Opportunity in Tucson
Poverty is costly, and not only for Tucson's poor
Part three in a five-part series
Think Tucson is a city of promise and opportunity? Then odds are, you aren't poor.
Even before the COVID-19 pandemic struck in early 2020, Tucson had a higher poverty rate than the nation, Arizona, and 10 of the 11 cities with which UA researchers frequently compare Tucson. With the economic fallout from the coronavirus most seriously affecting the poor and threatening to endure for at least another year, there's every reason to believe poverty in our community will become even worse.
Even without the virus' further depressing of the economy, our rough estimate is that poverty costs the Tucson economy nearly $2.2 billion every year.
Tucson's rich cultural heritage and extraordinary outdoor lifestyle don't translate into a high quality of life for everybody. That's because Tucson and the nation perpetuate poverty by offering much less opportunity to the poor.
"Children from poor families are twice as likely as children from other families to wind up at the bottom of the income distribution," says a 2014 Brookings Institution paper aptly titled, Poverty and Opportunity: Begin with Facts.
En español: La pobreza es costosa y no solo para los pobres
"For a nation that prides itself on the opportunities we offer to 'the tired, the poor, the huddled masses,' hardly anyone thinks we should be satisfied with the opportunities we offer to poor children," adds Brookings.
That Tucson's poor children have less opportunity is emphasized in Tucson's daunting poverty rate. In 2018, Tucson saw 17.8% of its residents living in poverty, a percentage higher than in Denver, Salt Lake City, Austin, Phoenix and six other western cities with which researchers at UA's Economic and Business Research Center compare Tucson.
And despite a slight improvement in 2018 over 2017 – the long-term trends are going in the wrong direction. The poverty rate of 17.8% in 2018 was up from 14.7% in 2000.
Even more concerning are the poverty rates for children. In 2018, children under the age of 18 in Tucson had a poverty rate of 25.1% — higher than the state of Arizona with a rate of 22.8% and the nation with a rate of 19.5%.
Worse, female-headed households with no male present and at least one child under 5 years of age had a 36.6% poverty rate.
With a significant percentage of kids who grow up in poverty remaining in poverty in adulthood, these trends should be of great concern to Tucsonans.
Add to that the grim fact that in January – before the onset of the coronavirus pandemic – George Hammond, director of the University of Arizona Economic and Business Research Center, estimated that 154,000 Tucson jobs are at a "high risk from automation during the next 20-30 years." That is 4 out of 10 jobs that are threatened. While new jobs will be created, Hammond added in obvious understatement: "Job disruptions are coming."
Poverty resulting from insufficient opportunity clearly has important costs other than economic costs both to the individual and to the community. But the economic costs are so substantial they cannot be ignored.
"There is abundant evidence in research, and in front of our eyes every day, that poverty is linked with poor physical and mental health, joblessness, lack of education and skills, developmental difficulties in children, crime, homelessness, racial discrimination and other issues," writes the Canadian National Council of Welfare Reports in "The Dollars and Sense of Solving Poverty..
These problems result in indirect costs to society, such as for the high use of emergency wards and additional expenditures for law enforcement, the courts system, remedial education and other expensive services. Poverty also has indirect costs to individuals and companies because of the increased need for insurance and security. Worth noting is that these indirect costs are in addition to the direct costs of poverty through federal and state programs of governmental assistance to the poor.
In short, while poverty's toxic effects fall most heavily on the poor, its cost is borne by the entire community.
Just what the cost is to the community can be calculated, and Pima County government is actively seeking consultants to do the research and perform the calculation.
In the meantime, it is possible to determine a rough estimate for Pima County by relying on the work of seven Canadian provinces that calculated the cost of poverty. They used an ingenious method: They estimated what the effect would be if the bottom quintile of income-earners were to have their incomes increased to the level of income-earners in the second quintile.
In the Canadian calculations, the costs average more than $6,100 per household. Helpful for our analysis because of the currency differences between Canada and the U.S., the provinces also calculated the costs as a percent of GDP. The figures ranged from 4 percent to 7 percent of GDP, and the average was 5.62%.
Take one step further and multiply Canada's average of 5.62% times Tucson's 2018 GDP of $40 billion, and the result is Tucson's cost of poverty is approximately $2.2 billion per year.
For perspective, that $2.2 billion is nearly as large as the $2.6 billion that ASU recently calculated is contributed to Arizona's economy annually by defense-giant Raytheon with its nearly 13,000 employees and a statewide network of more than 500 suppliers.
The $2.2 billion estimate of Tucson's cost of poverty is a rough estimate. However, the 5.62% of GDP rate used to calculate it is consistent with research published in April 2018 by Washington University's poverty expert Mark R. Rank. He estimated the economic cost of childhood poverty in the United States at 5.4 percent of GDP, surprisingly similar to the Canadian estimates.
If nothing else, the $2.2 billion estimate shows that it would be worthwhile to actually calculate the cost of poverty in the Tucson metro area.
When consumer spending constitutes 65 to 70 percent of the economy, as it is in the United States, any significant reduction in potential consumer spending is felt widely – as the coronavirus crisis is making clear. By foregoing the economic benefits of significantly reducing poverty, Tucson is paying a high price for its failure to provide opportunity to all its residents.
The complete 'Tucson Opportunity' series
Part 2: A tale of two Tucsons
Parte 1: ¿Oportunidad en Tucson? No tanto
Parte 2: Cuento de dos Tucson
Jim Kiser is a former editorial page columnist and editorial page editor for the Arizona Daily Star. He has undergraduate and graduate degrees in education from the University of Arizona and an MBA from Stanford University.