The Affordability Crisis might spark Social Change

April 12, 2021

My Dear Reader,

After the fallout from the 2008 economic crisis, a new trend emerged a decade later in low tax areas known as the “affordability crisis”.  In short, this crisis is measured by plummeting rent prices in high-wage counties such as Middlesex county- my native county, Santa Clara County in California, and Kings County in New York. Contrasted with rising wages in lower-income counties, such as Shelby County in Tennessee, Wayne County in Michigan, and DeKalb County in Georgia.  This has begun to hurt those who make a lower wage as their education or wage level has not increased at the same rate as the rent prices in these counties.  Wolf Richter of Wolf Street describes the problem succinctly;

“What has essentially taken place is a shift of renters from the most affluent counties to the less affluent counties, and once that shift started gaining momentum, rents surged in those receiving counties. Some of these people who moved retained their jobs but had shifted to working from anywhere; and they brought their high household incomes with them, and they’re used to the much higher rents in their expensive markets, and they’re bidding up the rents and they still think they’re getting a deal. But at the receiving end of these shifts are renters with relatively modest household incomes that now have to compete with an influx of renters with high household incomes, and they’re now facing massive and unaffordable rent increases.”

Part of this drive has been from an unlikely culprit; the working from home trend.  What started as a necessity with COVID-19 lockdowns has slowly started to become the norm in everyday business positions.  However, this trend is typically restricted to white-collar jobs that are focused more so on mental capacity over physical traits.  This means that those at the higher end of the income spectrum have more mobility without decreasing their ability to work and remain employed.  This brings another problem to the forefront; companies and corporations no longer need the large skyscrapers that dominate American skylines.  Recently, the esteemed Cushman and Wakefield firm published a research study that outlined the potential decline of American office space.

“The pandemic has forced organizations to allow widespread WFH. The results have shown that flexible, remote work has benefits. Workers themselves reported a preference for this kind of flexibility and continue to assert that preference today, despite also having a desire to be in the office at least some of the time. Further, executives report that they are planning on implementing more flexible work practices, including greater ability to work from home post-COVID-19.”

Obviously, this doesn’t mean that every business will allow everyone to work from home all the time, however, with increased automation taking away minimum wage jobs and rent prices increasing in those areas, it could lead to unwanted social change. For that perspective, we need only to look back at Imperial Russia and the conditions that led to her transformation into the murderous Soviet Union.

In her day, around 1905, Imperial Russia’s economy was largely based on agricultural production and an agrarian lifestyle.  Autocrats still owned large estates and sharecroppers tilled the soil, a practice that was seemingly obsolete in the rest of Europe. This created a societal divide, where a small handful of elite landowners held great amounts of wealth and political power, while the common man wasted away in the fields.  Yale Economist Andri Markevich explains this situation:

“In 1897 Russia looked relatively poor in international comparison. Russian GRP per capita was only about a quarter of the UK – the most wealthy country in that time; about a third of the US and about 40 percent of Germany and France. It was very similar to GDP per capita in Japan. National income within empire was distributed quite unequally, with the capital being substantially richer than the other provinces, like Moscow in modern Russian Federation. GRP per capita in Saint-Petersburg province was higher than average GDP per capita in any other country in 1897.”

Similarly, the current wealth gap in the United States has led to one of our greatest social divides.  While we do not have the same sharecropper and social caste system that Imperial Russia did at the turn of the 20th century, the automation of manual labor and the loss of manufacturing jobs have played a part in eroding the middle class, and when we add on the current working from home trend that has allowed the wealthiest to move into counties with low tax incentives, we can see a future in which radical politics can take hold. 

The driving force behind the rise of totalitarian societies typically starts with a lower class that feels mistreated by the elites.  All that is needed to spark a movement is a charismatic leader and a social incident.  For now, we do not have a leader on either side that sparks passion in the mass of people that are being left behind by changing business trends, however, we are not without social incidents.  This has undoubtedly created a precarious situation for the United States both socially and economically that no one seems to want to address.  While I do not personally have the capacity or desire to fix these issues or trends, I write to you in hopes that you may spark an idea in your own mind that can ease the social pressure that will only increase in the coming years.

To Your Creation and Potential,

Kevin Prendiville