Payday lenders, which typically charge high interest rates, are more common in lower-income neighborhoods
A cost of poverty, also known as a ghetto tax, a poverty premium, a cost of being poor, or the poor pay more,
is the phenomenon of people with lower incomes, particularly those
living in low-income areas, incurring higher expenses, paying more not
only in terms of money, but also in time, health, and opportunity costs. "Costs of poverty" can also refer to the costs to the broader society in which poverty exists.
Economic principles
A
ghetto tax is not a tax in literal sense. It is a situation in which
people pay higher costs for equivalent goods or services simply because
they are poor or live in a poor area. A paper by the Brookings Institution, titled From Poverty, Opportunity: Putting the Market to Work for Lower Income Families, is widely cited as a study into ghetto taxes, although the report itself does not use the term.
The problem of ghetto taxes is closely associated with mobility;
one study in the United States showed that higher prices might be
prevalent in some neighborhoods, but people with access to a car would
have more access to affordable goods and services elsewhere, whilst
those without a car would bear the brunt of higher local prices.
Consumer finance: Lower income consumers are much more reliant upon alternative financial services that are more expensive, such as check cashers and payday lenders, pawnshops, and auto-title lenders.
For those with a traditional bank, customers who can maintain a minimum
bank balance can avoid fees, such as monthly fees, or qualify for
higher interest rates on their deposits, while overdrafts can rack up
hundreds of dollars of debt in just a few days. There are fewer ATMs in
poor areas, and often they are third-party machines that charge fees to
all users. An area with inadequate access to traditional financial
services is known as a banking desert.
Health: Poorer people have worse and more expensive health conditions, and poorer neighborhoods have fewer doctors' offices, medical facilities, and pharmacies, a phenomenon known as a medical desert or pharmacy desert.
People with no or low-quality health insurance receive less preventive
and routine health care, leading to poorer health. Medically harmful
environmental pollution can be higher in minority neighborhoods, such as
in fenceline communities.
Due to this decreased access to care, maternal mortality and infant
mortality rates tend to be higher in such areas, as well as premature
and underweight births. This has cascading effects on communities in
psychological, social, political, and economic costs of varying degrees.
These conditions are often correlated with various psychological and
medical chronic conditions, disabilities, and/or disorders such as ADHD.
As an example, the costs of diagnosis are also significant; the firm
Neal Psychological Services in the state of Illinois, USA charges $1470
for 4 evaluative sessions and testing for ADHD.
Lack of access to mental healthcare is prevalent among impoverished
communities in no small part because of its prohibitively expensive
costs; for example, a subscription to BetterHelp, an online therapy
service, costs between $60 and $90 per week, billed every 4 weeks.
Transportation: Poorer neighborhoods tend to have fewer
nearby jobs, requiring longer commutes and higher transportation costs
in terms of both time and money. This can decrease employment
opportunities, increasing unemployment. Public transportation tends to underserve poorer areas, a situation known as a transit desert, which can reduce access to quality schools, health care, food, and other products at affordable prices. Poorer neighborhoods often have fewer street and sidewalk improvements, including curb ramps
that help not only disabled people using wheelchairs, walkers, and
canes, but also people with babies using strollers, and those engaging
in exercise such as cycling. These inequalities are known as the transport divide.
Highways tend to be routed through poorer neighborhoods, carving up
communities and walling them off from more prosperous areas.
Groceries and Food Access: Small dollar stores
that provide little to no fresh food tend to cluster in low-income
neighborhoods, driving out fuller service grocery stores and
supermarkets that provide more fresh food.
The price of fresh food then becomes more expensive due to the added
costs of the consumer's transportation to more distant stores in both
time and money, or because stores that stock fresh food in low-income
communities do so at higher prices, due to factors such as fewer
economies of scale in purchasing power, sales volume, and managing the
supply chain of perishable food.
Other stores that may provide food to low-income areas include gas
stations and convenience stores, neither of which tend to carry much
fresh food. Areas without access to fresh food are known as food deserts. In addition, landlords, HOAs,
and/or local laws have strict rules about land use in the form of
zoning laws, which may not allow for people to plant gardens for either
community or private use, which further hinders access to food. This
disproportionately impacts impoverished people because they cannot
easily access grocery stores as a replacement source of food due to food
deserts, transportation costs, and threat of crime.
General retail: Although studies have reached different
conclusions, there is evidence to suggest that the poor and wealthy pay
roughly the same prices when buying the same products.
However, inflation on basic, low-priced goods purchased by lower-income
consumers can rise faster than on goods purchased by higher-income
earners.
Rent-to-own and consumer financing terms tend to have high interest
rates and are mostly used by people unable to pay the full costs of
their purchases up-front. Poorer consumers are less able to afford bulk purchases, losing out on volume discounts.
A particular case of higher retail costs and health costs converging
involves cigarettes, with poorer people more likely to have a nicotine
addiction in part due to cigarette marketing targeting low-income
communities. In addition to the health costs of tobacco use, the unit price to purchase cigarettes is higher in a single pack vs. a larger carton, and can be higher still when purchased as individual cigarettes,
whether legally or illegally. While illegal purchases of single
cigarettes can avoid taxes, they carry the risk of costly criminal
penalties.
Utilities: Consumers without sufficient credit or who have
missed utility payments may be charged high deposits or connection fees
to receive utilities. Low-income consumers may have prepaid electricity, and rates can be higher than with a contract.
The consequence of prepaid electricity running out can range from
refrigerated food spoiling to going without lights, heat, internet, and
economic opportunity. Poor people are also more likely to pay higher
prices for long-distance phone calls.
Taxes: Sales taxes are highly regressive,
with poor families in the U.S. paying nearly eight times more of their
income in sales taxes than the wealthiest families due to spending more
of their smaller paychecks on buying goods, and having less left over to
save and invest. States have moved to raise sales taxes even higher, while cutting progressive income taxes that target higher-income earners.
The United States taxes workers at higher rates than those who make
their money from investments, due to taxes being lower on capital gains
than on income. Cuts to capital gains have been a major contributor to
rising income inequality in the U.S., according to the Congressional Research Service.
Government services: When government services involve more
complicated and frequent application, maintenance, and renewal
processes, and more requirements and preconditions, fewer people end up
receiving those services, and poorer people with fewer resources are
more likely to be excluded. Florida made the process of applying for
unemployment more difficult in order to reduce claims, according to the
governor. There are inefficiencies in the unemployment system elsewhere in the U.S. People with more expensive homes in wealthier areas are more likely to be approved for disaster aid from FEMA than people with more affordable homes in poorer areas, and difficulties with the application process play a role. FEMA is also more likely to buy out homes in wealthier areas. Certain aid only goes to communities that can already afford to pay a portion of the aid costs. The Army Corps of Engineers uses a cost-benefit analysis that favors protecting more expensive homes with flood control systems.
Small business loans: Attempts to provide more resources to
underserved neighborhoods can be challenged by banks' reluctance to
provide loans to businesses in low-income areas, as well as costlier
loan terms. Business insurance can also cost more in low-income neighborhoods.
Insurance: Poorer people are less likely to have money to pay
for insurance coverage, leaving them more vulnerable to financial
losses after adverse impacts.
Employment: Some states and localities have lower minimum wages than others. Low-income earners tend to be wage earners who have fewer employment benefits than salaried employees. Contracted or subcontracted employees have even fewer benefits and protections. A lack of employee health insurance can lead to workers incurring large medical debts when they get sick. A lack of parental leave can lead to workers losing their jobs when they have children. A lack of retirement benefits can lead the elderly to spend more or all of their would-be retirement years working. A lack of paid time off can increase stress and adversely impact health. A lack of sick days
can not only reduce health outcomes, but can additionally impact the
health of coworkers if the illness is infectious. U.S. unemployment
insurance is not generally available to workers who aren't considered
employees, which may include janitors, drivers, cafeteria workers,
meatpackers, and others who can be contracted or subcontracted rather
than employed.
Education: Underfunded schools, and poorer education
outcomes, can lead to lower lifetime earnings. Schools may also lack
nurses, counselors, and modern technology.
Environment: Lower-income and minority areas have often been
targeted as sites for environmental hazards or general hazards to
property values that those with more political power don't want in their neighborhoods, increasing costs to poor people's health and decreasing the net worth of the neighborhoods' homeowners. Such hazards can include landfills, power plants, chemical plants, oil wells, oil and chemical pipelines, industrial parks, sewage treatment plants, fracking sites, incinerators, quarries, prisons, adult entertainment clubs, railways, highways, airports, and seaports.
Routing highways and other major thoroughfares through minority
neighborhoods not only increased pollution in those communities, it also eliminated many minority communities, or created barriers that cut those communities off from their more prosperous surroundings, surroundings that certain families, including black families, were historically barred from moving to due to redlining and other housing discrimination.
Prior to being carved through by highways, minority neighborhoods were
often severed by railways, inspiring the phrase, "the wrong side of the
tracks."
Justice system: Poor people are more likely than wealthier people to be fined or jailed for the same crime, or to be wrongfully convicted of a crime, and poor neighborhoods can be targeted for more police enforcement actions than wealthier neighborhoods.
Courts can impose fines and fees that result in court debt,
incarceration, and driver's license suspension for those who can't pay. Courts can impose cash bail,
requiring the accused, while presumed innocent, to make a refundable
cash deposit in order to get out of jail before a trial, with the money
not refunded if the accused is not on time for all of their court dates.
Someone who is unable to pay the full bail amount may purchase a bail bond, under which the accused pays a non-refundable percentage of the bail amount and promises collateral like a car, home, or jewelry to the bond issuer in return for the bond issuer paying the full bail amount to the court. A bond issuer may hire a bounty hunter
to capture a creditor who does not appear in court. While in jail, the
accused can be charged high fees for communications such as phone calls
and emails, and for commissary items.
Crime: Housing tends to be more affordable in neighborhoods with higher crime rates, and poorer people are therefore more likely to become victims of crimes that cost money to recover from. Crime deterrence measures, such as security systems, can pose additional costs.
Costs of poverty to broader society
Poverty
not only creates costs for those experiencing it, but also for the
broader society in which poverty exists, through externalities. For
example, Walmart and McDonald's employ much of the United States's recipients of federal aid programs such as SNAP and Medicaid, according to the Government Accountability Office,
and so the cost burden of servicing these people falls on the public
while the benefits of their work flow to the companies employing them.
In addition, those who are poor are less likely to save for retirement,
emergencies, or other expenses due to the pressing need for the money
in the present. This results in higher financial stress and more
retirees working despite receiving Social Security
checks. This higher stress in turn decreases life expectancy, which
costs society in lost social and cultural capital. In total, according
to the Poor People's Campaign,
around 250,000 people a year in the US die of poverty. Roughly $1.442
trillion are lost annually to poverty and resulting effects, whether it
be hunger, education costs and outcomes, healthcare, crime, or homelessness and related issues. As an industry designed to take advantage of financial vulnerability of impoverished individuals, the poverty industry also earns $33 billion per year in the US.
Hidden Costs:
Lastly, there are many other hidden costs - that are difficult to
quantify and predict - but ultimately they all boil down to the fact
that people in poverty are far less prepared to weather an unexpected or
emergency expense, and are unlikely to be able to meet their basic needs after such an event.
Industry Costs:
In the US, medical tourism
results in losses to the healthcare industry because the cost of
receiving healthcare domestically outstrips the cost of traveling to
another country, receiving care there, and returning. Furthermore, black markets
result in loss of both business and tax revenue, as well as the impacts
of those unregulated products on the public, both when buying and when
using the products.
Social psychology
is the scientific study of how thoughts, feelings, and behaviors are influenced by the actual, imagined, or implied presence of others. Social psychologists typically explain human behavior as a result of the relationship between mental states
and social situations, studying the social conditions under which
thoughts, feelings, and behaviors occur, and how these variables
influence social interactions.
History
19th century
In the 19th century, social psychology began to emerge from the larger field of psychology.
At the time, many psychologists were concerned with developing concrete
explanations for the different aspects of human nature. They attempted
to discover concrete cause-and-effect relationships that explained
social interactions. In order to do so, they applied the scientific
method to human behavior. The first published study in the field was Norman Triplett's 1898 experiment on the phenomenon of social facilitation. These psychological experiments later went on to form the foundation of much of 20th century social psychological findings.
Early 20th century
An early, influential research program in social psychology was established by Kurt Lewin and his students. During World War II, social psychologists were mostly concerned with studies of persuasion and propaganda for the U.S. military (see also psychological warfare). Following the war, researchers became interested in a variety of social problems, including issues of gender and racial prejudice. During the years immediately following World War II,
there were frequent collaborations between psychologists and
sociologists. The two disciplines, however, have become increasingly
specialized and isolated from each other in recent years, with
sociologists generally focusing on high-level, large-scale examinations
of society, and psychologists generally focusing on more small-scale
studies of individual human behaviors.
Late 20th century
In the 1960s, there was growing interest in topics such as cognitive dissonance, bystander intervention, and aggression.
In the 1970s, a number of conceptual challenges to social psychology
emerged over issues such as ethical concerns about laboratory
experimentation, whether attitudes could accurately predict behavior,
and to what extent science could be done in a cultural context. It was also in this period where situationism—the theory that human behavior changes based on situational factors—emerged and challenged the relevance of self and personality in psychology. By the 1980s and 1990s, social psychology had developed a number of solutions to these issues with regard to theory and methodology.
21st century
At present, ethical standards regulate research, and pluralistic
and multicultural perspectives to the social sciences have emerged.
Most modern researchers in the 21st century are interested in phenomena
such as attribution, social cognition, and self-concept. Social psychologists are, in addition, concerned with applied psychology, contributing towards applications of social psychology in health, education, law, and the workplace.
In social psychology, an attitude is a learned, global evaluation that influences thought and action.
Attitudes are basic expressions of approval and disapproval or likes
and dislikes. For example, enjoying chocolate ice cream or endorsing the
values of a particular political party are examples of attitudes.
Because people are influenced by multiple factors in any given
situation, general attitudes are not always good predictors of specific
behavior. For example, a person may generally value the environment but
may not recycle a plastic bottle because of specific factors on a given
day.
One of the most influential 20th century attitude theories was Cognitive dissonance theory.
According to this theory, attitudes must be logically consistent with
each other. Noticing incongruence among one’s attitudes leads to an
uncomfortable state of tension, which may motivate a change in attitudes
or behavior.
Research on attitudes has examined the distinction between traditional, self-reported attitudes and implicit, unconscious attitudes. Experiments using the Implicit Association Test (IAT),
for instance, have found that people often demonstrate implicit bias
against other races, even when their explicit responses profess
impartiality.
Likewise, one study found that in interracial interactions, explicit
attitudes correlate with verbal behavior, while implicit attitudes
correlate with nonverbal behavior.
Persuasion is an active method of influencing that attempts to guide
people toward the adoption of an attitude, idea, or behavior by rational
or emotive means. Persuasion relies on appeals rather than strong
pressure or coercion.
The process of persuasion has been found to be influenced by numerous
variables that generally fall into one of five major categories:
Medium: includes printed word, radio, television, the internet, or face-to-face interactions.
Context: includes environment, group dynamics, and preliminary information.
Dual-process theories of persuasion (such as the elaboration likelihood model)
maintain that persuasion is mediated by two separate routes: central
and peripheral. The central route of persuasion is influenced by facts
and results in longer-lasting change, but requires motivation
to process. The peripheral route is influenced by superficial factors
(e.g. smiling, clothing) and results in shorter-lasting change, but does
not require as much motivation to process.
Social cognition studies how people perceive, recognize, and remember information about others.
Much research rests on the assertion that people think about other
people differently than they do non-social, or non-human, targets. This assertion is supported by the social-cognitive deficits exhibited by people with Williams syndrome and autism.
Attribution
A major research topic in social cognition is attribution. Attributions are explanations of behavior, either one's own behavior or the behavior of others.
One element of attribution ascribes the cause of behavior to
internal and external factors. An internal, or dispositional,
attribution reasons that a behavior is caused by inner traits such as
personality, disposition, character, and ability. An external, or
situational, attribution reasons that a behavior is caused by
situational elements such as the weather.A
second element of attribution ascribes the cause of behavior to stable
and unstable factors (i.e., whether the behavior will be repeated or
changed under similar circumstances). Individuals also attribute causes
of behavior to controllable and uncontrollable factors (i.e., how much
control one has over the situation at hand).
Numerous biases in the attribution process have been discovered. For instance, the fundamental attribution error is the bias towards make dispositional attributions for other people's behavior.
The actor-observer bias is an extension of the theory, positing that
tendency exists to make dispositional attributions for other people's
behavior and situational attributions for one's own. The self-serving bias
is the tendency to attribute dispositional causes for successes, and
situational causes for failure, particularly when self-esteem is
threatened. This leads to assuming one's successes are from innate
traits, and one's failures are due to situations.
Heuristics
Heuristics are cognitive shortcuts which are used to make decisions in lieu of conscious reasoning. The availability heuristic occurs when people estimate the probability
of an outcome based on how easy that outcome is to imagine. As such,
vivid or highly memorable possibilities will be perceived as more likely
than those that are harder to picture or difficult to understand. The
representativeness heuristic is a shortcut people use to categorize
something based on how similar it is to a prototype they know of. Numerous other biases have been found by social cognition researchers. The hindsight bias is a false memory of having predicted events, or an exaggeration of actual predictions, after becoming aware of the outcome. The confirmation bias is a type of bias leading to the tendency to search for or interpret information in a way that confirms one's preconceptions.
Schemas
Schemas
are generalized mental representations that organize knowledge and
guide information processing. They organize social information and
experiences. Schemas often operate automatically
and unconsciously. This leads to biases in perception and memory.
Schemas may induce expectations that lead us to see something that is
not there. One experiment found that people are more likely to
misperceive a weapon in the hands of a black man than a white man. This type of schema is a stereotype, a generalized set of beliefs about a particular group of people (when incorrect, an ultimate attribution error).
Stereotypes are often related to negative or preferential attitudes and
behavior. Schemas for behaviors (e.g., going to a restaurant, doing
laundry) are known as scripts.
Self-concept is the whole sum of beliefs that people have about
themselves. The self-concept is made up of cognitive aspects called self-schemas—beliefs that people have about themselves and that guide the processing of self-referential information.
For example, an athlete at a university would have multiple selves that
would process different information pertinent to each self: the student
would be oneself, who would process information pertinent to a student
(taking notes in class, completing a homework assignment, etc.); the
athlete would be the self who processes information about things related
to being an athlete. These selves are part of one's identity and the
self-referential information is that which relies on the appropriate
self to process and react to it.
There are many theories on the perception of our own behavior. Leon Festinger's 1954 social comparison theory
posits that people evaluate their own abilities and opinions by
comparing themselves to others when they are uncertain of their own
ability or opinions. Daryl Bem's 1972 self-perception theory claims that when internal cues are difficult to interpret, people gain self-insight by observing their own behavior.
Social influence is an overarching term that denotes the persuasive
effects people have on each other. It is seen as a fundamental concept
in social psychology. The study of it overlaps considerably with
research on attitudes and persuasion. The three main areas of social
influence include conformity, compliance, and obedience.
Social influence is also closely related to the study of group
dynamics, as most effects of influence are strongest when they take
place in social groups.
The first major area of social influence is conformity.
Conformity is defined as the tendency to act or think like other members
of a group. The identity of members within a group (i.e., status),
similarity, expertise, as well as cohesion, prior commitment, and
accountability to the group help to determine the level of conformity of
an individual. Individual variations among group members play a key
role in the dynamic of how willing people will be to conform.
Conformity is usually viewed as a negative tendency in American
culture, but a certain amount of conformity is adaptive in some
situations, as is nonconformity in other situations.
The second major area of social influence research is compliance, which refers to any change in behavior that is due to a request or suggestion from another person. The foot-in-the-door technique
is a compliance method in which the persuader requests a small favor
and then follows up with a larger favor (e.g., asking for the time and
then asking for ten dollars). A related trick is the bait and switch,
which is a disingenuous sales strategy that involves enticing potential
customers with advertisements of low-priced items which turn out to be
unavailable in order to sell a more expensive item.
The third major form of social influence is obedience;
this is a change in behavior that is the result of a direct order or
command from another person. Obedience as a form of compliance was
dramatically highlighted by the Milgram study, wherein people were ready to administer shocks to a person in distress on a researcher's command.
An unusual kind of social influence is the self-fulfilling prophecy.
This is a prediction that, by being made, causes itself to become true.
For example, in the financial field, if it is widely believed that a crash
is imminent, investors may lose confidence, sell most of their stock,
and thus cause a crash. Similarly, people may expect hostility in others
and induce this hostility by their own behavior.
Psychologists have spent decades studying the power of social
influence, and the way in which it manipulates people's opinions and
behavior. Specifically, social influence refers to the way in which
individuals change their ideas and actions to meet the demands of a
social group, received authority, social role, or a minority within a
group wielding influence over the majority.
Social psychologists study interactions within groups, and between both groups and individuals.
Social psychologists study group-related phenomena such as the behavior of crowds. A group can be defined as two or more individuals who are connected to each other by social relationships.
Groups tend to interact, influence each other, and share a common
identity. They have a number of emergent qualities that distinguish them
from coincidental, temporary gatherings, which are termed social
aggregates:
Norms: Implicit rules and expectations for group members to follow.
Roles: Implicit rules and expectations for specific members within the group.
Relations: Patterns of liking within the group, and also differences in prestige or status.
The shared social identity of individuals within a group influences intergroup behavior,
which denotes the way in which groups behave towards and perceive each
other. These perceptions and behaviors in turn define the social
identity of individuals within the interacting groups.
The tendency to define oneself by membership in a group may lead
to intergroup discrimination, which involves favorable perceptions and
behaviors directed towards the in-group, but negative perceptions and
behaviors directed towards the out-group.
Groups often moderate and improve decision making, and are frequently relied upon for these benefits, such as in committees and juries. Groups also affect performance and productivity. Social facilitation, for example, is a tendency to work harder and faster in the presence of others.
Another important concept in this area is deindividuation, a reduced state of self-awareness
that can be caused by feelings of anonymity. Deindividuation is
associated with uninhibited and sometimes dangerous behavior. It is
common in crowds and mobs, but it can also be caused by a disguise, a
uniform, alcohol, dark environments, or online anonymity.
A major area of study of people's relations to each other is
interpersonal attraction, which refers to all factors that lead people
to like each other, establish relationships, and (in some cases) fall in
love. Several general principles of attraction have been discovered by
social psychologists. One of the most important factors in interpersonal
attraction is how similar two particular people are. The more similar
two people are in general attitudes, backgrounds, environments,
worldviews, and other traits, the more likely they will be attracted to
each other.
Physical attractiveness is an important element of romantic relationships, particularly in the early stages characterized by high levels of passion.
Later on, similarity and other compatibility factors become more
important, and the type of love people experience shifts from passionate
to companionate. In 1986, Robert Sternberg suggested that there are actually three components of love: intimacy, passion, and commitment. When two (or more) people experience all three, they are said to be in a state of consummate love.
According to social exchange theory,
relationships are based on rational choice and cost-benefit analysis. A
person may leave a relationship if their partner's "costs" begin to
outweigh their benefits, especially if there are good alternatives
available. This theory is similar to the minimax principle
proposed by mathematicians and economists. With time, long-term
relationships tend to become communal rather than simply based on
exchange.
Research
Methods
Social psychology is an empirical
science that attempts to answer questions about human behavior by
testing hypotheses. Careful attention to research design, sampling, and statistical analysis is important in social psychology.
Whenever possible, social psychologists rely on controlled experimentation, which requires the manipulation of one or more independent variables in order to examine the effect on a dependent variable. Experiments are useful in social psychology because they are high in internal validity, meaning that they are free from the influence of confounding
or extraneous variables, and so are more likely to accurately indicate a
causal relationship. However, the small samples used in controlled
experiments are typically low in external validity,
or the degree to which the results can be generalized to the larger
population. There is usually a trade-off between experimental control
(internal validity) and being able to generalize to the population
(external validity).
Because it is usually impossible to test everyone, research tends to be conducted on a sample of persons from the wider population. Social psychologists frequently use survey research when they are interested in results that are high in external validity. Surveys use various forms of random sampling to obtain a sample of respondents that is representative of a population. This type of research is usually descriptive or correlational
because there is no experimental control over variables. Some
psychologists have raised concerns for social psychological research
relying too heavily on studies conducted on university undergraduates in
academic settings, or participants from crowdsourcing labor markets such as Amazon Mechanical Turk. In a 1986 study by David O. Sears,
over 70% of experiments used North American undergraduates as subjects,
a subset of the population that is unrepresentative of the population
as a whole.
Regardless of which method has been chosen, social psychologists
statistically review the significance of their results before accepting
them in evaluating an underlying hypothesis. Statistics and probability
testing define what constitutes a significant finding, which can be as low as 5% or less, and is unlikely due to chance. Replication testing is also important in ensuring that the results are valid and not due to chance. False positive conclusions, often resulting from the pressure to publish or the author's own confirmation bias, are a hazard in the field.
The Asch conformity experiments
used a line-length estimation task to demonstrate the power of people's
impulses to conform with other members in a small group. The task was
designed to be easy to assess but wrong answers were deliberately given
by at least some, oftentimes most, of the other participants.
In well over a third of the trials, participants conformed to the
majority, even though the majority judgment was clearly wrong.
Seventy-five percent of the participants conformed at least once during
the experiment. Additional manipulations of the experiment showed that
participant conformity decreased when at least one other individual
failed to conform but increased when the individual began conforming or
withdrew from the experiment.
Also, participant conformity increased substantially as the number of
"incorrect" individuals increased from one to three, and remained high
as the incorrect majority grew. Participants with three other, incorrect
participants made mistakes 31.8% of the time, while those with one or
two incorrect participants made mistakes only 3.6% and 13.6% of the
time, respectively.
Which line matches the first line, A, B, or C? In the Asch conformity experiments, people frequently followed the majority judgment, even when the majority was objectively wrong.
In Leon Festinger's cognitive dissonance
experiment, participants were divided into two groups and were asked to
perform a boring task. Both groups were later asked to dishonestly give
their opinion of the task, but were rewarded according to two different
pay scales. At the end of the study, some participants were paid $1 to
say that they enjoyed the task, while the group of participants were
paid $20 to tell the same lie. The first group ($1) later reported
liking the task better than the second group ($20). Festinger's
explanation was that for people in the first group, being paid only $1
was not sufficient incentive. This led them to experience dissonance, or
discomfort and internal conflict. They could only overcome that
dissonance by justifying their lies. They did this by changing their
previously unfavorable attitudes about the task. Being paid $20 provided
a reason for doing the boring task, which resulted in no dissonance.
The Milgram experiment:
The experimenter (E) persuades the participant (T) to give what the
participant believes are painful electric shocks to another participant
(L), who is actually an actor. Many participants continued to give
shocks despite pleas for mercy from the actor.
The Milgram experiment was designed to study how far people would go in obeying an authority
figure. The experiment showed that normal American citizens would
follow orders even when they believed they were causing an innocent
person to suffer or even apparently die.
Philip Zimbardo's Stanford prison study,
a simulated exercise involving students playing at being prison guards
and inmates, attempted to show how far people would go in role playing.
In just a few days, the guards became brutal and cruel, and the
prisoners became miserable and compliant. This was initially argued to
be an important demonstration of the power of the immediate social
situation and its capacity to overwhelm normal personality traits.
Subsequent research has contested the initial conclusions of the study.
For example, it has been pointed out that participant self-selection
may have affected the participants' behavior,
and that the participants' personalities influenced their reactions in a
variety of ways, including how long they chose to remain in the study.
The 2002 BBC prison study,
designed to replicate the conditions in the Stanford study, produced
conclusions that were drastically different from the initial findings.
Bandura's Bobo doll
Albert Bandura's Bobo doll experiment attempted to demonstrate how aggression is learned by imitation.
In the experiment, 72 children, grouped based on similar levels of
pre-tested aggressivity, either witnessed an aggressive or a
non-aggressive actor interact with a "bobo doll." The children were then
placed alone in the room with the doll and observed to see if they
would imitate the same behavior of the actor they had observed. As
hypothesized, the children who had witnessed the aggressive actor,
imitated the behavior and proceeded to act aggressively towards the
doll. Both male and female children who witnessed the non-aggressive
actor behaved less aggressively towards the doll. However, boys were
more likely to exhibit aggression, especially after observing the
behavior from an actor of the same gender. In addition, boys were found
to imitate more physical aggression, while girls displayed more verbal
aggression.
Ethics
The goal
of social psychology is to understand cognition and behavior as they
naturally occur in a social context, but the very act of observing
people can influence and alter their behavior. For this reason, many
social psychology experiments utilize deception
to conceal or distort certain aspects of the study. Deception may
include false cover stories, false participants (known as confederates
or stooges), false feedback given to the participants, and other
techniques that help remove potential obstacles to participation.
The practice of deception has been challenged by psychologists
who maintain that deception under any circumstances is unethical and
that other research strategies (e.g., role-playing)
should be used instead. Research has shown that role-playing studies do
not produce the same results as deception studies, and this has cast
doubt on their validity.
In addition to deception, experimenters have at times put people in
potentially uncomfortable or embarrassing situations (e.g., the Milgram experiment and Stanford prison experiment), and this has also been criticized for ethical reasons.
Virtually all social psychology research in the modern day must pass an ethical review. At most colleges and universities, this is conducted by an ethics committee or institutional review board,
which examines the proposed research to make sure that no harm is
likely to come to the participants, and that the study's benefits
outweigh any possible risks or discomforts to people participating.
Furthermore, a process of informed consent is often used to make sure that volunteers know what will be asked of them in the experiment and understand that they are allowed to quit the experiment at any time. A debriefing
is typically done at the experiment's conclusion in order to reveal any
deceptions used and generally make sure that the participants are
unharmed by the procedures.
Today, most research in social psychology involves minimal risk, or no
greater risk of harm than can be expected from normal daily activities
or routine psychological testing.
Many social psychological research findings have proven difficult to
replicate, leading some to argue that social psychology is undergoing a replication crisis. A 2014 special edition of Social Psychology
focused on replication studies, finding that a number of previously
held social psychological beliefs were difficult to replicate. Likewise, a 2012 special edition of Perspectives on Psychological Science focused on issues ranging from publication bias to null-aversion which have contributed to the replication crisis.
Some factors have been identified in social psychological
research as contributing to the crisis. For one, questionable research
practices have been identified as common. Such practices, while not
necessarily intentionally fraudulent, often involve converting undesired
statistical outcomes into desired outcomes via the manipulation of
statistical analyses, sample sizes, or data management systems,
typically to convert non-significant findings into significant ones. Some studies have suggested that at least mild versions of these practices are prevalent.
Some social psychologists have also published fraudulent research
that has entered into mainstream academia, most notably the admitted
data fabrication by Diederik Stapel as well as allegations against others. Fraudulent research is not the main contributor to the replication crisis.
Many researchers attribute the failure to replicate as a result of the
difficulty of being able to recreate the exact same conditions of a
study conducted many years ago, as the environment and people have
changed.
Even before the current replication crisis, several effects in
social psychology have also been found to be difficult to replicate. For
example, the scientific journal Judgment and Decision Making has published several studies over the years that fail to provide support for the unconscious thought theory.
Replication failures are not unique to social psychology and are found in many fields of science.
One of the consequences of the current crisis is that some areas of
social psychology once considered solid, such as social priming, have
come under increased scrutiny due to failure to replicate findings.
A 1937 HOLC "residential security" map of Philadelphia, classifying various neighborhoods by estimated 'riskiness' of mortgage loans.
Redlining is a discriminatory practice in which services (financial and otherwise) are withheld from potential customers who reside in neighborhoods classified as "hazardous" to investment; these neighborhoods have significant numbers of racial and ethnic minorities, and low-income residents. While the best-known examples involve denial of credit and insurance, also sometimes attributed to redlining in many instances are denial of healthcare and the development of food deserts in minority neighborhoods. In the case of retail businesses like supermarkets, the purposeful construction of stores impractically far away from targeted residents results in a redlining effect.
Reverse redlining occurs when a lender or insurer targets majority-minority neighborhood residents with inflated interest rates by taking advantage of the lack of lending competition relative to non-redlined neighborhoods. The effect also emerges when service providers artificially restrict the supply of real estate available for loanable funds to nonwhites, thus providing alternative pretext for higher rates. Neighborhoods which were targeted for blockbusting were also subject to reverse redlining.
In the 1960s, sociologist John McKnight originally coined the term to describe the discriminatory banking
practice of classifying certain neighborhoods as "hazardous," or not
worthy of investment due to the racial makeup of their residents. During the heyday of redlining, the areas most frequently discriminated against were Blackinner city neighborhoods. For example, in the 1980s a Pulitzer Prize-winning series of articles by investigative reporter Bill Dedman demonstrated how Atlanta banks would often lend in lower-income white neighborhoods but not in middle-income or even upper-income Black neighborhoods. Blacklisting
was a related mechanism employed by redlining institutions to keep
track of areas, groups, and people that the discriminating party
intended to exclude. In academic literature, redlining falls under the broader category of credit rationing. The documented history of redlining in the United States is a manifestation of the historical systemic racism that has had wide-ranging impacts on American society, two examples being educational and housing inequality across racial groups. Redlining is also an example of spatial inequality and economic inequality.
The specific process termed "redlining" in the United States occurred
on the background of racial segregation and discrimination against
minority populations. It had its origins in sales practices of the National Association of Real Estate Boards and theories about race and property values codified by economists surrounding Richard T. Ely and his Institute for Research in Land Economics and Public Utilities, founded at the University of Wisconsin in 1920. With the National Housing Act of 1934 the federal government began to be involved in the practice and the concurrent establishment of the Federal Housing Administration (FHA). The FHA's formalized redlining process was developed by their Chief Land Economist, Homer Hoyt, as part of an initiative to develop the first underwriting criteria for mortgages.
The implementation of this federal policy accelerated the decay and
isolation of minority inner-city neighborhoods through withholding of
mortgage capital, making it even more difficult for neighborhoods to
attract and retain families able to purchase homes. The discriminatory assumptions in redlining exacerbated residential racial segregation and urban decay in the United States.
Page of HOLC document for above Philadelphia redlining map. Covering zone D20, one of the red areas.
It lists one of the 'Detrimental Influences' as a "concentration of Negros and Italians."
In 1935, the Federal Home Loan Bank Board (FHLBB) asked the Home Owners' Loan Corporation
(HOLC) to look at 239 cities and create "residential security maps" to
indicate the level of security for real-estate investments in each
surveyed city. On the maps, the newest areas—those considered desirable
for lending purposes—were outlined in green and known as "Type A". These
were typically affluent suburbs on the outskirts of cities. "Type B"
neighborhoods, outlined in blue, were considered "Still Desirable",
whereas older "Type C" were labeled "Declining" and outlined in yellow.
"Type D" neighborhoods were outlined in red and were considered the most
risky for mortgage support. While about 85% of the residents of such
neighborhoods were white, they included most of the African-American urban households. These neighborhoods tended to be the older districts in the center of cities; often they were also African-American neighborhoods.
Urban planning historians theorize that the maps were used by private
and public entities for years afterward to deny loans to people in black
communities.
Redlining maps even became prominent under private organizations, such as appraiser J. M. Brewer's 1934 map of Philadelphia. Private organizations created maps designed to meet the requirements of the Federal Housing Administration's
underwriting manual. The lenders had to consider FHA standards if they
wanted to receive FHA insurance for their loans. FHA appraisal manuals
instructed banks to steer clear of areas with "inharmonious racial
groups", and recommended that municipalities enact racially restrictive
zoning ordinances. Between 1945 and 1959, African Americans received less than 2 percent of all federally insured home loans.
Banks and mortgage lenders were not the only private entities to
develop redlining practices. Property insurance companies also
instituted rigid redlining policies in the post-World War II period.
According to urban historian Bench Ansfield, the postwar advent of
comprehensive homeowners' insurance was limited to the suburbs and
withheld from neighborhoods of color in U.S. cities. One Aetna bulletin
from 1964 advised underwriters to "use a red line around questionable
areas on territorial maps." The New York Urban Coalition warned in 1978,
"A neighborhood without insurance is a neighborhood doomed to death."
Following a National Housing Conference in 1973, a group of Chicago community organizations led by The Northwest Community Organization (NCO) formed National People's Action
(NPA), to broaden the fight against disinvestment and mortgage
redlining in neighborhoods all over the country. This organization, led
by Chicago housewife Gale Cincotta and Shel Trapp,
a professional community organizer, targeted The Federal Home Loan Bank
Board, the governing authority over federally chartered Savings and loan associations
(S&L) that held at that time the bulk of the country's home
mortgages. NPA embarked on an effort to build a national coalition of
urban community organizations to pass a national disclosure regulation
or law to require banks to reveal their lending patterns.
For many years, urban community organizations had battled neighborhood decay by attacking blockbusting (deceptive encouragement of white flight
from neighborhoods in order to buy up real estate at a huge discount
and then rent to low-income, usually black tenants), forcing landlords
to maintain properties, and requiring cities to board up and tear down
abandoned properties. These actions addressed the short-term issues of
neighborhood decline. Neighborhood leaders began to learn that these
issues and conditions were symptoms of disinvestment that was the true,
though hidden, underlying cause of these problems. They changed their
strategy as more data was gathered.
With the help of NPA, a coalition of loosely affiliated community
organizations began to form. At the Third Annual Housing Conference
held in Chicago in 1974, eight hundred delegates representing 25 states
and 35 cities attended. The strategy focused on the Federal Home Loan Bank Board (FHLBB), which oversaw S&Ls in cities all over the country.
In 1974, Chicago's Metropolitan Area Housing Association (MAHA),
made up of representatives of local organizations, succeeded in having
the Illinois State Legislature pass laws mandating disclosure and
outlawing redlining. In Massachusetts, organizers allied with NPA
confronted a unique situation. Over 90% of home mortgages were held by
state-chartered savings banks. A Jamaica Plain neighborhood organization
pushed the disinvestment issue into the statewide gubernatorial race.
The Jamaica Plain Banking & Mortgage Committee and its citywide
affiliate, The Boston Anti-redlining Coalition (BARC), won a commitment
from Democratic candidate Michael S. Dukakis
to order statewide disclosure through the Massachusetts State Banking
Commission. After Dukakis was elected, his new Banking Commissioner
ordered banks to disclose mortgage-lending patterns by ZIP code. The suspected redlining was revealed. Richard W. "Rick" Wise, a former community organizer who led the Boston organizing, has published a novel, Redlined, which gives a somewhat fictionalized account of the anti-redlining campaign.
NPA and its affiliates achieved disclosure of lending practices with the passage of The Home Mortgage Disclosure Act
of 1975. The required transparency and review of loan practices began
to change lending practices. NPA began to work on reinvestment in areas
that had been neglected. Their support helped gain passage in 1977 of
the Community Reinvestment Act.
Redlining was prevalent in Canada from the 1930s to 1950s in
Ontario, with intergenerational consequences that persist to the present
day.
Efforts to end
Legislation
In the United States, the Fair Housing Act of 1968 was passed to fight the practice of redlining. According to the Department of Housing and Urban Development, "The Fair Housing Act
makes it unlawful to discriminate in the terms, conditions, or
privileges of sale of a dwelling because of race or national origin. The
Act also makes it unlawful for any person or other entity whose
business includes residential real estate-related transactions to
discriminate against any person in making available such a transaction,
or in the terms or conditions of such a transaction, because of race or
national origin." The Office of Fair Housing and Equal Opportunity was tasked with administering and enforcing this law.
The Equal Credit Opportunity Act (ECOA) is a United States law (codified at 15 U.S.C. § 1691 et seq.), enacted 28 October 1974,
that makes it unlawful for any creditor to discriminate against any
applicant, with respect to any aspect of a credit transaction, on the
basis of race, color, religion, national origin, sex, marital status, or
age (provided the applicant has the capacity to contract);
to the fact that all or part of the applicant's income derives from a
public assistance program; or to the fact that the applicant has in good
faith exercised any right under the Consumer Credit Protection Act. The
law applies to any person who, in the ordinary course of business,
regularly participates in a credit decision, including banks, retailers, bankcard companies, finance companies, and credit unions.
The part of the law that defines its authority and scope is known as Regulation B, from the (b) that appears in Title 12 part 1002's official identifier: 12 C.F.R. § 1002.1(b) (2017).
Failure to comply with Regulation B can subject a financial institution
to civil liability for actual and punitive damages in individual or
class actions. Liability for punitive damages can be as much as $10,000
in individual actions and the lesser of $500,000 or 1% of the creditor's
net worth in class actions.
The Community Reinvestment Act, passed by Congress in 1977 required banks to apply the same lending criteria in all communities.
Regulatory lawsuits
In May 2015, the U.S. Department of Housing and Urban Development announced that Associated Bank
had agreed to a $200 million settlement over redlining in Chicago and
Milwaukee. The three-year HUD observation led to the complaint that the
bank purposely rejected mortgage applications from black and Latino
applicants. The final settlement required AB to open branches in non-white neighborhoods.
New York Attorney GeneralEric Schneiderman
announced a settlement with Evans Bank for $825,000 on September 10,
2015. An investigation had uncovered the erasure of black neighborhoods
from mortgage lending maps.
According to Schneiderman, of the over 1,100 mortgage applications the
bank received between 2009 and 2012, only four were from African
Americans. Following this investigation, The Buffalo News
reported that more banks could be investigated for the same reasons in
the near future. The most notable examples of such DOJ and HUD
settlements have focused heavily on community banks in large
metropolitan areas, but banks in other regions have been the subject of
such orders as well, including First United Security Bank in
Thomasville, Alabama, and Community State Bank in Saginaw, Michigan.
The United States Department of Justice announced a $33 million settlement with Hudson City Savings Bank, which services New Jersey, New York, and Pennsylvania, on September 24, 2015.
The six-year DOJ investigation had proven that the company was
intentionally avoiding granting mortgages to Latinos and African
Americans and purposely avoided expanding into minority-majority
communities. The Justice Department called it the "largest residential
mortgage redlining settlement in its history."
As a part of the settlement agreement, HCSB was forced to open branches
in non-white communities. As U.S. Attorney Paul Fishman explained to
Emily Badger for The Washington Post,
"[i]f you lived in a majority-black or Hispanic neighborhood and you
wanted to apply for a mortgage, Hudson City Savings Bank was not the
place to go." The enforcement agencies cited additional evidence of
discrimination in Hudson City's broker selection practices, noting that
the bank received 80 percent of its mortgage applications from mortgage
brokers but that the brokers with whom the bank worked were not located
in majority African-American and Hispanic areas.
ShoreBank, a community-development bank in Chicago's South Shore neighborhood, was a part of the private sector fight against redlining. Founded in 1973, ShoreBank sought to combat racist lending practices in Chicago's African-American communities by providing financial services, especially mortgage loans, to local residents. In a 1992 speech, then-Presidential candidate Bill Clinton called ShoreBank "the most important bank in America". On August 20, 2010, the bank was declared insolvent, closed by regulators and most of its assets were acquired by Urban Partnership Bank.
In the mid-1970s, community organizations, under the banner of
the NPA, worked to fight against redlining in South Austin, Illinois.
One of these organizations was SACCC (South Austin Coalition Community Council),
formed to restore South Austin's neighborhood and to fight against
financial institutions accused of propagating redlining. This got the
attention of insurance regulators in the Illinois Department of
Insurance, as well as federal officers enforcing anti-racial
discrimination laws.
The United States Federal Government has enacted legislation since
the 1970s to reduce the segregation of American cities. While many
cities have reduced the amount of segregated neighborhoods, some still
have clearly defined racial boundaries. Since 1990, the City of Chicago
has been one of the most persistently racially segregated cities,
despite efforts to improve mobility and reduce barriers. Other cities
like Detroit, Houston, and Atlanta
likewise have very pronounced black and white neighborhoods, the same
neighborhoods that were originally redlined by financial institutions
decades ago. While other cities have made progress, this continued racial segregation has contributed to reduced economic mobility for millions of people.
Formerly redlined neighborhoods in places like Los Angeles have been shown to be more likely to have a gang injunction issued against them, as the work of geographer Stefano Bloch and anthropologist Susan A. Phillips shows.
The practice of redlining actively helped to create what is now known as the Racial Wealth Gap seen in the United States.
Black families in America earned just $57.30 for every $100 in
income earned by white families, according to the Census Bureau's
Current Population Survey. For every $100 in white family wealth, black
families hold just $5.04.
In 2016, the median wealth for black and Hispanic families was $17,600
and $20,700, respectively, compared with white families' median wealth
of $171,000. The black-white wealth gap
has not recovered from the Great Recession. In 2007, immediately before
the Great Recession, the median wealth of blacks was nearly 14 percent
that of whites. Although black wealth increased at a faster rate than
white wealth in 2016, blacks still owned less than 10 percent of whites'
wealth at the median.
A multigenerational study of people from five race groups analyzed upward mobility trends in American cities.
The study concluded that black men who grew up in racially segregated
neighborhoods were substantially less likely to gain upward economic
mobility, finding "black children born to parents in the bottom
household income quintile have a 2.5% chance of rising to the top
quintile of household income, compared with 10.6% for whites." Because
of this intergenerational poverty, black households are "stuck in place"
and are less able to grow wealth.
A 2017 study by Federal Reserve Bank of Chicago economists found
that redlining—the practice whereby banks discriminated against the
inhabitants of certain neighborhoods—had a persistent adverse impact on
the neighborhoods, with redlining affecting homeownership rates, home
values and credit scores in 2010.
Since many African-Americans could not access conventional home loans,
they had to turn to predatory lenders (who charged high interest rates). Due to lower home ownership rates, slumlords were able to rent out apartments that would otherwise be owned.
Retail
Brick and mortar
Retail redlining is a spatially discriminatory practice among retailers. Taxicab services and delivery food
may not serve certain areas, based on their ethnic-minority composition
and assumptions about business (and perceived crime), rather than data
and economic criteria, such as the potential profitability of operating
in those areas. Consequently, consumers in these areas are vulnerable to
prices set by fewer retailers. They may be exploited by retailers who
charge higher prices and/or offer them inferior goods.
Online
A 2012 study by The Wall Street Journal found that Staples, The Home Depot, Rosetta Stone
and some other online retailers displayed different prices to customers
in different locations (distinct from shipping prices). Staples based
discounts on proximity to competitors like OfficeMax and Office Depot.
This generally resulted in higher prices for customers in more rural
areas, who were on average less wealthy than customers seeing lower
prices.
Some service providers target low-income neighborhoods for nuisance
sales. When those services are believed to have adverse effects on a
community, they may considered to be a form of "reverse redlining". The
term "liquorlining" is sometimes used to describe high densities of
liquor stores in low income and/or minority communities relative to
surrounding areas. High densities of liquor stores are associated with
crime and public health issues, which may in turn drive away
supermarkets, grocery stores, and other retail outlets, contributing to
low levels of economic development.
Controlled for income, nonwhites face higher concentrations of liquor
stores than do whites. One study done on "liquorlining" found that, in
urban neighborhoods, there is weak correlation between demand for
alcohol and supply of liquor stores.
The case alleged that the factors Sallie Mae used to underwriteprivate student loans caused a disparate impact
on students attending schools with higher minority populations. The
suit also alleged that Sallie Mae failed to properly disclose loan terms
to private student loan borrowers.
The lawsuit was settled in 2011. The terms of the settlement included Sallie Mae agreeing to make a $500,000 donation to the United Negro College Fund and the attorneys for the plaintiffs receiving $1.8 million in attorneys' fees.
Credit cards
Credit card redlining is a spatially discriminatory practice among credit card issuers, of providing different amounts of credit
to different areas, based on their ethnic-minority composition, rather
than on economic criteria, such as the potential profitability of
operating in those areas.
Scholars assess certain policies, such as credit card issuers reducing
credit lines of individuals with a record of purchases at retailers
frequented by so-called "high-risk" customers, to be akin to redlining.
Banks
Much of the
economic impacts we find as a result of redlining and the banking
system directly impact the African American community. Beginning in the
1960s, there was a large influx of black veterans
and their families moving into suburban white communities. As blacks
moved in, whites moved out and the market value of these homes dropped
dramatically. In observation of said market values, bank lenders were
able to keep close track by literally drawing red lines around the
neighborhoods on a map. These lines signified areas that they would not
invest in. By way of racial redlining, not only banks but savings and
loans companies, insurance companies, grocery chains, and even pizza
delivery companies thwarted economic vitality in black communities. The severe lacking in civil rights laws in combination with the economic impact led to the passing of the Community Reinvestment Act in 1977.
Racial and economic redlining set the people who live in these
communities up for failure from the start, so much so that banks would
often deny people who came from these areas bank loans or offered them
at stricter repayment rates. As a result, there was a very low rate at
which people (in particular African Americans) were able to own their
homes; opening the door for slum landlords (who could get approved for low interest loans in those communities) to take over and do as they saw fit.
Insurance
Gregory
D. Squires wrote in 2003 that data showed that race continues to affect
the policies and practices of the insurance industry. Racial profiling or redlining has a long history in the property-insurance industry in the United States.
From a review of industry underwriting and marketing materials, court
documents, and research by government agencies, industry and community
groups, and academics, it is clear that race has long affected and
continues to affect the policies and practices of the insurance
industry.
Home-insurance agents may try to assess the ethnicity of a potential
customer just by telephone, affecting what services they offer to
inquiries about purchasing a home insurance policy. This type of
discrimination is called linguistic profiling. There have also been concerns raised about redlining in the automotive insurance industry. Reviews of insurance scores
based on credit are shown to have unequal results by ethnic group. The
Ohio Department of Insurance in the early 21st century allows insurance
providers to use maps and collection of demographic data by ZIP code in
determining insurance rates. The FHEO Director of Investigations at the Department of Housing and Urban Development, Sara Pratt, wrote:
Like other forms of discrimination, the history of
insurance redlining began in conscious, overt racial discrimination
practiced openly and with significant community support in communities
throughout the country. There was documented overt discrimination in
practices relating to residential housing—from the appraisal manuals
which established an articulated "policy" of preferences based on race,
religion and national origin. to lending practices which only made loans
available in certain parts of town or to certain borrowers, to the
decision-making process in loans and insurance which allowed the
insertion of discriminatory assessments into final decisions about
either.
Mortgages
In
reverse redlining, lenders and insurers target minority consumers by
charging them more than a similarly situated white consumer would be
charged, specifically marketing the most expensive and onerous loan
products. In the 2000s, some financial institutions considered black
communities as suitable for subprime mortgages. Wells Fargo
partnered with churches in black communities, where pastors would
deliver "wealth building" sermons encouraging new mortgage applications.
The bank would then make a donation to the church in return for every
new application. Many working-class blacks wanted to be included in the
nation's home-owning trend. Instead of empowering them to contribute to
homeownership and community progress, predatory lending practices
through reverse redlining stripped the equity homeowners sought and
drained the wealth of those communities for the enrichment of financial firms. The growth of subprime lending, higher cost loans to borrowers with flaws on their credit records, prior to the 2008 financial crisis,
coupled with growing law enforcement activity in those areas, clearly
showed a surge in manipulative practices. Not all subprime loans were
predatory, but virtually all predatory loans
were subprime. Predatory loans are dangerous because they charge
unreasonably higher rates and fees compared to the risk, trapping
homeowners in unaffordable debt and often costing them their homes and
life savings.
A survey of two districts of similar incomes, one being largely
white and the other largely black, found that bank branches in the black
community offered exclusively subprime loans. Studies found out that
high-income blacks were almost twice as likely to end up with subprime
home-purchase mortgages compared to low-income whites. Fueled by deep
racism, some loan officers referred to blacks as "mud people" and to
subprime lending as "ghetto loans".
Lower savings rate and distrust of banks, stemming from this legacy of
redlining, may explain why there are fewer financial institutions in
minority neighborhoods. In the early 21st century, brokers and
telemarketers actively encouraged subprime mortgages to be offered to
minority residents. A majority of the loans were refinance transactions,
allowing homeowners to take cash out of their appreciating property or
pay off credit card and other debt.
Redlining has helped preserve residential segregation between blacks and whites in the United States. Lending institutions such as Wells Fargo
have shown that they treat black mortgage applicants differently when
they are buying homes in white neighborhoods than when buying homes in
black neighborhoods by offering them subprime and predatory loans when
black residents try and integrate neighborhoods.
The inequality in loaning extends past residential to commercial
loans as well; Dan Immergluck writes that in 2002, small businesses in
black neighborhoods received fewer loans, even after accounting for
business density, business size, industrial mix, neighborhood income,
and the credit quality of local businesses.
Several State Attorneys General have begun investigating these de facto practices, which may violate fair lending laws. The NAACP filed a class-action lawsuit charging systematic racial discrimination by more than a dozen banks.
Policies related to redlining and urban decay can also act as a form of environmental racism,
which in turn affect public health. Urban minority communities may face
environmental racism in the form of parks that are smaller, less
accessible and of poorer quality than those in more affluent or white
areas in some cities, which may have an indirect effect on health, since
young people have fewer places to play, and adults have fewer
opportunities for exercise.
A 2022 study published in the journal Environmental Science &
Technology Letters found redlined areas in 202 US cities had higher
levels of air pollution (nitrogen dioxide and fine particulate matter) in 2010, so 80 years later.
In 1990, Robert Wallace wrote that the pattern of the AIDS outbreak during the 1980s was affected by the outcomes of a program of "planned shrinkage"
directed at African-American and Hispanic communities. It was
implemented through systematic denial of municipal services,
particularly fire protection resources, essential to maintain urban
levels of population density and ensure community stability. Institutionalized racism
affects general health care as well as the quality of AIDS health
intervention and services in minority communities. The
over-representation of minorities in various disease categories,
including AIDS, is partially related to environmental racism. The
national response to the AIDS epidemic in minority communities was slow
during the 1980s and 1990s, showing an insensitivity to ethnic diversity
in prevention efforts and AIDS health services.
African-Americans are 75 percent more likely than others to live near facilities that produce hazardous waste and pollutants.
Philadelphia, which has a 44 percent Black population, received a
warning from the American Lung Association in 2019: "If you live in
Philadelphia County, the air you breathe may put your health at risk." It was found that a refinery in Grays Ferry, Philadelphia was responsible for most of the toxic air emission in the city. The refinery had not been in compliance with the Clean Air Act for 9 out of the 12 quarters through 2019.
Digital redlining is a term used to refer to the practice of
creating and perpetuating inequities between racial, cultural, and class
groups specifically through the use of digital technologies, digital
content, and the internet.Digital redlining
is an extension of the historical housing discrimination practice of
redlining to include an ability to discriminate against vulnerable
classes of society using algorithms, connected digital technologies, and
big data.
This extension of the term tends to include both geographically based
and non-geographically based discrimination. For example, in March 2019
the United States Department of Housing and Urban Development (HUD) charged Facebook with housing discrimination over the company's targeted advertising practices.
While these charges included geographically based targeting in the form
of a tool that allowed advertisers to draw a red line on a map; they
also included non-geographically based methods that did not use maps but
rather utilized algorithmic targeting using Facebook's user profile
information to directly exclude specific groups of people. A press
release from HUD on March 28, 2019, stated that HUD was charging that
"Facebook enabled advertisers to exclude people whom Facebook classified
as parents; non-American-born; non-Christian; interested in
accessibility; interested in Hispanic culture; or a wide variety of
other interests that closely align with the Fair Housing Act's protected classes."
Political redlining
Political
redlining is the process of restricting the supply of political
information with assumptions about demographics and present or past
opinions.
It occurs when political campaign managers delimit which population is
less likely to vote and design information campaigns only with likely
voters in mind. It can also occur when politicians, lobbyists, or
political campaign managers identify which communities to actively
discourage from voting through voter suppression campaigns.
Redlining and Health Inequality
Health
inequality in the United States persists today as a direct result of
the effects of redlining. This is because health in America is
synonymous with wealth, both of which minority groups have been denied
as a result of discriminatory practices. Wealth affords the privilege of
living in a neighborhood or community with clean air, pure water,
outdoor spaces and places for recreation and exercise, safe streets
during the day and night, infrastructure that supports the growth of
intergenerational wealth through access to good schools, healthy food,
public transportation, and opportunities to connect, belong, and
contribute to the surrounding community. Wealth also provides stability
of home as those with capital are not confined to the deteriorating
housing stock that minority groups who were redlined were forced to try
and rehabilitate without access to loans.
For example, a concept called supermarket redlining has been proposed
as a cause of lower access to supermarkets that is characteristic of
some scholarly definitions of food deserts.
The concept describes how large chain supermarkets tend to relocate out
of or refrain from opening stores in inner-city areas or impoverished
neighborhoods due to perceived urban and economic obstacles, decreasing
certain communities' access to supermarkets.
Redlining intentionally excluded black Americans from
accumulating intergenerational wealth. The effects of this exclusion on
black Americans' health continues to play out daily, generations later,
in the same communities. This is evident currently in the
disproportionate effects that COVID-19 has had on the same communities
which the HOLC redlined in the 1930s. Research published in September
2020 overlaid maps of the highly affected COVID-19 areas with the HOLC
maps, showing that those areas marked "risky" to lenders because they
contained minority residents were the same neighborhoods most affected
by COVID-19. The Center for Disease Control (CDC) looks at inequities in
the social determinants of health like concentrated poverty and
healthcare access that are interrelated and influence health outcomes
with regard to COVID-19 as well as quality-of-life in general for
minority groups. The CDC points to discrimination within health care,
education, criminal justice, housing, and finance, direct results of
systematically subversive tactics like redlining which led to chronic
and toxic stress that shaped social and economic factors for minority
groups, increasing their risk for COVID-19. Healthcare access is
similarly limited by factors like a lack of public transportation, child
care, and communication and language barriers which result from the
spatial and economic isolation of minority communities from redlining.
Educational, income, and wealth gaps that result from this isolation
mean that minority groups' limited access to the job market may force
them to remain in fields that have higher risk of exposure to the virus,
without options to take time off. Finally, a direct result of redlining
is the overcrowding of minority groups into neighborhoods that do not
boast adequate housing to sustain burgeoning populations, leading to
crowded conditions that make prevention strategies of COVID-19 nearly
impossible to implement.
After years of de facto discrimination achieved through
redlining, a system of structural racism blocking the achievement of
health equity for all Americans has developed. As a result, a de facto
health narrative that does not inspire belonging, compel political
participation, nor dictate strategic change towards the social justice
model for health equity has matured. In order to eliminate health
inequality in America, a new de facto health narrative needs to dictate
strategy. The process for achieving health equity relies on healthcare
leaders articulating, acting on, and building the vision into all
decisions and structures that support equity. Sufficient resources must
be allocated to establishing a governance structure that can oversee
health equity work. This includes taking specific action to address the
social determinants of building intergenerational wealth as well as
confronting institutional racism within health systems themselves. Next,
health systems need to address the socioeconomic determinants of health
which disadvantage minority groups. Through training, education,
support groups, housing support, improved transportation, resource
assistance, and community health programs, health equity organizations
can begin to break down the long-lasting barriers that tactics like
redlining have imposed on achieving health equity. In addition to
ensuring the equal health outcomes of patients, healthcare organizations
can also utilize their position as employers to develop a more diverse
workforce through improved hiring practices and ensuring living wages to
minority employees.
Strategies to reverse effects of redlining
Redlining has contributed to the long-term decline of low-income, inner city neighborhoods and the continuation of ethnic minority enclaves.
Compared to prospering ethnic minority areas, historically redlined or
other struggling black communities need targeted investments in
infrastructure and services in order to prosper.
Some of these strategies include:
Targeting planning resources to improve employment, incomes,
wealth, the built environment, and social services in struggling
communities.
Recognize the importance of public transportation as a means for low-income communities to access jobs and services.
