The post-COVID recovery: a rising tide for some, a tsunami for others
We don't talk a lot about class in this country, perhaps it's time to start
A remarkable mea culpa popped up on my morning news peck-and-hunt a few weeks ago; the head of the Canada Mortgage and Housing Corporation admitted that his institution was wildly off in its prediction of a COVID-19-inspired housing correction.
Like most millennials, I've been divining bird entrails to predict any sign of the long-imminent Canadian housing price crash. Once, I did this with hope — now, with fear. And so this admission by Evan Siddall was met with a mix of both exasperation and schadenfreude.
"We never pretended to have a crystal ball," Siddall said.
Not only did the feared 9 to 18 per cent housing correction never come to pass — the housing market is booming. Even in economically struggling areas like Alberta.
As is usually the case with errors, the why of the wrong is more interesting than the fact of it.
Siddall said the CMHC couldn't predict the surge in demand for larger properties from a class of homeowners who suddenly found themselves perpetually trapped in a shared home office with screaming children and irritated spouses. Meanwhile, the pandemic-driven economic decline has been entirely focused on low-wage workers who were renters anyway.
Two different realities
To put it more bluntly; if you were well off going into COVID-19, 2020 has likely been fabulous for your family's finances.
You probably made a smooth transition to working from home, doing a job that was never threatened. Cutting commuting, vacations, restaurant and clothing purchases has been great for your savings account.
Your investments have held. You've probably put enough money in the bank to make an extra payment on your mortgage; you may even have enough set aside to go for the bigger house. After all, why live in a tiny box in a deadened city if you're telecommuting anyway?
If, on the other hand, you went into this pandemic as a member of the precariat — dependent on uncertain hourly jobs, or running your own small business — your relationship to the last year has been something else entirely.
The pandemic has not only threatened your balance sheet, but your long-term ability to function in the world as you once knew it.
Investments? Try debt that is about to become harder for you to service. You were never in a position to buy a new house, provided you own one. Your reality doesn't show up in stories about a housing boom, because you were never in that market to begin with — and you probably won't be for the foreseeable future.
"There has been data that Statistics Canada put out in the last week, and as a result we're hearing a lot of economists talk about how Canadian bank accounts are flush with cash, household savings have never been higher," said Jennifer Robson, associate professor of political management at Carleton University. "That is glossing over really important differences in terms of the distributions, here."
High income people didn't take a hit from COVID-19. But lower income people — and that disproportionately includes women, visible minorities, and young people — they lost jobs that aren't coming back.
As governments roll back temporary income relief programs, that reality is going to begin to look a lot more stark.
Take a look at this data point from Car and Driver magazine: even though total sales on cars dropped by almost 15 per cent in 2020, dealership profits rose by 50 per cent.
How is that possible? Reduced supply of new vehicles was part of it. The other: the cars that were purchased over the last year were more expensive models.
The 'K-shaped' recovery
According to the report, sales of cars that cost between $80,000 and $90,000 grew by 91 per cent in the last quarter of 2020. By comparison, the sales rates of cars that cost less than $20,000 collapsed.
This is an artifact of what's coming to be known as the "K-shaped" recovery, a term that is skipping over from the business pages to the A-section.
It's a clever way of describing the shape of a graph in which certain sections of the economy are booming, while others struggle.
Some industries, like online retail or housing, are going gangbusters. Others, like hospitality and travel, are immolating. We see this divergence in personal finances as well. In short; the rich are getting richer, and the poor poorer.
The post-COVID-19 recovery isn't the rising tide. It's a tsunami, lifting the yachts and cruisers 30 feet above sea level while smaller explorers are picking at the newly barren beach in search of pretty shells.
But the wave is going to roll back, and we don't yet know what dry land is going to look like when it's over.
Most of the discussion of the "K-shaped" recovery has focused on what is happening in the U.S., but even though Canada's income inequalities are nowhere near as stark, Stephen Poloz, the former governor of the Bank of Canada, suggested late last year that Canada was on a similar trajectory. And, indeed, why would it not be?
Every trend eking its way into the public consciousness before COVID-19 has been exacerbated and catalyzed by the pandemic. This will be no exception.
We don't talk a lot about class in this country because, for the most part, it's not something we've needed to talk very much about.
We consider ourselves a broadly egalitarian society with a high degree of social mobility, a healthy safety net, good schools, low interpersonal conflict and so on.
I think we should prepare ourselves for the possibility that some of these assumptions are ending.
The chasm between those on the top end of the K and those on the bottom end is going to grow larger, and more difficult to cross post COVID-19. And a lot of what is happening around us, both politically and socially, will become inexplicable unless we understand the gap.
A class distinction
Imagine, for a moment, how two sides of the same K are going to interpret mask requirements, or stringent lockdown guidelines; to the at-home class, these are minor and reasonable requirements to stop the spread of a deadly pandemic. To the other, the government-mandated responses to the pandemic are as harmful, or more harmful, than the disease itself.
The distinction is one of class and perception, not personal morality.
Or, for another example, take the rhetoric that was, until recently, spouted by the Davos-set: Justin Trudeau promising "The Great Reset." To "Build Back Better."
I will note that this language no longer seems to be en vogue, and no wonder. How many people on the downward slope of the K felt that all these resets and rebuilds included them?
Are their businesses, their lives, and their values fair collateral damage in our new and better post-pandemic world? The one in which we get to work in bigger houses on leafy streets with comfortable home offices.
There is something that those of us dictating the narrative of this pandemic — we who thrive in media, academia, and the civil service — need to learn from this. We are on one side of this letter, and we are increasingly not living in the same world as the other.
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