"It's Costly Being Poor": An Article from the Economist about Philadelphia

This article came from the August 11th, 2005 edition of the Economist.

THIS week saw the start of yet another campaign to boycott Wal-Mart. In Philadelphia, the United Food and Commercial Workers (UFCW) joined two teachers' unions to urge parents not to buy their school supplies at the big store, which doesn't recognise unions. “Low wages mean more poverty,” announced the UFCW's local chief.

Yet the poor might benefit from low prices. “The Price is Wrong”, a recent report from the Brookings Institution, a think-tank based in Washington, DC, found that Philadelphia's poor pay more for almost everything than the city's rich folk do: they pay more for loans because their credit history is patchier, more for insurance because their neighbourhoods are rougher, and more to cash cheques because they don't have bank accounts and go to extortionate cheque-cashing stores that can bite $450 a year out of a household income of $15,000.

And they pay more for their groceries because they shop at places like the Thrift Discount store on Girard Avenue. Wal-Mart, it ain't. There's not much choice, the soup cans are grimy with dust and the nappies are 57% dearer than at a big store in the suburbs.

Why doesn't somebody undercut Thrift Discount and its sort? One reason is the powerful lobby against big stores, such as Wal-Mart, opening in cities. Another is that small entrepreneurs don't like working in rough neighbourhoods. “It's not so bad round here during the day, but you hear gunshots every night,” says Patrick Park, a member of the Korean-American family that owns Thrift Discount. Armed robberies are fairly common in the area, he says, and shoplifting is “a big problem”.

Brookings says the risks of running shops in poor areas are exaggerated, citing a Department of Agriculture report that found no statistically significant differences in operating expenses between grocery stores in poor and rich areas. Poor densely populated areas also contain more potential shoppers. Heidi Hwang, Mr Park's sister, who is minding the till, says she is astonished how many $50 hair extensions she sells.

One intangible and awkward cost glossed over in the Brookings report is the daily experience of racial tension. “They don't like us watching them,” says Ms Hwang, “but then you turn your back and they steal something.” Black shoppers have a different perspective. Ice Cube, a rap artist, once released a song called “Black Korea” that included the lyrics: “[D]on't follow me up and down your market/Or your little chop-suey ass 'll be a target” and “[P]ay respect to the black fist/Or we'll burn your store, right down to a crisp.

Such threats are very rarely carried out, of course, but they are another reason why shopkeepers shun the inner cities. Mr Park's family moved to the suburbs as soon as they could afford it. And Mr Park says he won't take over the family business unless he has to. He's planning to be a lawyer.