By Maura Collins
Editor’s note: Maura Collins is the executive director of the Vermont Housing Finance Agency and Chair of the Board of Pathways Vermont. This commentary is from a 10-part series in which the authors respond to the pressing topics developed by the non-partisan Vermont Council on Rural Development.
Part 4: Vermont must reduce economic disparity, advance economic opportunity and rebuild the middle class
As a white kid from suburbia growing up in the ‘80s, I thought everyone was in the middle.
I assumed, probably rightfully, that my neighborhood, my church, my classmates, and my extended family all fell in the same middle place as my own family. As a child I knew I couldn’t get everything I wanted, but I didn’t worry that there wouldn’t be enough.
Mom clipped coupons, knit our winter wear, and we all worried each time dad’s company was bought out by another big firm.
But somehow, we also each had orthodontics, always had new school clothes, and visited family in Florida each winter to escape the cold.
There were small differences I noticed — like friends who lived in what I now know was public housing, or those who had hot tubs and real Cheez-Its instead of our store brand knock offs — but it all fell within the bounds of what I learned was called the middle class.
But something happened as I was going about my own emergence into adulthood and trying to make my way into my own version of the middle class — the center of the income bell curve dropped, and the ends rose.
It’s not my imagination. Since the 1980s the number of middle income Vermonters shrank by 7% while those with the lowest and highest incomes have grown. “The wealth gap between America’s richest and poorest families more than doubled from 1989 to 2016,” according to Pew Research.
Discussions of inequality often focus on those left behind — the needs of those experiencing poverty because of lack of access to education, jobs, housing and healthcare.
Less often do we name that this also limits those with means because the growing disparity holds our entire economy back and everyone suffers.
Rising income inequality took five percentage points off the U.S. cumulative GDP per capita between 1990 and 2010, according to the Organization for Economic Cooperation and Development. This undermines “education opportunities for children from poor socio-economic backgrounds, lowering social mobility and hampering skills development.”
Not only that, company owners who earn the most rely on the consumer spending of their employees and others to fuel the economy and buy their products. So lower incomes means fewer customers.
We can see this clearly with the pandemic, but frustratingly, we are blind to how it plays out in our economy.
Take, for instance, how epidemiologists are clear that we need herd immunity (through infections and/or vaccinations) for us all to be safe. Since it is not safe to leave anyone behind, we all need access to vaccinations that are free to ensure we are all healthier and safer. As a result our economy can recover.
How can we be blind to how an increasing wealth gap creates the same health and economic dangers for our society when that gap means not everyone has access to the tools to maintain their own health and prosperity?
Even ratings agencies like Standard & Poor’s have lowered the nation’s expected growth rate because the “wealth gap undermines economic growth by dampening social mobility and creating a less-educated workforce unable to compete in the global economy,” according to a CBS News article.
Increased wages, universal health care, lower cost education, and affordable housing are often cited as approaches to reduce disparity.
Homeownership has always been intertwined with the American Dream because home equity is the largest asset of the middle class.
Homeownership brings the potential for passive income. By making monthly payments to pay down a mortgage and hoping for price appreciation, owners can make money on their home while also benefiting from its shelter.
But this is only possible if you have access to that golden ticket of ownership.
When my grandfather’s World War II service ended, the GI Bill helped him afford the modest three bedroom home in South Burlington. It was a tight space for eight people, but it was the first seed of what would become generational wealth when it was sold 50 years later.
In families whose parents owned a home, it is more likely those parents can help their adult children afford a down payment, pay for college, help out with childcare, or support entrepreneurial ideas.
But for too many Blacks and other People of Color, who were long denied homeownership and the corresponding prosperity that came from unprecedented home appreciation in the latter half of last century, there is far less to draw from to help the next generation.
Without access to homeownership, we only perpetuate our differences and too many are left out of the chance to grow that kind of nest egg. Consider:
In Vermont, 72% of white households own their home, compared to 24% of Blacks.
The homeownership rate of young adults dropped by nine percentage points between 2005 and 2014. The Federal Reserve found that 20% of that drop was because student loan debt had doubled over that time.
A Burlington Young Professionals survey found 40% of respondents plan to leave the state, mostly because of low pay and high housing costs.
Vermont must make serious and concerted efforts to diversify our economic opportunities, and make them universally available, or we risk economic and social decline.
For our state to not just survive but thrive, we must have access to wealth generation for all Vermonters. This means diverse job prospects, pathways to homeownership, affordable care for our children and our health, and a strong economy supporting livable wages.
Because every child should know that even if they can’t get everything they want, there will always be enough.