Book Explores Impact of Fees on Middle Class
Each month when we receive bills for services such as cable television or cell phones, those bills typically include one or more fees that increase the total cost of the service, often above what is marketed to consumers as the basic price of that particular service. A new book by Devin Fergus, the Arvarh E. Strickland Distinguished Professor of History and Black Studies at MU, argues these fees and related charges cost American consumers almost $1.5 trillion each year and hinder upward mobility.
“These fees are baked into the essential products and services consumers demand,” Fergus says. “Our campus and college campuses across the country have student fees, which are in addition to tuition, but if a student here or somewhere else does not pay their fees, they can’t come into the classroom.”
Upward Wealth Redistribution
Fergus’ new book, Land of the Fee: Hidden Costs and the Decline of the American Middle Class (Oxford University Press), traces the history of fees from the deregulation era of the 1970s to the present and explores the effect of increasing fees on growing inequality in the United States. It’s a phenomenon common to both the private and the public sector.
“No elected official wants to say, ‘I’m going to raise your taxes,’ but they will increase fees, and we see this at public universities or in fees at the Department of Motor Vehicles,” Fergus says. “The increasing fees are a way to create revenue for the public sector or profit for the private sector without giving the consumer the idea they are raising the cost of the product or service, when in reality they are.”
Those fees, he argues, tend to fall disproportionately on the poor and middle class and can limit upward mobility. Fergus says there are four spheres of upward mobility: home ownership, automobile ownership, a college education, and employment. Fee increases across the first three spheres have made it more difficult for many to buy a home, own a car, or get a college degree. In the employment sphere, Fergus notes that wage stagnation has led to the rise of payday lenders, which tend to tack on huge fees to their loans, trapping consumers in a cycle of debt.
“We know that home ownership is a primary means by which members of a society increase their status – same with a college education. These things are essential, and the private sector knows this, so they know they can increase fees and people will still pay,” he says.
Fergus says consumers often don’t know they are agreeing to pay fees associated with a product or service when they sign up because they don’t have the time or the inclination to read a lengthy service contract written in legalese. He says Americans today work longer hours than their grandparents did, they tend to commute farther to work, and they have more social obligations, such as taking kids to soccer practice. “So this individual, as a consumer, has fewer hours of leisure and the documentation with these fees has increased, so how do you square that circle?” Fergus asks.
Change via the Ballot Box
Fergus says a key to correcting this problem is to outsource these kinds of obligations to regulators (financial and otherwise), and if the regulators don’t do their jobs, then consumers must hold the elected officials who appointed the regulators accountable.
“The main choice you have is to elect officials who will require more robust financial regulatory policies,” Fergus says. “Until we are able to reform lobbying and limit the impact of the donor class or the very wealthy, we will not see a rollback of these costs and fees.”
He is not optimistic things will change soon. The Trump administration is in the process of gutting the Consumer Financial Protection Bureau, which Fergus says is America’s only consumer-focused regulatory authority.