Normalized Poverty

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The charts of U.S. Consumer Spending are from Raj Chetty, Harvard Economics Professor and the Opportunity Insights Research Lab. As Bloomberg.com reports on September 4, 2020:

​If you want to understand what’s really wrong with the economy, this is a telling symptom: Chetty used to travel widely sharing insights from his work, which mines data to paint a vividly detailed picture of inequality in the U.S. Now he, like millions of other affluent Americans, is at home. That might seem harmless—Chetty and his wife enjoy cooking together and spending time with their 5-year-old daughter—until you confront the effects on the already-precarious livelihoods of the people who fed, clothed, and pampered this professional class.

High Income Earners and their families can afford to quarantine and work and educate themselves from home. This drop in their neighborhood consumer spending negatively affects the incomes of nearby Lower Income Workers.

Last month, a couple days after former Vice President Joe Biden selected California Senator Kamala Harris as his running mate, Chetty briefed the pair over video, presenting data that demonstrated lower-income workers were bearing the brunt of the Covid recession. His chart showed that by April, the bottom quarter of wage earners, those making less than $27,000 a year, had lost almost 11 million jobs, more than three times the number lost by the top quarter, which earn more than $60,000 annually. By late June the gap had widened further, even though many businesses had reopened. In fact, the segment of Americans who are paid best had recovered almost all the jobs lost since the start of the pandemic. “The recession has essentially ended for high-income individuals,” Chetty told Biden and Harris. Meanwhile, the bottom half of American workers represented almost 80% of the jobs still missing. 
​Read the full article at Bloomberg.com

In Canada we are getting warnings of increasing wealth gaps as reported September 9, 2020 by NationalPost.com:

SNIPPETS: Experts say the pandemic could widen the poverty gap this year, and that overall poverty rates are also rising, despite a massive influx of government benefits meant to replace earnings for those whose incomes disappeared from lost jobs, hours or business.

The Bank of Canada... warned of indicators that point to a slow and choppy recovery... that includes an uneven rebound in employment, and subdued business confidence...

​Poverty rates are likely to go up this year as a result of COVID-19, which has caused a historic drop in Canada’s labour market that is still 1.1 million jobs short of pre-pandemic levels.

“There is no doubt the COVID-19 job losses will spike poverty rates,” said David Macdonald, a senior economist at the Canadian Centre for Policy Alternatives, noting official numbers for this year won’t be available until 2022.

As I noted in a June 20, 2020 post "Household Net Worth", The middle 40% of Canadian Households have less than $100,000 of net worth and the bottom 40% have less than $50,000! These people are not going to be reliable buyers of housing as the current FOMO 2.0 rages in the hot metros.

And this from the ​Canadian Centre for Policy Alternatives (May 1, 2020):

​A 2019 study by David Macdonald for the Canadian Centre for Policy Alternatives, titled Unaccommodating: Rental Wages in Canada, put the affordability crisis into a context everyone can understand. Macdonald set out to determine the minimum hourly wage a person would have to make in order to comfortably afford to rent (using no more than 30% of their income) a one- or two-bedroom apartment in nearly 800 neighbourhoods within Canada’s major cities. The answer: $22.40 an hour for a two-bedroom apartment and just over $20 an hour for an average one-bedroom unit. 

These “rental wages” are at least $5 an hour more than the highest provincial minimum wage in Canada ($15 in Alberta). In most Canadian cities, including Canada’s largest metropolitan areas of Toronto and Vancouver, Macdonald found there are no neighbourhoods where it is possible to afford a one- or two-bedroom unit on a single minimum wage, and even people earning much more than that will struggle to find a home they can afford. 

Not only is there a woefully inadequate supply of affordable rental stock, but what little stock is available is eroding at alarming rates. CMHC data from 2011 and 2016 show that for every new affordable unit constructed in Ottawa, seven are lost to demolition, reconstruction or raised rents. Slowing and offsetting this erosion will be key to solving Ottawa’s housing affordability crisis and meeting recent federal targets, in the National Housing Strategy, for reducing chronic homelessness and renter housing needs by 50%. 

​“The public model has been far from perfect, but that’s not because its public—it’s because we’ve starved it” said Shauna Mackinnon, associate professor and chair of urban and inner-city studies at the University of Winnipeg and former director of the CCPA-Manitoba said.
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"As a city develops, nothing is more important than maintaining mobility and housing affordability."
Alain Bertaud Urbanist

​"There have not been any significant new additions to public housing stock in decades and what little stock exists is often in poor repair and typically goes to people in most desperate need. This feeds into the notion of public housing as ghettos, she said. The only reason why people get ghettoized in public housing is because there’s not enough public housing. If we had more public housing you would have more variety of people, maybe with low income, but a greater variety of people, not just the most destitute with the most complex lives.” Shauna Mackinnon

​From my charts of Annual Demographia (Price / Income) Ranks of 50 Canadian Cities

Affordability is the ability for any urban household to be able to rent a dwelling for less than a 25% of its monthly income, or to buy one for less than about three time its yearly income. ​The mobility and affordability objectives are tightly related. ​A residential location that only allows access to only a small segment of the job market in less than an hour commuting time has not much value to households, even if it is theoretically affordable.​

And from the OECD, May 2019:

Under Pressure: The Squeezed Middle Class
Middle-class households feel left behind and have questioned the benefits of economic globalisation. In many OECD countries, middle incomes have grown less than the average and in some they have not grown at all. Technology has automated several middle-skilled jobs that used to be carried out by middle-class workers a few decades ago. The costs of some goods and services such as housing, which are essential for a middle-class lifestyle, have risen faster than earnings and overall inflation. Faced with this, middle classes have reduced their ability to save and in some cases have fallen into debt.

Saskia Sassen, philosopher, sociologist, with a Ph.D. in Political Science author of Expulsions: Brutality and Complexity in the Global Economy in a September 24, 2020 interview responds to an interviewer's following remark: "What the pandemic cries out for is solidarity, a state that focuses on the weakest and is concerned for the most fragile. But the system favours the exact opposite."

It’s the consequence of entering a new era, and that has its own price. I said it, and I insist on it, the expansion of sectors with economic capacity is not small. They may not be the richest, but there is a lot of money. On the other hand, the traditional middle classes have lost ground. We’re witnessing a different middle class from the one we saw thirty years ago. It’s good to see it because poor families have children who acquire greater solvency, earn high salaries, and obtain real possibilities for individual and collective development. Yes, there’s a kind of new modality that, on the one hand, generates a more prosperous middle class, but on the other hand, an impoverishment of the more modest middle class. The neighborhood’s business, the lawyer who helps people's causes, who are also modest, are all experiencing a process of pauperization.

The rich sectors become much richer, which leads to the growth of urban land grabbing capacity for the construction of luxury buildings. Austere houses are evicted and replaced with luxury housing towers. That is the reality in New York, Paris, and many cities. This trend takes away living space and opportunities from a middle class that has always been humble, but has managed to be well off and now is not well off.

Read the full interview:  The transformation of housing into financial assets normalizes misery in the cities of the Americas ... It is crucial to become aware of the advance of financial speculation on poor housing in the Americas, says Saskia Sassen, interviewed by José Zepeda for democraciaAbierta.

​Ending Global Poverty Begins with Women's Rights
OXFAM Canada September 9, 2020

​Why Women's Rights? It's a simple answer. Gender is the most persistent predictor of poverty and powerlessness in our world today. ​

​Women are the powerhouses of developing countries: they produce most of the food, make up a third of the official labour force and care for families and homes. Yet they tend to have fewer rights, fewer resources and fewer opportunities to make life-shaping decisions than men. Gender remains the most persistent predictor of poverty. When women’s rights are respected, women are healthier, better educated and better paid. Children thrive and so do communities, organizations and societies, creating lasting benefits for generations to come.
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