POSC 1200U Lecture Notes - Lecture 6: Thomas Piketty, The Globe And Mail, Child Poverty
Poverty, Unemployment, Homeslessness
Lecture 6
Causes of poverty
• 1) Poverty:
o If you are poor and go to college, you have as much chance of being poor as a
rich kid who drops out of high school (Duncan & Murnane, 2011).
o US Data, poorest 1/3rd population:
o If this were a society of equal opportunity, and 17% are poor (as in the USA),
only 17% should stay in poverty.
o An intergenerational elasticity in earnings of .6 tells us that if one father makes
100% more than another then the son of the high income father will, as an
adult, earn 60% more than the son of the relatively lower income father. An
elasticity of 0.2 says this 100% difference between the fathers would only lead to
a 20% difference between the sons. A lower elasticity means a society with more
mobility.
o Child poverty leads to low-education, which leads to poverty as adult:
▪ High School Diploma: Never Poor (92.7%); Poor (63.5%)
▪ Postsecondary enrolment: Never Poor (69.7%); Poor (22.8%)
▪ Completed College: Never Poor (36.5%); Poor (3.2%)
• US data (Ratcliffe, 2015)
o High income parents spend much more on enrichment activities (tutors, lessons,
volunteer opportunities, educational DVDs, books)
o Middle class spends 11 times as much on enrichment activities than poor
families.
o High income parents have time to talk to their kids for three more hours per
week than poor parents can.
o Wealthy provide around four-and-a-half extra hours per week of time in novel or
stimulating places, such as parks or museums, for their infants and toddlers.
o Poverty requires that people spend all their money for current needs, leaving
little to invest in their future
• 2) Capitalism
o The best way to make a million dollars is to be rich already!
o Thomas Piketty, and economist, studied economic data from the past two
centuries.
o He found that returns to capital (% profit you make from investment) are
consistently higher than the rate that he economy is growing.
o This means that the share of those who work for a living is declining year after
year, and the share of those who make money only from investing, is increasing.
o Piketty found that this is the way capitalism has always worked over the
centuries. The only way to change it is through purposeful wealth redistribution.
• 3) Labour Market (unemployment/ underemployment)
o Workig is o loger a tiket out of poerty – Globe & Mail (2012)
o Average Ontarian works about 30 hrs per week
• u80% of Ontario jobs are temporary
find more resources at oneclass.com
find more resources at oneclass.com
o In 2002, 70% Canadians defined themselves as middle class, now only 43%
o Those who identify as working (poorest) class have doubled, upper class stayed
stable
o Top half of Ontario families make 81% of income; up 3% since 2000
o Bottom half have shrunk to 19% of earnings
o As labour markets include less stable, well-paid, full-time work, we can expect
more poverty
o Currently 70% of those in poverty in Canada are working (Statistics Canada)
o Sometimes we can have more people employed while poverty increases
o Why the change? Decline of unions, economic globalization, technology, rise of
flexible labour (decline of regulation of labour market)
• 4) Living in a poor country
o Wealthiest in poorest countries have much more than poorest in wealthiest
economies
o But poorest in wealthy economies have much more than poorest in poor
economies
• 5) Living in a poor region
o Differences in poverty are significant
o They are less than international differences since people can freely migrate
within Canada in search of jobs
• u6) Stress/Anxiety
o The financial stress of being in poverty has been found to reduce cognitive
function in experiments
o Also, brains that are focused on immediate survival problems are less able to
plan for the future
o With stress, you engage fight/flight and are less ble to be reflective and plan
rationally
o So poverty causes stress, and stress causes poverty
o The poor need more reminders and simpler procedures for accessing education,
applying for assistance, and searching for and applying for jobs
o Anxiety often leads to drug/alcohol use, which increases poverty, and increases
anxiety.
• 7) Inflation
o When prices go up, people get less for their money. More are then in poverty.
o Especially true of food prices.
o Food price changes impact poor families the most, because they spend the
highest % of their income on food and necessities.
o Inflation and poverty (US):
o Nominal Income: Dollars you actually bring home (blue)
o Real income: Nominal adjusted for inflation (red)
• 8) Racial Inequality
o Racialized Canadians are 3 times more likely to be in poverty (19.8% vs 6.4%)
o Racialized Canadians earn 81% compared to non-racialized
o This is partially due to racial discrimination
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
If you are poor and go to college, you have as much chance of being poor as a rich kid who drops out of high school (duncan & murnane, 2011): us data, poorest 1/3rd population: If this were a society of equal opportunity, and 17% are poor (as in the usa), only 17% should stay in poverty: an intergenerational elasticity in earnings of . 6 tells us that if one father makes. 100% more than another then the son of the high income father will, as an adult, earn 60% more than the son of the relatively lower income father. An elasticity of 0. 2 says this 100% difference between the fathers would only lead to a 20% difference between the sons. More are then in poverty: especially true of food prices, food price changes impact poor families the most, because they spend the highest % of their income on food and necessities.