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/

by ericglyman • 11 years ago

47 63 11 years ago

blog.paribus.co

geoffwoo• 11 years ago

Cool to see screenshots of price discrimination in practice

ericglyman7• 11 years ago

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.

pkaye• 11 years ago

The question is what kind of price discrimination is this? Do we attribute browsing/shopping on the phone to be being poor?

gluelogic2• 11 years ago

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.

jacquesm• 11 years ago

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.

briandear• 11 years ago

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.

venomsnake• 11 years ago

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.

smt88• 11 years ago

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.

Mz3• 11 years ago

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.

ryan-c• 11 years ago

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...).

manicdee3• 11 years ago

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.

6502nerdface• 11 years ago

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.

refurb2• 11 years ago

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?

Mz3• 11 years ago

Lots of poor people are online via smartphones, not desktop computers. That's how.

refurb2• 11 years ago

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?

gluelogic2• 11 years ago

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.

delinka• 11 years ago

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.

wildmusings3• 11 years ago

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.

ams6110• 11 years ago

Paribus: I've never heard of you. I don't know what you do. You have no link to your website on your blog.

ericglyman7• 11 years ago

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/

wildmusings3• 11 years ago

A few problems with this article:

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).

PhasmaFelis2• 11 years ago

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.

pkinsky• 11 years ago

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...)

ericglyman7• 11 years ago

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.

berberous• 11 years ago

> "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?

rdancer• 11 years ago

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?

wildmusings3• 11 years ago

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.

thadd• 11 years ago

Inflation- the secret tax

vacri2• 11 years ago

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.

yummyfajitas7• 11 years ago

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.

ericglyman7• 11 years ago

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)."

yummyfajitas7• 11 years ago

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).

shkkmo4• 11 years ago

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."

bane4• 11 years ago

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.

yummyfajitas7• 11 years ago

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

bane4• 11 years ago

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.

DanBC• 11 years ago

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.

shkkmo4• 11 years ago

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?

frogpelt• 11 years ago

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.

The double whammy of being poor – making less and getting charged more

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