Gas Exceeds Food, Housing, Health Care and Entertainment
USA TODAY
By Barbara Hagenbaugh, USA TODAY
June 4, 2007

Single mom Esther Guzman is used to juggling her family finances. But lately, it's gotten harder to make ends meet.

The 38-year-old mother of four's monthly gasoline bill has jumped to more than $300. Guzman, of Monmouth Junction, N.J., makes $11 an hour helping others apply for low-income energy aid, and receives $400 a month in child support.

With the recent increase in gas prices, she has been forced to cut back on extras, such as the family's traditional meal out on Saturdays, trips to the movies and even visits to see her 76-year-old father, who lives in the next town over and is dying of emphysema.

Drivers across the country are paying near-record prices for gasoline. While there's a lot of griping going on at the pump, for many Americans, higher gas costs represent a minor crimp in family budgets.

But for those living paycheck to paycheck, rising gasoline prices can mean the difference between being able to pay bills and going into debt.

Recently, to help pay for senior pictures and a prom dress for her 18-year-old daughter, Esther Bonilla, Guzman was forced to pay less than what she owed for utilities.

"I do a lot of driving," says Guzman, whose other kids are 17, 14 and 5. In addition to driving to work and to her dad's, she shuttles her kids to their jobs, to church activities and to other functions.

"Now my concern is, am I going to be able to cover the utility bill or the rent?" she says. "I can't cover all my bills; I really can't."

On average, U.S. households spent 3.6% of their after-tax income on gasoline in 2005, the period of most recent data. That trails expenses for food, housing, health care and entertainment.

But spending on gasoline ate up more than 9% of after-tax income for households in the lowest income bracket in 2005, according to the government. For those people, swings in gasoline prices can have a profound impact.

"All it takes is just one event for many of these families to push them over the edge," says Juan Onésimo Sandoval, assistant professor of urban transportation and urban sociology at Northwestern University. "There are many working class families that are in this precarious situation … and if it's another 20 cents in gasoline, that can be it."

There are few assistance programs to help people pay gasoline bills. And many low-income workers have little access to public transportation. Plus, poorer consumers tend to drive older cars and often don't have the money to maintain them. That can lead to diminished gas mileage and help drive up gas costs.

"Higher gas prices are likely to impact low-income workers more because they are less capable of making adjustments," says Qing Shen, professor of urban studies and planning at the University of Maryland at College Park.

Even if gasoline prices drop, the impact of the recent run-up could be long-lasting, Sandoval says. To help pay elevated gasoline bills, low-income drivers often take out payday and other high-interest loans or put gas and other expenses on high-rate credit cards. Such debt can take a long time to pay off.

"This is a vicious cycle," Sandoval says. "Once they get in it, they can't get out."

Significant impact for some

Gasoline prices skyrocketed in the past few months as rising demand and shutdowns at U.S. refineries strained an already tight balance between supply and demand.

The nationwide average price of a gallon of regular gasoline was $3.164 Sunday, up 31 cents from a year ago, and 6 cents lower than the record high, not adjusted for inflation, hit May 24, according to motorist club AAA. Adjusted for inflation, the all-time high was set in March 1981 at $3.292 a gallon in today's dollars, according to the Energy Department.

The higher prices have had very little impact on the overall economy. Consumer confidence rose in May despite the surge in gasoline costs, and many retailers, such as Target, have posted strong sales in recent months. Although demand for gasoline has eased, it's still stronger than a year ago.

But for low-income households, the impact has been significant.

Misti Davison, 28, recently told her supervisors at SunBridge Care and Rehabilitation in Tuscumbia, Ala., that she's looking for a job closer to her home in Morris Chapel, Tenn. The activities assistant, who says she loves her job planning events at the senior center, has been driving 66 miles each way to work in her 1998 Nissan Altima. Davison makes $7.25 an hour.

"I'm spending almost half my paycheck every two weeks on gas," Davison says.

Davison started at SunBridge in January after getting out of an alcohol rehabilitation program nearby. But she recently moved in with her mom in Tennessee to be close to her kids, who are 8 and 6 and have been living with her sister-in-law. To regain custody, Davison says, she needs a home of her own. But with gasoline prices high, she has struggled to save enough to move out.

"I'm someone trying to do right in life, and I'm having a hard time," says Davison, who says it's even expensive to drive to her Alcoholics Anonymous meetings. "Life is stressful."

Jim Letts, a family medicine doctor in St. Paul, sees many of his low-income patients struggling with higher gasoline prices. It's forcing them to make tough choices, he says. Sometimes patients choose to take their medications erratically or not at all.

"For chronic conditions, that doesn't work," Letts says. "People are trying to balance paying $80 a month for their medication and paying $50 a (week) for gasoline."

Cars required for work

Low-income families are hit hard by rising gasoline prices mainly because they have little, if any, wiggle room in their expenses. But there are other factors in play:

•Cars required. Low-income workers often must drive.

Poorer families tend to live in central cities, but the strongest job growth in recent years has been in the suburbs, according to UCLA professor Matthew Kahn. From 1994 to 2000, the latest data available, there was a 10% increase in jobs in ZIP codes within five miles of city centers in the USA. In that same period, there was a 23% jump in jobs more than five miles but less than 25 miles from city centers, Kahn says.

Such reverse commutes — from the city to the suburbs — are often not served well by public transportation, notes Steven Raphael, a professor of public policy at the University of California, Berkeley, who studies poverty and low-wage labor markets. Plus, low-wage workers often work in the service industry, requiring them to work nights or weekends, when public transportation often is not operating at full swing.

"Those commutes aren't really well-facilitated by public transit," Raphael says. "Owning a car can actually be quite important."

•Older cars. Low-income families often drive older cars that need maintenance and repair, Raphael notes. That means gas mileage is likely lower than what drivers get on a new vehicle.

The deterioration in gas mileage can be "significant," says Jack Nerad, executive market analyst at Kelley Blue Book. "Cars are kind of like our own bodies; as we age, we don't run as well."

Tyrone Vincent of Donaldsonville, La., estimates his 1991 Cadillac DeVille gets about 16 miles a gallon. The 48-year-old disabled veteran, who lives in a FEMA-provided trailer, usually makes the 120-mile round trip to New Orleans about three times a week to see family and to volunteer. But the trip has become too expensive, and Vincent, who lives on $2,400 a month he gets from the government, doesn't have the money to buy a new, more fuel-efficient car. He's had to cut back on trips to New Orleans.

"I'm not the type of person to lean on anyone," says Vincent, who says he has been reluctant to ask for help although he is struggling to pay bills. "I'm an independent person. It's embarrassing."

The federal government has a program to help low-income households pay heating bills, but there is not a similar program to help drivers pay for gasoline. And although many states have laws that forbid utilities from shutting off homeowners' electricity or other energy source during the winter, there is no policy that says a station owner has to give someone gas, notes Mark Wolfe, executive director of the National Energy Assistance Directors Association.

Strapped and scrambling

Michelle Damm of Kalispell, Mont., recently received a $20 gas card from a state agency to help offset higher pump prices. While she says the money helped, it hardly put a dent in her gas bill, which can be as high as $100 a week for her decade-old Ford Bronco.

"I'm strapped; I'm scrambling," says Damm, 41, who is raising three kids, ages 15, 12 and 11. She made $17,000 last year at her job as driver of a gravel dump truck and receives $387 a month in child support.

Damm says she's done everything she can think of to cut back on non-gasoline expenses. When the family recently moved, she chose not to sign up for Internet access. The family isn't renting movies. She's cut back on buying fresh meat, vegetables and fruit. She's even buying cheaper toilet paper.

The situation became more dire last week when she got notice that she was going to have several hundred dollars a month garnished from her paycheck to pay an overdue $2,700 emergency room bill: Her uninsured 15-year-old son broke his finger. Damm, who says she cannot afford to pay health insurance premiums, is looking for a part-time waitress job to augment her full-time salary.

"I'm going to have to do whatever it takes," she says. "I just keep the faith that things will work out."

Back in New Jersey, Esther Guzman says she applied for public assistance but has been rejected. She can't afford the repairs needed on her 10-year-old Chevy Venture minivan, and any hope of putting her 5-year-old in a summer day camp has faded.

"There's a lot I'm not able to do now because the funds are just not available," Guzman says. "This is just killing me."

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