families. Television sets, on the other hand, have a high priority and provide daily recreation, costing more time than money.
Available evidence shows that low-income consumers are not more deliberate in their shopping, not more wide-ranging in their search, not more price conscious, and not more informed on the characteristics of products than higher income consumers are.
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The reason for this seems to lie in the low level of education of many poor people. They lack the knowledge of the large variety of goods on the market, especially of technical features.
Poor families tend to use neighborhood stores and peddlers rather than bureaucratic impersonal ones. Many are insecure about using department stores and experience anxiety in talking to salespeople. The poorer the family, the narrower the shopping scope.
Caplovitz found in his New York study that those families who bought from neighborhood stores and peddlers paid more for their goods.
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He also found narrower shopping scope to be a characteristic of newly arrived groups such as Puerto Ricans and migrant Negroes.
Word of mouth recommendations are heavily relied upon especially in making major purchases. Many prefer to buy from relatives or friends who run businesses or from people or “connections” their relatives might know. They do quite well in negotiating special deals on durables.
More than half of the poor families throughout the nation use credit of some kind. Here again, because of lack of education, particularly in the intricacies of credit agreements, credit can be ruinous to those who undertake it.
Because they lack steady jobs, many are refused general market credit. They must therefore turn to their neighborhood dealers and peddlers for credit. Caplovitz cites that credit costs were higher from the dealers whom poor families patronize, and also that the majority of families do not know where to go if they are cheated by a merchant.
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Some low-income market retailers charge effective annual finance charges as high as thirty-three percent. When smaller credit charges are imposed, markups are often two or three times higher than those charged by general market merchants.
Many neighborhood merchants give the customers only a payment card, not a contract. On the payment card, the cost of credit and the cash price are not specified. Caplovitz noted in his East Harlem study that price tags on merchandise are conspicuously absent. The price a customer is quoted depends on many things. If the merchant considers him a poor risk, if he thinks the customer naive, or if he must pay a commission to the peddler who referred the customer, the price will be higher.
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Three kinds of peddlers operate in low income neighborhoods. Some are canvassers who are employed directly by the stores; others are small entrepreneurs who act as brokers; and still others are more successful entrepreneurs who operate as dealers. A fourth type represents large companies outside the neighborhood specializing in a particular commodity, such as vacuum cleaners or pots and pans. Included in this category are the enterprising women who hold evening demonstrations in private homes. These peddlers add greatly to the cost of goods, sometimes five or six times what a store would charge.
Although some of the merchants resort to garnishments and repossessions in order to collect debts, most prefer to avoid the use of these formal controls, because their use results in the loss of good will.
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Actually, repossession is not usually practical, since the shoddy merchandise is soon of little or no value. Garnishment of wages usually leads to the employee being fired for being a nuisance. Selling delinquent accounts to a finance company results in loss of control by the merchant. Competitors can find out which customers pay regularly to the collection agency and lure them away from the original merchant.
The merchants rely mostly on informal controls in insuring that payments are made. They frequently draw up a weekly contract of very small payments giving the illusion of easy credit. In this way they get to know their customers and are able to keep tabs on them. The merchant also gets to know the customers’ relatives and friends and utilizes this network in conducting his business.
The weekly payment system also gives the merchant the opportunity to sell the customer other items, especially when his original bill is almost paid. The customer as a result remains continuously in his debt.
Putting a high markup on low-quality goods is a way a merchant protects himself against the risks of the credit business. In a “normal” market, competition results in pricing commensurate with quality. However, merchants in low income neighborhoods do not compete with those outside, and ironically, the people who can least afford the buying in the first place, get comparatively less for their dollar. These merchants have a captive market of families who do not meet the economic requirements of the bureaucratic marketplace and who also are not price and quality conscious.
Caplovitz’ interviewers discovered evidence that some merchants engage in the illegal practice of selling reconditioned furniture and appliances as new. An unethical activity widely practiced is “bait” advertising. After seeing merchandise in the window at an unusually low price, the customer enters the store only to be persuaded by the salesman that he doesn’t really want the merchandise in the window, but a smaller amount of more expensive goods. This kind of exploitation is known as the “switch sale” and is frequently successful.
Turning now to the above mentioned recommended rules of financial management, it is possible to summarize the information presented in order to see how poor families score in each area.
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Do poor families buy necessities first and luxuries
last
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For the most part they do, but there is considerable overspending on durables, especially appliances, radios, television sets, and phonographs. This is probably because of the desire to achieve the role of the efficient American housewife, the vulnerability of the poor to the copious advertisements of these items, and the heavier need in newly formed households, as the poor include larger numbers of young, large families.
2.
Do they take advantage of the benefits
available to them
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Most workers would agree that the existing government programs for the poor are not utilized to the fullest. There is a great need to plan the services of these programs to conform to the attitudes, schedules, and locations of the recipients. Their availability should also be communicated simply and directly, and the preliminaries should be carried out smoothly and quickly.
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Do low income families budget carefully and plan in advance
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The answer here is clearly “no”. Many are insolvent. Most have little savings and insurance. Also, studies show inefficiency in planning.
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Do poor families get the best quality for the lowest price
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The answer here according to available evidence is also in the negative. Most do not use more but less deliberation, sources of knowledge, and wide-ranging shopping to get the best buys. Also low income makes it more difficult to buy in bulk.
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Do they try to get what is needed through home production
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Although evidence here is sparse, it does point to less production in the areas of food growing and home repairs. Since expensive tools and an understanding of technical instructions are needed here, this area is not one where the poor can best improve their situation. However, most families do have common household appliances, and using them can often result in substantial savings.
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