Low-Income Consumers Pay More for Poorer Services, Study Finds

The same people who bring you Consumer Reports, long respected for the ability to rate televisions and toasters, have turned to comparing communities.

Their findings, based on research in low-income and middle-income neighborhoods of Los Angeles and Oakland: The poor suffer from poorer shopping, housing, health and banking services.

“It’s not just that poor consumers don’t have much money,” said Judith Bell, co-director of the Consumers Union’s West Coast regional office. “Low-income consumers don’t have easy access to the basic goods and services that middle-income consumers take for granted.”

The study, issued Tuesday by the nonprofit organization, compared services in the Broadway-Manchester neighborhood of South-Central Los Angeles to those in the Mar Vista neighborhood on the Westside. Although the median rent in Broadway-Manchester was $520, compared to $729 in Mar Vista, that rent represented 38% of the average inner-city family’s income, compared to 21% in Mar Vista.

In Oakland, the study confirmed that groceries tend to cost more at inner-city supermarkets, and that banking services are far less available. There were only four bank branches in the low-income neighborhoods of East, West and Central Oakland, compared to 31 in the more affluent Oakland Hills area. The report did not include comparable information for Los Angeles.

To many, the individual findings in the report, titled “The Thin Red Line--How the Poor Still Pay More,” are little more surprising than a Cadillac ranking higher than a Hyundai on the pages of Consumer Reports. But what is particularly troubling, experts say, is the bleak overall picture and the reasons for disparities.

“We’ve known for years that poor communities have been redlined by banks, insurance companies and so on,” said James Johnson, director of the UCLA Center for the Study of Urban Poverty. “The crucial issue is why that’s the case.

“It has something to do with the communities being victimized by disinvestment of mainstream employers and consumer businesses,” said Johnson. “The ones that come in (do so) to exploit people locked into the communities, who are a captive audience.”

The study demonstrates that, whenever possible, inner-city residents flock to supermarkets and banks in more affluent neighborhoods in search of better values and quality, Bell said.

But that represents a marked inconvenience and results in an outflow of money, which in the best of circumstances could be turned over several times to help revitalize and rejuvenate downtrodden neighborhoods.

In Oakland, the study showed, 33% of low-income residents spend at least 11 minutes driving to a “decent” grocery store, compared to 8% of middle-income residents.

Moreover, low-income consumers spend $34 in their own neighborhoods of every $100 spent for food. Middle-income shoppers, by contrast, spend $83 of every $100 near their homes.

Since the 1992 Los Angeles riots, there has been some basis for hope locally, Bell said.

Several large Los Angeles-based corporations have invested $1 million or more in the city’s handful of black-owned banking institutions, creating a greater capacity for lending to inner-city economic projects. In addition, black-owned Founders National Bank last month opened two branches that it recently purchased from Bank of America.

Major supermarket chains have also promised to open inner-city supermarkets, including Vons and Smart & Final, which plan to open as many as 12 stores each within the next five years.

“Life in an inner-city neighborhood should be like life everywhere else,” said Barry Sanders, co-chairman of RLA, formerly known as Rebuild L.A. “‘It takes time to decide to build a supermarket, buy land, clear it, build it and open. These things are happening.”

But Johnson cautioned that any gains could be short-lived if the bleak inner-city employment picture does not improve. “The current development of large grocery chains is a response to the civil unrest and the feeling of businesses that they have to do something,” Johnson said. “However, in the current economic climate, one must remain skeptical.

“If you don’t have an infusion of jobs, you don’t have an economic base to buy groceries and services and it will be difficult for the businesses to last.”