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The Consequences of Insufficient Household Income

This new Consequences of Insufficient Household Income report provides a deeper level of understanding of the choices that ALICE and poverty-level families across the country make when they do not have enough income or assistance to afford basic necessities, and the consequences of those choices.

socioeconomic status,

socioeconomic status, including education level, occupation, homeownership status, insurance purchasing history, and marital status. More recently, insurance companies have started to use information from credit reports to determine insurance premiums, and in some states credit scores can have more of an impact on premiums than any other factor. These higher rates make it even harder for ALICE and poverty-level drivers to afford insurance and increase the likelihood that they will skip payments or opt out altogether (Ong & Stoll, 2007; Heller & Styczynski, 2016; Consumer Reports, 2015). Another cost-saving strategy is not registering a vehicle, which avoids the annual fee and possibly the repairs needed for it to pass inspection. Other common but often unanticipated expenses associated with driving are speeding, parking, and other traffic tickets. In many states, drivers who cannot pay the fine can have their license suspended. In some cases, they can even receive jail time or be sentenced to community service (University of Wisconsin-Milwaukee Employment & Training Institute, 2015; American Association of Motor Vehicle Administrators, 2013; Consumer Reports, 2015; PBS NewsHour, 2014). Consequences Long-term penalties: Avoiding insurance, registration, or tickets may provide short-term savings, but these strategies have long-term consequences such as fines, towing, and storage fees, points on a driver’s license that increase the cost of car insurance, and even impounding of the vehicle or license suspension. In particular, the system of large fixed fines for certain offenses in most municipalities hits low-income drivers harder than those who are more affluent. Having a driver’s license suspended for failure to pay a traffic fine not only takes away someone’s ability to get to a job but also harms credit ratings, which in turn can make it harder for people to get and keep jobs and take care of their families. These added layers of indirect consequence significantly increase traffic 54 UNITED WAY ALICE REPORT – THE CONSEQUENCES OF INSUFFICIENT HOUSEHOLD INCOME

Despite working full time (and having a second job on the side), Christina Forgione and her fiancé still cannot afford their own home or a desperately needed second car. Christina works full time as a junior medical secretary at a surgery facility, and brings in extra money as a hair stylist after hours. Her fiancé of two years delivers Meals on Wheels. They have three young children (a 3-year-old and 1-year-old twin boys) and have had to live at her fiancé’s mother’s house in order to stretch their money. “We only have one car that we share between us,” Christina says. It’s a logistical headache: She wakes up before dawn to take her fiancé to work by 5 a.m., and then at the end of his shift, he picks up the car from her workplace, which is close by. “We both work but I feel like there’s never enough money because everything is so expensive and we just can’t keep up,” Christina says. “We basically are able to get what we need and not what we want.” The “wants” include vacation, dance class for their toddler, and other fun family activities. “It comes down to, what can I not pay this month so I can pay something extra for them?” says Christina. “It is very difficult.” violation penalties for low-income drivers (Urbana IDOT Traffic Stop Data Task Force, 2015; Lawyers Committee for Civil Rights, 2015). Disruptions in day-to-day transportation: When drivers have their licenses suspended because of problems with insurance, registration, or unpaid fines, there are delays and complications in getting to work, school, shopping, and medical appointments, creating added stress and expenses for the whole family (Eaglin, 2015). Strategy 4: Move Near Public Transportation Public transportation is a far less expensive means to commute to work than driving a car, but is not widely available in most parts of the U.S. Nationally, only 11 percent of adults use public transit to commute to work, with most of these commuters concentrated in urban areas. Among households in rural areas, only 3 percent of workers report using public transit regularly. Illustrating its cost effectiveness, the highest levels of UNITED WAY ALICE REPORT – THE CONSEQUENCES OF INSUFFICIENT HOUSEHOLD INCOME 55

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