In recent months, a view of the economy has emerged that’s more troubling than might be expected with unemployment near a record low.
A new Wisconsin Policy Forum analysis shows many people can barely afford their rent, with 46.7 percent of Wisconsin renters considered “rent burdened,” meaning more than 30 percent of their income goes toward rent and utilities. By this standard, they lack enough money to cover other expenses.
Locally, the figures are also worrisome. Rock County is 46.9 percent “rent burdened,” while Walworth County is at 50.8 percent.
The findings echo another statistic from the United Way: In Rock County, 42 percent of all households are either in poverty or at risk of not being able to meet financial obligations, despite people in those households having jobs. More concerning, this percentage has increased since 2014 even as unemployment rates fell during two years examined in the study.
Instead of all boats rising with the economic tide, we’re witnessing the marginalization of a large swath of the employed population. In today’s economy, the problem isn’t a lack of jobs but a lack of jobs paying enough to keep people out of poverty.
From previous economic cycles, we’ve learned to associate low unemployment rates with a strong economy, and politicians often cite monthly job reports (Wisconsin’s unemployment rate is 3 percent) as further proof of prosperity. But there’s a growing disconnect between our assumptions about what full employment means and the reality of many fully-employed residents.
This disconnect perhaps explains why Janesville has a dearth of new rental housing developments amid extremely low vacancy rates. Some developers say they won’t build here because rents are too low. But shouldn’t a booming economy push rents high enough to spur new construction?
The Wisconsin Policy Forum analysis provides a possible answer. It suggests many renters cannot afford rent at current levels, let alone the higher rates sought by developers.
To try to resolve this dilemma, the city of Janesville has turned to tax incremental financing—subsidies typically reserved for industrial sites—to encourage new rental developments.
In previous editorials, we’ve supported using TIFs for rental housing, but the implication is unsettling. If renters are struggling to pay the rent when times are good, what happens if they’re laid off from jobs that already pay too little?
A glimmer of hope appears in recent economic data. The tight job market is finally resulting in higher wages, which should help reduce rent-burden figures cited above. But given the nation is 108 months into an economic expansion and interest rates are moving higher, this bump in wages may be too little, too late.
Yes, many businesses and families are prospering as we’d expect during an economic expansion. But we as a community must acknowledge the economy’s inability to lift many of the employed out of poverty.
If this is what prosperity looks like, we’re reluctant to contemplate what the next economic downturn might bring.