Reducing the High Costs of Being Poor

Matt Fellowes
Matt Fellowes Former Brookings Expert, CEO and Founder - United Income

March 8, 2008

Mrs. Chairman, and other members of the Committee, thank you for the invitation to testify today about the higher prices that lower-income individuals often pay for necessities and the private- and public-sector responses needed to bring down those higher costs of living. Price premiums tacked onto goods and services pose a serious obstacle for lower-income workers that are trying to convert scarce dollars into economic mobility. Fortunately, steps that a select group of states, cities, and private-sector partners have taken in recent years provide a roadmap for a new federal agenda that will lower these costs of living for households across the country.

I want to make three broad points.

First, moderate- and low-income households often pay higher prices for basic necessities, from basic financial services to cars to mortgages.

Second, these higher prices curb the ability of moderate- and low-income households to convert their wages into economic mobility and erode the efficacy of federal work-support subsidies, including the $42 billion Earned Income Tax Credit.

Third, federal policymakers can lower these higher prices by a) reducing the real higher costs of doing business with low-income consumers, b) curbing market practices that unnecessarily drive up prices, and c) boosting the ability of consumers to find the lowest possible price in a market for a good or service.