POSC 1200U Lecture Notes - Lecture 6: Thomas Piketty, The Globe And Mail, Child Poverty

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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 Workig is o loger a tiket out of poerty – Globe & Mail (2012)
o Average Ontarian works about 30 hrs per week
u80% of Ontario jobs are temporary
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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
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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.

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