These data indicate that nonwhite families in the lower income group spent less than half as much per person on medical services as white families with similar incomes. This discrepancy sharply declines but is still significant in the higher income group, where total nonwhite medical expenditures per person equal, on the average, 74.3 percent of white expenditures. Negroes spend less on medical care for several reasons. Negro households generally are larger, requiring greater nonmedical expenses for each household and leaving less money for meeting medical expenses. Thus, lower expenditures per person would result even if expenditures per household were the same. Negroes also often pay more for other basic necessities such as food and consumer durables, as discussed in the next part of this chapter. In addition, fewer doctors, dentists, and medical facilities are conveniently available to Negroes than to most whites a result both of geographic concentration of doctors in higher income ENVIRONMENTAL FACTORS Environmental conditions in disadvantaged Negro neighborhoods create further reasons for poor health conditions there. The level of sanitation is strikingly below that which is prevalent in most higher income areas. One simple reason is that residents often lack proper storage facilities for food-adequate refrigerators, freezers, even garbage cans, which are sometimes stolen as fast as landlords can replace them. In areas where garbage collection and other sanitation services are grossly inadequate-commonly in the poorer parts of our large cities-rats proliferate. It is estimated that in 1965, there were over 14,000 cases of ratbite in the United States, mostly in such neighborhoods. The importance of these conditions was outlined for the Commission as follows: 5 5 Sanitation Commissioners of New York City and Chicago both feel this [sanitation] to be an important community problem and report themselves as being under substantial pressure to improve conditions. It must be concluded that slum sanitation is a serious problem in the minds of the urban poor and well merits, at least on that ground, the attention of the Commission. A related problem, according to one Sanitation Commissioner, is the fact that residents of areas bordering on slums feel that sanitation and neighborhood cleanliness is a crucial issue, relating to the stability of their blocks and constituting an important psychological index of "how far gone" their area is. *** There is no known study comparing sanitation services between slum and non-slum areas. The experts agree, however, that there are more services in the slums on a quantitative basis, although per Memorandum to the Commission dated Nov. 16, 1967, from Robert Patricelli, minority counsel, Subcommittee on Employment Manpower and Poverty, U.S. Senate. haps not on a per capita basis. In New York, for example, garbage pickups are supposedly scheduled for about six times a week in slums, compared to three times a week in other areas of the city; the comparable figures in Chicago are two to three times a week versus once a week. The point, therefore, is not the relative quantitative level of services but the peculiarly intense needs of ghetto areas for sanitation services. This high demand is the product of numerous factors including: (1) higher population density; (2) lack of well managed buildings and adequate garbage services pro vided by landlords, number of receptacles, carrying to curbside, number of electric garbage disposals; (3) high relocation rates of tenants and businesses, producing heavy volume of bulk refuse left on streets and in buildings; (4) different uses of the streets-as outdoor living rooms in summer, recreation areasproducing high visibility and sensitivity to garbage problems; (5) large numbers of abandoned cars; (6) severe rodent and pest problems; (7) traffic congestion blocking garbage collection; and (8) obstructed street cleaning and snow removal on crowded, car-choked streets. Each of these elements adds to the problem and suggests a different possible line of attack. EXPLOITATION OF DISADVANTAGED Much of the violence in recent civil disorders has been directed at stores and other commercial establishments in disadvantaged Negro areas. In some cases, rioters focused on stores operated by white merchants who, they apparently believed, had been charging exorbitant prices or selling inferior goods. Not all the violence against these stores can be attributed to "revenge" for such practices. Yet it is clear that many residents of disadvantaged Negro neighborhoods believe they suffer constant abuses by local merchants. Significant grievances concerning unfair commercial practices affecting Negro consumers were found in 11 of the 20 cities studied by the Commission. The fact that most of the merchants who operate stores in Negro areas are white undoubtedly contributes to the conclusion among Negroes that they are exploited by white society. It is difficult to assess the precise degree and extent of exploitation. No systematic and reliable survey comparing consumer pricing and credit practices in all-Negro and other neighborhoods has ever been conducted on a nationwide basis. Differences in prices and credit practices between white middle-income areas and Negro low-income areas to some extent reflect differences in the real costs of serving these two markets (such as differential losses from pilferage in supermarkets), but the exact extent of these cost differences has never been estimated accurately. Finally, an examination of exploitative consumer practices must consider the particular structure and functions of the low-income consumer durables market. INSTALLMENT BUYING This complex situation can best be understood by first considering certain basic facts: ■ Various cultural factors generate constant pressure on low-income families to buy many relatively expensive durable goods and display them in their homes. This pressure comes in part from continuous exposure to commercial advertising, especially on television. In January, 1967, over 88 percent of all Negro households had TV sets. A 1961 study of 464 lowincome families in New York City showed that 95 percent of these relatively poor families had TV sets. ■ Many poor families have extremely low incomes, bad previous credit records, unstable sources of income or other attributes which make it virtually impossible for them to buy merchandise from established large national or local retail firms. These families lack enough savings to pay cash, and they cannot meet the standard credit requirements of established general merchants because they are too likely to fall behind in their payments. Poor families in urban areas are far less mobile than others. A 1967 Chicago study of low-income Negro households indicated their low automobile ownership compelled them to patronize neighborhood merchants. These merchants typically provided smaller selection, poorer services and higher prices than big national outlets. The 1961 New York study also indicated that families who shopped outside their own neighborhoods were far less likely to pay exorbitant prices. ■Most low-income families are uneducated concerning the nature of credit purchase contracts, the legal rights and obligations of both buyers and sellers, sources of advice for consumers who are having difficulties with merchants and the operation of the courts concerned with these matters. In contrast, merchants engaged in selling goods to them are very well informed. In most states, the laws governing relations between consumers and merchants in effect offer protection only to informed, sophisticated parties with understanding of each other's rights and obligations. Consequently, these laws are little suited to protect the rights of most low-income consumers. In this situation, exploitative practices flourish. Ghetto residents who want to buy relatively expensive goods cannot do so from standard retail outlets and are thus restricted to local stores. Forced to use credit, they have little understanding of the pitfalls of credit buying. But because they have unstable incomes and frequently fail to make payments, the cost to the merchants of serving them is significantly above that of serving middle-income consumers. Consequently, a special kind of merchant appears to sell them goods on terms designed to cover the high cost of doing business in ghetto neighborhoods. Whether they actually gain higher profits, these merchants charge higher prices than those in other parts of the city to cover the greater credit risks and other higher operating costs inherent in neighborhood outlets. A recent study conducted by the Federal Trade Commission in Washington, D.C., illustrates this conclusion dramatically. The FTC identified a number of stores specializing in selling furniture and appliances to low-income households. About 92 percent of the sales of these stores were credit sales involving installment purchases, as compared to 27 percent of the sales in general retail outlets handling the same merchandise. The median income annually of a sample of 486 customers of these stores was about $4,200, but onethird had annual incomes below $3,600, about 6 percent were receiving welfare payments, and another 76 percent were employed in the lowest paying occupations (service workers, operatives, laborers and domestics), as compared to 36 percent of the total labor force in Washington in those occupations. Definitely catering to a low-income group, these stores charged significantly higher prices than general merchandise outlets in the Washington area. According to testimony by Paul Rand Dixon, Chairman of the FTC, an item selling wholesale at $100 would retail on the average for $165 in a general merchandise store and for $250 in a low-income specialty store. Thus, the customers of these outlets were paying an average price premium of about 52 percent. While higher prices are not necessarily exploitative in themselves, many merchants in ghetto neighborhoods take advantage of their superior knowledge of credit buying by engaging in various exploitative tactics high-pressure salesmanship, "bait advertising," misrepresentation of prices, substitution of used goods for promised new ones, failure to notify consumers of legal actions against them, refusal to repair or replace substandard goods, exorbitant prices or credit charges, and use of shoddy merchandise. Such tactics affect a great many low-income consumers. In the New York study, 60 percent of all households had suffered from consumer problems (some of which were purely their own fault). About 23 percent had experienced serious exploitation. Another 20 percent, many of whom were also exploited, had experienced repossession, garnishment, or threat of garnishment. GARNISHMENT Garnishment practices in many states allow creditors to deprive individuals of their wages through court action, without hearing or trial. In about 20 states, the wages of an employee can be diverted to a creditor merely upon the latter's deposition, with no advance hearing where the employee can defend himself. He often receives no prior notice of such action and is usually unaware of the law's operation and too poor to hire legal defense. Moreover, consumers may find themselves still owing money on a sales contract even after the creditor has repossessed the goods. The New York study cited earlier in this chapter indicated that 20 percent of a sample of low-income families had been subjected to legal action regarding consumer purchases. And the Federal Trade Commission study in Washington, D.C., showed that, on the average, retailers specializing in credit sales of furniture and appliances to low-income consumers resorted to court action once for every $2,200 of sales. Since their average sale was for $207, this amounted to using the courts to collect from one of every 11 customers. In contrast, department stores in the same area used court action against approximately one of every 14,500 customers. VARIATIONS IN FOOD PRICES Residents of low-income Negro neighborhoods frequently claim that they pay higher prices for food in local markets than wealthier white suburbanites and receive inferior quality meat and produce. Statistically reliable information comparing prices and quality in these two kinds of areas is generally unavailable. The U.S. Bureau of Labor Statistics, studying food prices in six cities in 1966, compared prices of a standard list of 18 items in low-income areas and higher income areas in each city. In a total of 180 stores, including independent and chain stores, and for items of the same type sold in the same types of stores, there were no significant differences in prices between low-income and high-income areas. However, stores in low-income "Assuming their sales also averaged $207 per customer. areas were more likely to be small independents (which had somewhat higher prices), to sell low-quality produce and meat at any given price, and to be patronized by people who typically bought smaller sized packages which are more expensive per unit of measure. In other words, many low-income consumers in fact pay higher prices, although the situation varies greatly from place to place. Although these findings must be considered inconclusive, there are significant reasons to believe that poor households generally pay higher prices for the food they buy and receive lower quality food. Lowincome consumers buy more food at local groceries because they are less mobile. Prices in these small stores are significantly higher than in major supermarkets because they cannot achieve economies of scale and be cause real operating costs are higher in low-income Negro areas than in outlying suburbs. For instance, inventory "shrinkage" from pilfering and other causes is normally under 2 percent of sales but can run twice as much in high-crime areas. Managers seek to make up for these added costs by charging higher prices for food or by substituting lower grades. These practices do not necessarily involve exploitation, but they are often perceived as exploitative and unfair by those who are aware of the price and quality differences involved but unaware of operating costs. In addition, it is probable that genuinely exploitative pricing practices exist in some areas. In either case, differential food prices constitute another factor convincing urban Negroes in low-income neighborhoods that whites discriminate against them. |