Rich Economy, Poor Economy: Part II | The second in a two-part look at how the income gap between the poorest and wealthiest has impacted local businesses. Part I ran in our Dec. 20 issue.
Photo/Christina H. Davis
WASH & RINSE: Ara Asadoorian, owner of Oscar's Coin-Op in Worcester, has seen an uptick in business since the recession started.
As the economy slid into the Great Recession, Ara Asadoorian, manager of Oscar’s Coin-Op laundromat on Millbury Street in Worcester, noticed more and more customers coming through his doors.
In part, he said, it’s because the third-generation family-owned business is one of the cheapest places in town to do the wash. But it’s also the fact that Oscar’s doesn’t make its patrons buy a card with a minimum cost of $5 to run the machines. Asadoorian said many of his customers just don’t want to tie up that much money on a card if they’re not going to spend it all at one visit.
Asadoorian knows how precarious people’s financial situations can be, and has no problem with someone scraping together nickels and pennies and asking him to change them to quarters for the machines.
“I do it probably five times a day,” he said.
Between the late 1980s and the mid-2000s, the incomes of the richest 20 percent of Massachusetts families grew 44 percent in inflation-adjusted terms, according to a report by the Center on Budget and Policy Priorities and the Economic Policy Institute. Those of the poorest 20 percent grew less than 2 percent.
When the recession hit, many people living in that bottom fifth of the pile found they didn’t have any fat in their budget to cut. For some businesses whose customers are largely low-income, that has meant a blow to their own bottom lines. For others, it’s meant a push toward new business strategies.
Extreme Liquidity
Lance Rozell ran convenience stores in Fitchburg and Leominster for 25 years. Over that time, he saw the business shift away from milk and bread, toward beer and lottery tickets, and — especially for customers with little money — check cashing and other financial services.
Just this past August, Rozell got out of that business and opened Cash Link Check Cashing in Fitchburg, where he and his wife and son can devote themselves to the financial services aspect of their old business.
Rozell said his customers include students and day laborers who have trouble keeping minimum balances in checking accounts, subcontractors who have to deal with personal checks that bigger stores wouldn’t take the time to authenticate and people from other countries who have only a passport for an ID.
Rozell said the demand for check cashing at his convenience stores grew over the past two decades as bank accounts got more complicated. Many people found it difficult to deal with debit cards that sometimes charged $2 to get cash from a machine, or steep fees if they bounced a check.
“I think a lot of people had trouble balancing their accounts,” he said.
Almost by definition, people who use check cashing stores instead of banks are financially insecure, but Rozell said he’s seen things get even more difficult for his customers in recent months. Day labor staffing companies have had layoffs or closed, he said, and some of his regular customers have had their hours reduced from full- to part-time.
“I see a lot of smaller checks,” he said.
Rozell said his customers don’t seem to be jealous of the wealthy. Most believe what they hear from their employers about the reason layoffs and pay cuts are needed.
“They’re seeing their company struggle,” he said.
At the same time, though, he said workers seem to have less loyalty to their employers than they once did. And they’re less likely to have qualms about saving money by shopping at stores like Wal-Mart.
“They definitely want to save that 100 bucks,” Rozell said. “Buyers aren’t saying ‘Buy American, be American.’”
Too Taxing To Wait
Denise Dobson-Shea has run Denise’s Tax and Financial Services in Worcester since 1986. She said she started seeing signs of extreme insecurity among her lower-income clients long before the recession.
When she first started her business, she said, she didn’t offer “rapid refund” tax anticipation loans. But about 10 years ago, so many people were demanding the service that she began offering it.
Dobson-Shea said that for a client who’s due a $5,000 tax refund, a rapid refund loan can cost $300. But she said many are willing to take that deal to get their money a little faster.
Since the recession, she said, things have gotten even tougher. She said many of her clients haven’t had as much withheld from their paychecks as they should.
“They can’t afford to, because they need every penny to pay their bills,” she said.
That means they end up owing a chunk of money at tax time, Dobson-Shea said, and some decide to take the chance and not file taxes at all rather than try to come up with the cash.
It’s not just at the very low end of the economic spectrum that people are tenser about money these days. Jerry Ellis, co-founder of the Building 19 chain of discount stores, said his customers come from all economic backgrounds, and many view bargain-hunting as a sport rather than a necessity.
Still, he said, over the past few years even bargain shopping has become tough for many.
“I think everybody seems to be so frightened now that they’re afraid to spend money,” he said. “By nature Americans are upbeat, optimistic people, but I think that the optimism has cooled substantially.”
Budget Crunched
If there’s enormous pressure on the budgets of low-income individuals and families these days, the same can be said of the government agencies that help poor people afford services.
Jessica Hardy, owner of JYL Transportation in Spencer, said she’s seen a significant increase in the number of people the company takes to medical appointments through state contracts over the past two years.
“I don’t know if it’s simply that word’s spreading, or if more and more people meet the demand,” she said.
But Hardy said the state’s ongoing budget crisis could dry up that source of business in a hurry, and could make life much harder for the people she serves. “The elders and disabled people are really in trouble,” she said. “Those are the first things that are going to get cut… It’s kind of scary to think what could happen with all these clients that really need a place to go.”
If the discussion of low-income people’s spending tends to bring up fear and anxiety, some say there’s also reason for hope. Asadoorian, of Oscar’s Coin-Op, said he likes the changes he’s seen on Millbury Street over the years. Bars have given way to family-oriented businesses, and local companies and kids from the nearby College of the Holy Cross have pitched in to clean things up.
And Asadoorian said it’s not unusual for him to find out he’s losing a customer for a very positive reason — because they’ve improved their circumstances and now have their own washer and dryer.
“That happens a lot,” he said. “It kind of feels good.”
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