WASHINGTON, September 21, 2015 − The value of something is how much people think it is worth. The process of negotiating a price for a service introduces personal bias, which can devalue a service so much that the provider of that service cannot earn an income. When trying to understand issues like poverty, the impact of a business owner’s or contractor’s socioeconomic status must be considered.
According to the fundamental laws of economics, supply and demand determine the price of a good or service. The same principle applies to abstract commodities like labor. This means people can be expected to value the work of a middle class or affluent person higher than that of a poor person.
Celebrities and CEOs are often able to extort millions of dollar in pay for their services because they have more leverage than the average person. The potential loss of revenue their employers might sustain if they quit affords them that leverage.
For middle class individuals, education, expertise, union membership, professional affiliation and a host of other factors give them varying degrees of leverage. Those living in poverty, however, often lack the power of negotiation, leverage, the those in higher classes might have.
Not only do they face few prospects for work, which means they can be persuaded to work for less than what that they need to survive. They often live in poor communities where jobs are scarce leading to an additional disadvantage.
Businesses close when their costs become prohibitive. Higher, or constantly increasing wages make employees too costly and businesses can actively seek to suppress wages to offset this economic damage to their businesses. Worse, businesses and service providers located in poor communities also have a diminished potential for profit because their customers cannot afford to pay as much as often.
One not-so-obvious form of social leverage comes from how others treat a person based on his or her socioeconomic status.
A common practice today is for skilled individuals to do private and informal contract work. Although these individuals may not earn as much for their “side work” as they do from their regular jobs, they can easily charge their clients the going rate for a particular service, even if that service is not their actual 9 to 5 profession.
The poor also rely on informal economic activities to help supplement their incomes. But, holding true to the aforementioned economic principles, this writer − who comes from a poor family and community − has encountered numerous examples where the same clients will too often fail to pay the same amount for the same quality of services if they are performed by a poor person.
One intangible but key reason for this is that poor people often undervalue themselves. They do not see their time and effort as valuable or they feel no one will pay the amount they deserve. In turn, they charge too little, fearful that they’ll be turned down for a freelance job if they ask for a fair price.
This fear has basis in fact. When asked to pay a more equitable amount, potential clients indeed are frequently willing to pay even more to someone else from a higher socioeconomic status. That essentially punishes the poor person for asserting his or her interests.
When this happens, it can be explained once again by the phenomenon of social leverage.
In dealing with contractors of the same or higher socioeconomic standing, peer pressure and high expectations can induce middle class and wealthy individuals into paying more for a given service. When dealing with contractors of a much lower socioeconomic standing, little peer pressure exists and expectations are low, so potential clients tend to devalue the services of the poor.
Whether it is the fault of the poor, or of those exploiting them and the work the offer to provide, the quiet reality of undervaluing and underpaying the poor and disenfranchised makes it difficult for them to break the cycle of poverty, even if they work hard to get themselves out.