Landscaping the Issue of Economic Inequality: An Interview with Dr. Krishna Pendakur

Posted on Feb 11, 2016 in Creative Artists Series | 4 comments

By Sean Yoon

Photos by Noriko Nasu-Tidball

Born and raised in Kerrisdale through the late 70s, Dr. Krishna Pendakur can be described as someone whose work speaks about his passion towards helping this country, this city he grew up in and this world in which economic inequality represses the poor. Dr. Krishna Pendakur is currently a professor of economics at Simon Fraser University. His work in economics fundamentally seeks to develop a toolkit to describe and measure efficiently the landscape of social issues impacting our well-being such as economic inequality, discrimination, and poverty.

It was during his bachelor studies in sociology at UBC when Krishna ventured towards a 4^th year course title in economics which was welfare economics. This course introduced the economic aspects to the issues of social welfare and economic inequality that Krishna had been interested in for a long time. His interest in economics grew, eventually leading to his doctoral studies at UC Berkeley. Krishna’s research at the time was focused on the distribution of income vs. the distribution of consumption and on the measurement of household characteristics such as the cost of raising children, which you need to know in order to measure the distribution of income or consumption. In particular, if you want to measure inequality and the data you have is household-level data, then you need to have some way of comparing apples and oranges, like families with children to families without children. They have different needs so if they have more money it doesn’t mean that they’re better off; you have to have a way to scale or deflate household incomes per household characteristics.

Much of Krishna’s research was done in collaboration with his brother Dr. Ravi Pendakur, a professor in the Department of Public and International Affairs at the University of Ottawa. They wrote and published around 10 papers together, where much of it has to do with developing the landscape of inter-ethnic inequality in Canada. Among these is their renowned paper published in 1998 titled, “The Colour of Money: Earnings Differentials among Ethnic Groups in Canada.” This paper began a form of literature on inter-ethnic inequality in Canada that has established what it looks like and how it has evolved over time across different ethnic groups, migrant groups, age groups, time periods, and across provinces. Essentially, it argues that inter-ethnic income inequality exists in Canada and that it can only partially be explained by immigration. A chunk of that inequality cannot be explained by the fact that many ethnic minorities are immigrants, as it is relevant for Canadian-born ethnic minorities too. Krishna notes that at the time when people talked about inter-ethnic inequality, it was all discussion of migration, but Canada even then was a special case in that it had a lot of ethnic diversity among its Canadian-born population. Because of this, Krishna and Ravi were able to separate inter-ethnic economic disparities from migration induced disparities and also to separate it from the discussion of blackness and the legacy of slavery in the US.

Krishna’s research interests have also been aligned with exploring the distinction between consumption versus income as measures of material well-being. One of the things he has discovered in the case of Canada is that if you use income measures of poverty, close to a third of low-income households own their homes and so he asks, is that really a good measure of poverty then? If you instead flip it over and think about trying to measure poverty by looking at the consumption of people’s households and imputing the consumption, or the rental flow that people get from accommodation, it gives you quite a different picture of what the distributions of well-being and material poverty looks like.

In the more recent paper he published in 2015 with Sam Norris titled, “Consumption Inequality in Canada, 1997 to 2009,” it states that consumption inequality in Canada went up from the late 90s to mid-2000s and then seems to have stabilised since the mid-2000s. In contrast, in a 2013 paper also done with Sam Norris on poverty rates, they found that consumption poverty rates have come down since the early 2000s. This brings to the foreground another point, which is that inequality and poverty are completely distinct objects. Krishna explains that inequality is the distance between rich and poor, while poverty is the fraction of the population that falls below some well-defined threshold. It’s the distance between rich and poor that characterizes inequality. If you were take the whole distribution of people and make them all richer, the distance remains the same, but the amount of poverty would be reduced to zero. These papers show that this is what has happened over the mid-2000s in Canada. That the distribution has enriched by a bit, which has reduced the amount of poverty, but has not really changed the amount of inequality.

And yet issues of homelessness still persist in Vancouver today. In a situation where shelter takes up roughly 30-40% of consumption for most people in Vancouver, when we talk about the homeless who are deprived of shelter, we don’t tend to describe those facing poverty as the clothingless, or the foodless. So the question we need to explore is why is there so little financial support for the shelter market? Krishna explains that the rented shelter market is different from the market for other necessities like food and clothing in that you can’t shave your shelter expenses down close to zero. You CAN shave clothing costs way down by shopping at thrift stores, and you CAN shave down food costs by shopping at a discount food store. But when it comes to shelter, you can’t do that because there are technical and legal problems with tiny, terrible rental shelters. So when you’re poor, you get stuck in a bind, where you wish you could pay 100 dollars a month worth of shelter so that you could have more food and clothing. Instead we are stuck in a world where you must choose between 500 dollars a month for shelter, or not have it at all.

“People often say that the reason we have homelessness is that there aren’t enough homes, and there’s a truth to that. This can be described as a supply-side problem, but if you describe it as a supply-side problem, you have to be very careful about what supply you’re talking about. What we want to have an expansion of is the supply of low-cost rental accommodation. Creating a bunch of low-cost purchase condos has a very small effect on the low-cost rental market.”

Compounding the problem of homelessness is another well-known issue that Vancouver has been facing for over a decade, which are the high land and housing prices. Krishna explains that the issue is partially driven by the fact that we have an export market in condos and houses, which has negative effects on the local population. And so, we would have a better chance of making a dent on rental prices if we took a stand on foreign purchases of housing. For example, he asserts that if we had a property tax that foreign owners were exposed to that domestic owners weren’t (there are many ways to do this completely legally), it would take some steam out of the housing market.

(From Left) Sean, Dr. Pendakur, Alan (videographer)

“The provincial government could implement a property tax, it’s in their jurisdiction. But to do it right, they would need the cooperation of Canada Revenue Agency (CRA) because you would want to integrate it with the income tax system. You’d want to say well here’s your 1% property tax bill, but if you paid income taxes, it counts against it. It could be done and if you think about what a 1% property excise tax would do to property values, the present value of a 1% a year tax is perhaps 25%, so it would take a 2 million dollar house and reduce its value to 1.5 million, which is not nothing. It would make a difference.”
The last question I had for Krishna was in regards to the situation of the Indigenous poor in Canada. Like trying to understand poverty among African Americans in the United States, Krishna states that ultimately, this is about colonization and the near extermination of Indigenous peoples over Canada’s long history. Following that, it’s about the history of torture through policies like the reserve system and the residential school system.

“These policies of torture leave a very long legacy and all kinds of First Nations people are dealing with that every day and so it’s a big set of problems, but I think in a lot of ways we’ve stopped being intentionally evil so that’s great. But that’s not really enough, de-vilifying is really just the first step. The natural levers an economist would look at for this population is improving the quality and quantity of K-12 education, and even K-5 really because dropping out starts at grade 6 for First Nations people. So even if the provinces just took seriously the bilateral obligation of people and government to keep kids in school until grade 10 would be a big deal.”

Later this year in September, Dr. Krishna Pendakur will be heading over to Harvard University for a 9 month teaching opportunity. For more information check out: https://www.sfu.ca/sfunews/stories/2015/krishna-pendakur-awarded-visiting-professorship-at-harvard-unive0.html