I was reading something recently about the cost of poverty in Tucson, AZ. As it turns out, poverty is pretty expensive. If you ask average homeowners how much they spend on water or heat each year, they can give you at least a rough estimate. If you ask the same homeowners how much they spend on poverty, they would not be able to answer the question. Nobody gets a poverty bill, so the cost of poverty in Washtenaw County goes largely unnoticed.
How can you even measure the cost of poverty? What makes poverty so expensive?
Calculating the cost of poverty in Washtenaw County
The cost of poverty in Washtenaw County includes things you’d expect, like the cost of healthcare for people who don’t have health insurance. Healthcare is outrageously expensive, and when people without insurance need care, the public shoulders the cost of healthcare services. This cost comes in the form of entitlements like Medicaid, and noncollectable losses to publicly funded hospitals.
Crime has a cost, and the public pays for it. The cost of crime includes not only losses and other damage from crimes themselves, but also the cost of the law enforcement, justice and corrections systems.
Poverty begets poverty, and there’s a cost to that. People who were impoverished as children are more than twice as likely to remain in poverty as adults. This is “inter-generational poverty” – poverty that passes (and grows) from generation to generation. Catastrophic economic events like the Great Recession and the COVID-19 pandemic can throw previously prosperous people into poverty. It not only becomes harder for those newly impoverished people to get out, but also it mires their children in poverty. And for those children, never escaping poverty becomes a very real possibility.
Probably the worst, most insidious cost of poverty is its opportunity cost. When impoverished people do not escape poverty, it costs society actual dollars. But it also eliminates the opportunity for those people to contribute to society.
And that’s where you can begin to measure the cost of poverty in Washtenaw County. A prosperous person contributes to the gross domestic product (GDP) by engaging in positive economic activity. The GDP of an area suffers when people cannot contribute to it through positive economic activity.
Washtenaw County’s annual poverty bill
So, what does poverty in Washtenaw County cost? The St. Louis Federal Reserve Board estimates that Washtenaw County’s GDP in 2019 was $25.6B. The cost of poverty can diminish the GDP anywhere between 4% and 7%. So, for the sake of argument, let’s say that the cost of poverty in Washtenaw County is 5% of its GDP. In dollars, that’s nearly $1.3B. On a per household basis, that’s about $9,000.
Right now, that’s Washtenaw County’s annual poverty bill.
Education does more than reduce poverty. It breaks the cycle of poverty. Fewer children grow up poor, so fewer people remain poor as adults. Public education costs less than public healthcare does. It’s cheaper than crime (and punishment), and it enables people to contribute positively to the economy.
16% of Washtenaw County residents live in poverty right now. That’s higher than the national average.
So, it is frustrating to hear Washtenaw Community College executives characterize Ann Arbor as a “rich community.” WCC serves the nearly all 141,700 households in Washtenaw County, only about one-third of which are in Ann Arbor.
It’s also frustrating to see WCC executives promote a master plan that diverts money from education to a hotel. The taxpayers here are apparently so “rich” that we can afford to spend our education dollars on real estate development schemes instead.
The 16% of county residents who are stuck in poverty? The $9,000 per household that we lose to poverty each year? The WCC Board of Trustees and its executives believe that building a hotel is a better idea than reducing poverty. Educating people out of poverty could return an extra $1.3B to the Washtenaw County economy each year.
The nicest hotel in the world is never going to generate that kind of return.
Photo Credit: Karen Bryan , via Flickr