Weekly Wisconsin News Roundup, Frugality May Be Out Of Reach For Low-Income Families

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• State News Roundup For October 7, 2016

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  On Wednesday, Wisconsin Attorney General Brad Schimel announced state authorities will begin processing the backlog of untested sexual assault evidence, following criticism of how the state has handled these untested “rape kits.” A state news editor joins us to talk about this and other top news from the last week.

• Frugality May Be Out Of Reach For Low-Income Families

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  Convention wisdom dictates that bulk buying, while expensive up front, can save families money over the long-term. But a new study shows that low-income families have the hardest time affording products in bulk and end up paying more for items over time. We’ll learn more from one of the researchers.

• Study: Low-Income Households Miss Out On Savings Because They Can't Afford To Buy In Bulk

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  Low-income households in the United States are often forced to pay more annually for some everyday household items like toilet paper due to their inability to buy in bulk or take advantage of sale prices, according to new research.

  Mike Palazzolo, marketing professor at University of California, Davis and co-author of the study “Frugality is Hard to Afford,” said his research shows it’s a privilege to be able to buy 36 rolls of toilet paper at once.

  “If you think about when you go to the supermarket and you see say, something on sale, you may not need it right now, but if it’s cheaper than it would be in a week from now when you would need it, for many of us it would be very trivial to just go ahead and make that purchase at this moment, or, alternatively, to buy a 26-pack of toilet paper at Costco,” Palazzolo said.

  “But for low-income households, because they don’t have an infinite supply of cash to just throw around, they have to make much more difficult choices, or are prohibited sometimes, or at least inhibited, from engaging in these behaviors.”

  Palazzolo’s study unraveled just how much more poor people, on average, pay annually for toilet paper.

  “We compared the behavior of the lowest-income quintile in the U.S. to the highest-income quintile, and based on their toilet paper purchase habits, we found that we would expect that the lowest-income households would pay about 5.9 percent more per sheet of toilet paper due to their inability to buy in bulk and on sale as often as higher-income households,” Palazzolo said.

  But it’s not just an issue of liquidity and how much money might be in the billfold, said Palazzolo. Oftentimes access to transportation and storage limitations also present hurdles for poor people.

  “Often, naturally, lower-income households are more likely renting or may live in a smaller house where there’s less storage space, so there are a number of other factors,” he said.

  Additionally, some discount stores may not be available within low-income households, a phenomenon Palazzolo referred to as redlining. Moreover, even when stores are available in areas stricken by poverty, product prices might be higher due to shipping costs or lack of competition.

  It’s not uncommon to hear financial advice targeted at poor people that chastises them for not being frugal enough, said Palazzolo. But his research shows it’s more complicated than that — there’s a lot of built-in obstacles preventing people from spending their money wisely.

  “There is a lot of disagreement about the degree to which low-income households may be just prohibited from doing the smart thing, and the degree to which perhaps their circumstances have made it very difficult to actually do the smart thing even if they’re able to do so,” he said.

  Until there’s more research to verify some of the larger themes in his study, Palazzolo said he is reluctant to start offering solutions to the problem. However, giving low-income communities access to short-term financial lending without the high-interest rates could be helpful.

  “I can say that the evidence does seem to indicate that the kind of loans available to these low-income households currently is insufficient, and we do need to find another solution, and that’s probably a very important next step for us to start thinking about,” Palazzolo said.