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Comment by zanny | Hacker News Reader

And the people that provide goods and services now to the impoverished (especially the actual exploiters, like pay day loans and corner stores, and the manufacturers that supply the junk foods they eat and drink) have a financial incentive to keep people in poverty and grow their demographic. Combine that with an very easily corrupted government like the US has now, and you get corporations dictating policy to prevent economic upward mobility and create more poor to become dependent on their products.

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I'm not so sure the corner bodega belongs in the same category with the payday loan assholes.

Yes, the corner bodega is more expensive than the full grocery store, but they also probably have way lower sales per hour of labor, lower sales per square foot, lower sales per other overhead (rent, insurance, security, utilities, taxes), higher credit card interchange fees, higher shrinkage and spoilage, and pay more for their inbound groceries than the large chain down the street. If my guesses are true, all of these are perfectly legitimate business expenses and the corner store owner needs a return on their investment, just like the large chain does. (Grocers operate on razor-thin overall margins. Average net margin for the supermarket industry was 1.3%, 1.9%, and "1-2%" in the first three references I could find online.) Anything that increases costs basically HAS to go to the price as there's nothing else left to flex.

Payday jackholes can DiaF for all I care, but even the prevalence of those is driving in part by the banking regulations meant to "punish the banks" which have the effect of making poor communities "money losing to serve". When the predictable bank pullouts happen and payday lenders move in, it's not that hard to see the connection. Let the banks make a profit and they'll serve the community; prohibit them from making a profit and they won't, leaving only the even less savory financial businesses.

Corner stores make their profit on tobacco, alcohol and scratch tickets, though. The rest of it is just to give a patina of respectability.

That's an excellent point. The lottery aspect does bug me a lot. (Though my "regular" grocer also has lottery, tobacco, and beer/wine, so I don't think the bodega is worse than the other grocers in that regard.)

The lottos are state-run though. Don't blame the bodega owner, blame the government for financially preying on poor people who are bad at math in the first place. I don't think you can really criticize someone too much for selling something that the government plays ads for on the radio.

> bad at math

It's not primarily that people are bad at math. It's that they don't see any other way out. I've seen data that show that people play lotteries "for money" at higher rates the lower their income is. I can't find the exact citation, but here's a CMU article about study that shows something similar: http://www.cmu.edu/news/archive/2008/July/july24_lottery.sht...

We really just need to end state-run lotteries. The problem is that the states depend on this regressive tax for revenue.

One interesting argument I've seen is that there is a serious demand for lotteries and gambling, and that making them illegal won't stop them (as it hasn't for drugs or prostitution). Instead, it just creates a black market for gambling, which is even more problematic than a well-regulated state one with a predictable and reasonable house rake. We may be trying to fight the human psyche itself here, for which making things illegal tends not to work.

But at the very least the states shouldn't be advertising the damn things!

Ending state lotteries is just another form of prohibition. It's part of human nature and population will still end up participating in alternative get rich quick schemes.

Then make them more fair with better payouts. They don't need to be completely exploitative.

A non exploitative lottery is also called a bank.

Interesting that you mention that. Such a thing exists, is fairly widespread in some countries, and is quite successful at encouraging the correct behavior: https://en.wikipedia.org/wiki/Prize-linked_savings_account

Basically, every so many dollars that are in a savings account for a set period of time counts as one ticket, and so of course the way to increase your chance of winning is to "buy more tickets". Winnings are paid out in lieu of interest, but in the end averages to about the same.

Don't forget food stamp fraud.

> Yes, the corner bodega is more expensive than the full grocery store

All your justifications are reasonable from a business standpoint. But if I'm so poor and my circumstances are so bad that a bodega is the only place I can realistically go for groceries, what difference does it make to me?

This seems to be the exact point of the original article. Someone is making money off of bodegas, just like someone is making money off of gouging the poor on housing or payday loans, and in all cases the added cost can be justified as "perfectly legitimate business expenses." And the poor continue to suffer and bear the brunt.

> But if I'm so poor and my circumstances are so bad that a bodega is the only place I can realistically go for groceries, what difference does it make to me?

You're also still worse off if the bodega closes, right? I think we're just circling on "being hopelessly poor sucks in lots of ways".

Even the payday loan guys aren't that bad, many of their users are people who legit just need emergency cash and will pay it back on their next payday.

Freakonomics did a pretty good episode discussing advantages and problems with it recently.

A huge portion of payday loans are repeat loans from people trapped in a cycle of debt, taking out loans to pay off interest on previous usurious loans.

Yes, payday loans have defait risk, whixh is part of why they are expensive. But that also shows that many borrowers can't acurally afford them. And the cost of defaults is borne by...the next-pooorest people who barely scrape by, who DO lay off their loans, but pay 50-200% APR

From what I've heard it seems like about 60% are completely competent loans. It's those other 40% which are roll overs. Note I'm not talking % of customers here but % of loans. Yeah, 40 is still bad, but there a legit demand too.

Some have suggested that a governmental or other instution needs to be made just to break people out of the cycle and give them a loan at a rate closer to that of credit cards. It's a tricky situation though from a regulatory perspective because you don't want to have those 60% of people who are avoiding massive overdraft fees or dropping credit scores using these services to get stuck with no options.

Personally I think if you sign up for a loan you can't pay, that's on you, not really exploitative as some people seem to propose. Take some personal responsibility, you know?

What's different about the payday loan industry such that the "better to have some alternative than no alternative" argument not apply? Running such a business clearly takes lots of work, and clearly there is lots of demand for the services they provide. What differentiates them from other business that provide "value"?

They take extraordinarily high margins, often involving mis-representation to their customers along the way (largely by illustrating their fees as flat numbers, which obfuscates that if you translate it into actual APR terms - to compare to other lenders - they're asking for what equates to absolutely ridiculous interest rates).

Generally, if there's a demand for a service, people should come flooding in and reduce the marginal profits through competition. In this case, people came rushing in ... and profit margins went up over time. This alone, in a big picture perspective, suggests shadiness (though not by itself guaranteeing it, since you could argue for growth in demand outstripping the growth in supply).

Pay day lenders are required by law to publish APR. The ugly truth at the bottom of it is that their customers base is fundamental to stupid to know what is good for them, or too impulsive to make responsible choices, or too desperate to seek alternatives, or too ignorant to know their alternatives.

Their are some easy improvements (education and outreach and banking programs for the poor and poorly educated) and some controversial ones (removing citizen's legal rights and freedoms to make self-destructive decisions)

I had a friend who worked for a UK payday lending company. The borrowing patterns of customers seemed hard to interpret as being in their long-term interests. Customer retention was too high and borrowing patterns too consistent for the loans to be primarily shielding customers from unexpected shocks rather than just punishing their lack of self-discipline.

The parent companies of traditional banks instituted high overdraft fees and the ChexSystems blacklist to steer poor customers away from checking accounts and towards the check cashing and payday loan companies, which they also own, but which have vastly higher margins on poor customers. At least, this is the claim I've seen thrown around.

I think you're letting off too easy the politicians in impoverished communities who are incentivized to keep their constituencies so they themselves keep their jobs.

Do you have any examples of where Frito-Lay, McDonalds, Burger King, etc. are lobbying the government to "keep people in poverty?"

Edit: and as mentioned elsewhere here, state lotteries are another huge government-authorized program that disproportionately takes from the poor.

I don't see that: they still have to compete with other providers, so they have no incentive to spend their own money to increase the general demand for their kind of service, since their competitors "free ride" off such efforts.

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