There are tens of millions of people in the U.S. who face chronic hunger,
housing insecurity, inadequate healthcare, and a daily struggle to make
ends meet. The causes of poverty are diverse, complex, and often
structural, and the consequences are catastrophic at an individual and
Our inaugural cohort of entrepreneurs at
Ventures for Shared Prosperity
will focus on building businesses that
improve the lives of millions by reducing the costs for those living
in poverty. While most anti-poverty efforts focus (justifiably) on
increasing incomes and economic opportunity, an often-ignored part of
the equation is the reality that living in poverty in America is
incredibly expensive (PDF).
In partnership with our first cohort of entrepreneurs we will work to
alleviate the pernicious ways that the “poverty tax” manifests itself.
Read on if you want to learn
more about the problem, and where we see opportunities to build large,
sustainable, impact businesses.
In order to identify potential business opportunities, it's important to
first understand the many different forms that the poverty tax takes:
For those who live on low incomes, many goods and services are simply
more expensive than they are for wealthier families. From more
expensive financial statements to higher car insurance rates to paying
more for everyday goods like toilet paper, people living in poverty
spend billions more on many products and services than people with
greater income and wealth.
Other costs are technically the same for everyone, but they
disproportionately impact people living in poverty. Many of these,
like court fines and fees, are predominantly borne by people of color with lower incomes,
while others, like security deposits for rental
housing, have an outsized downstream impact on people who can’t
afford them, reducing housing security, mobility, and affordability.
Without sufficient liquidity or access to affordable credit,
families with lower incomes often have no choice but to purchase cheaper,
lower-quality assets. When these assets - such as cars or household
appliances - need repairs, families must incur additional expenses
to fix or replace them, resulting in a higher total cost of
In addition to financial costs, individuals with lower incomes also face higher
temporal costs (e.g. spending more time on caregiving), administrative costs,
and cognitive costs (the near-constant trade-off decisions one must make
when managing scarce resources) than individuals with higher incomes.
We have identified six specific facets of life where the poverty tax is
significant. This list is not meant to be comprehensive, nor is it
necessarily the case that each of these problems has a credible software
powered, behavioral science informed solution. Instead, they are
illustrative of the kinds of problems in the excess costs space that we
anticipate our first cohort of entrepreneurs will explore in partnership
with our business design team.
1 in 4 renters are spending at least 50% of their wages on housing
and utilities. Tragically, these costs not only represent a larger
portion of the budgets of people with lower incomes, they’re also greater in
real terms. Renters with lower incomes, especially those of color, are
routinely overcharged relative to market values, and these
discrepancies persist for homeowners with Black families paying higher
property taxes and receiving more expensive mortgage loans.
For families living on low-incomes, finding a way to get around
town - to work, to the store, to childcare - can be a major
challenge. Buying and maintaining a car can be prohibitively
expensive, but the alternative - relying on public transit systems
that require multiple transfers to get from Point A to B - can also
have prohibitively high time and opportunity costs. And while COVID
has transformed the daily commute for many to a short walk down the
hallway, the same can’t be said for the 43% of Black and Latinx
workers who work in jobs that can’t be done remotely (compared to
around 25% for white workers).
Unpredictable work schedules characterize the professional lives of
millions of workers -- especially women of color -- and impose
devastating cognitive, physical, and economic costs. The result is an
increased incidence of hunger, housing hardships, and psychological
distress for families, and higher job turnover for employers.
Furthermore, gig workers and employees in many part-time and hourly jobs
lack key benefits, like employer-subsidized health, disability, and
unemployment insurance. Without these critical supports, the future
costs of dealing with health and economic shocks are much much higher.
More than 25% of U.S. adults age 18-64 struggle to pay their medical
bills, and as with so many other costs, this debt disproportionately
impacts individuals with lower incomes and people of color. In addition to
pushing families into bankruptcy, this debt has a compounding impact on
future costs: damaging credit scores and making borrowing more
expensive, leading to late fees on missed bills, and increasing future
healthcare costs, which arise due to delayed medical care.
With limited liquidity, individuals living on low incomes are often
unable to take advantage of fee-based wholesale services or bulk
discounts (e.g. buy two, get one free) at grocery stores, resulting
in excess annual costs of over $5 billion. Similarly, due to the
inability to purchase furniture and appliances outright, many
individuals with lower incomes rely on rent-to-own companies which can often
charge twice as much in total costs.
Whether it's exorbitant payday loan interest rates, overdraft fees, or
prepaid card fees, individuals with lower incomes face a wide array
of costs related to financial services that individuals with higher incomes do
not. Estimates of those costs continue to grow each year and were
estimated at $196 billion in 2019.
We are deeply aware that the causes of poverty are diverse, complex, and
often structural. While market-based solutions can improve people’s
financial health, they are not a panacea. We are incredibly proud to be
doing this work as part of a broader team - the
Shared Prosperity Catalyst -
that will simultaneously be working to change the narratives around
poverty in America and shape the policies that can help - and too often
hurt - people with lower incomes.