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The Hidden Costs Of Being Poor

24/08/2015 5:24 AM AEST | Updated 15/07/2016 12:51 PM AEST
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Recently I applied for a new bank account at one of Australia's larger banks. But before signing on the dotted line, there was a line that caught my eye: "Have your monthly account fee waived if you deposit at least $2000 each calendar month..."

Reading on, it was made clear that a $4 account fee would be applied to me on those months that I failed to deposit two thousand dollars into my new account.

As a contractor who derives my income from a variety of sources, I often can't control when I am paid.

Some months I'm not paid much at all, other months, all my invoices come rolling in at once.

Although $4 doesn't seem like much - sure, I spend more on coffee most days - I don't feel right paying the bank to hold my savings. In fact, I feel a little bit repulsed by the idea.

Firstly, because the bank already invests my savings and makes money from it - an extra fee is essentially the bank double­dipping on my savings.

Secondly, because I started thinking about those people whose entire income is less than $2000; not some months, but every month.

The Australian Council of Social Services reports that the poverty line in Australia represents 50 percent of the median household income. This works out to be approximately $400 per week for a single adult and $841 for a couple with two children. In 2012, there were 2.55 million people living below the poverty line in Australia, or 13.9 percent of the population.

This means that a significant proportion of Australia's population is far less than $2000 per month, and must pay all of their bills and living expenses out of this very meagre pot.

For these Australians, most would probably not spend $4 on coffee everyday. It is for these two reasons that I decided not to open this new account.

This incident got me thinking about other areas where our most disadvantaged citizens are forced to pay more than other Australians.

Insurance is one example of this. The cost of car, home and contents insurance are all affected by your postcode of residence: it will cost you more to insure your belongings if you live in a statistically more dangerous neighbourhood or postcode that records a higher incidence of car crashes.

Of course, the cost of property prohibits many people from just moving to a nicer neighbourhood, forcing many to pay more for insurance than those less-disadvantaged.

Taxes is another area where the poor are often disproportionately disadvantaged. Tax breaks to the rich is a hotly contested issue at the moment - particularly around superannuation and negative gearing. But there are also some taxes that disproportionately affect those most disadvantaged.

The newly reinstated fuel excise indexation will disproportionately affect the poor. Australia's Treasurer Joe Hockey infamously claimed that the poor don't drive all that much.

However, data from the Australian Bureau of Statistics shows that as a proportion of income, fuel consumption takes up 9.8% of weekly disposable income for those in the lowest income percentile, whereas for those who earn the most, it only takes up 3.9%.

And of course there is the recent news out of the Council of Australian Governments (COAG) meetings that the GST might now be raised to 15% from the current 10% level.

A rise to the GST will hit the poorest families hardest - the GST is not exempt from many essential costs of living - most notably women's sanitary products - and a larger proportion of the working poor's disposable income will now be forced to go to this tax hike.

To be fair, the State Premiers who argued for an increase to the GST have also stated that there would need to be compensation for those least wealthy; however how that compensation will be distributed is yet to be released.

And then there is the cost of poor health that afflicts many of Australia's poorest.

Although the links between poverty and health are complicated, it is widely acknowledged that disadvantaged Australians exhibit higher levels of disease risk factors and are less likely to undertake preventative health practices than those who are more well­off.

The incidence of many diseases and health ailments are much higher in Australia's most disadvantaged areas than in the least disadvantaged areas.

On health risk factors, the ABS also reports that those living in Australia's most disadvantaged areas are more likely to be overweight or obese, to be sedentary or not engage in regular exercise, and are much more likely to be daily smokers than those living in the highest income areas.

And finally, perhaps the greatest cost of being poor is that of time. Wealthier Australians can value their own time more effectively: by hiring cleaners, day care and nannies, and going to restaurants for meals.

As Randy Albelda, an economics professor at the University of Massachusetts in Boston says: "When you are poor, you substitute time for money. You have to work a lot of hours and still not make a lot of money. You get squeezed, and your money is squeezed."

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