Climate impacts exacerbate inequality
An update on climate change and economic inequality
In June 2022 I published Climate change will dramatically worsen inequality, in which I wrote:
Place will not be the only driver of unequal climate harms. The more time I spend reading and thinking about climate change the clearer it is that money, along with location, will be the critical dividing line. Most people and communities with enough money will be able to protect themselves from the worst climate impacts, while impoverished people and communities around the globe will be more exposed and have a more difficult time finding shelter from literal and figurative storms.
In addition to the truly impoverished, working and middle class families in the U.S., Japan, France, and other developed countries will also be on the wrong side of climate change’s financial impact - especially those who live in climate vulnerable areas.
Here’s how I explained the significance of wealth in preparing for and reacting to serious climate impacts (quoted material in italics):
Homeowners insurance – Perhaps the most important defense against the financial risks of climate change is home insurance. But not everyone can afford it. When climate disasters hit areas where fewer people have home insurance, the damage to communities can be devastating, and sometimes permanent. In addition, insurance policies vary in quality. The better policies cover more and cost more, putting them out of reach for lower-income homeowners, who are left with thinner coverage that leaves them exposed. As insurance costs rise to reflect growing risks from climate-intensified weather events, this “insurance inequality” will continue to grow.
Home ruggedization – Homes themselves, the physical structures, can be more climate durable or less. Homes can be made more durable, i.e. ruggedized, with a range of improvements like better drainage, tighter connection between frame and roof, double-paned windows, fire resistant exteriors, sump pumps, and much more. A climate ruggedized home provides not just physical safety, but financial security, as well. That’s because even if home insurance pays out when a climate disaster damages a home, the owner’s rates will rise as a result. The surest financial investment is having a structurally strong and climate resilient home in the first place, and that costs money.
Evacuations – As life-threatening wildfires and hurricanes become a more frequent feature of life in vulnerable places, the annual cost of evacuations will increase. Evacuations cost money, for gas and especially lodging. For those with comfortable finances the expense is relatively minor, but for households with little savings it can bite. (This hints at another kind of climate infrastructure we need more of: temporary shelters for evacuees.)
Household agility – Agility is how quickly a household can act when speed is beneficial. Climate change will create a variety of situations where people who can react quickly will thrive, while those who can’t will suffer. We just discussed one example: evacuations. Another situation is the need to quickly sell a home in a climate vulnerable place when the market starts to turn down.1 Households with more money can worry less about getting the best possible price for their home, or whether they’ll be able to find a new place to live. But those whose wealth is mostly home equity may be hesitant to sell in general, and especially disinclined to sell quickly. But waiting will only hurt. When housing bubbles in vulnerable places start to deflate, minimizing financial harm will require selling quickly. (Another factor, distinct from wealth but often correlated with it, is people whose jobs can be done remotely have more flexibility to sell their homes and move on short notice without jeopardizing their jobs.)
The above are all qualities of individual households, but the relative wealth of communities will matter, as well:
Paying for infrastructure upgrades – [W]ell-off cities and counties have the financial wherewithal to pay for smaller infrastructure projects directly, and to borrow to finance larger ones. This includes the flexibility to raise local taxes, the strong credit rating to finance larger projects at low interest rates, and the political influence to capture a disproportionate share of federal and state funds. Infrastructure is the key to climate adaptation so these advantages are extremely consequential.
Whether wealth is more important than location or vice versa is the wrong question. The way to understand it is that the two factors operate in tandem. We could model this with a 2 by 2 grid, with Higher Wealth/Lower Wealth on one dimension and Climate Durable/Climate Vulnerable area on the other:
Those with more wealth in climate durable places are the most secure
Those with less wealth in climate vulnerable places are the most at risk
To this list of advantages well-off people have in the climate change era, we can add the amount of GoFundMe support they are likely to receive in the case of climate hardship. In an article called GoFundMe Is a Boon for Disaster Survivors. Especially the Wealthy Ones., the New York Times described an interesting study:
Researchers examined donations to hundreds of people who lost their homes in the 2021 Marshall fire in Colorado, which destroyed more than 1,000 dwellings near Boulder. They found that those with household incomes above $150,000 received 28 percent more money, on average, than those with incomes below $75,000.
The authors concluded that the explanation largely revolves around social networks: Wealthier disaster survivors tend to be connected to more people, and those people often have more money to give.
As climate impacts grow, this is becoming a larger issue.
Weather-related disasters pushed more than 3.3 million American adults out of their homes in 2022, census data show. Of those, at least 1.2 million people were out of their homes for a month or longer.
The number of people impacted by climate disasters will rise in the years ahead.
It’s not just GoFundMe where discrepancies based on wealth and income emerge, it’s also in federal disaster relief. Multiple studies show essentially the same pattern: after natural disasters, those with higher levels of wealth receive more support than those with less. Due to a mix of rigid application requirements, FEMA policies that have advantaged homeowners over renters (but have recently been updated), and IRS tax relief rules that inherently - because those with higher incomes pay more taxes - deliver greater benefits to those with higher incomes, federal disaster relief ends up helping the well-off significantly more than those in the middle and bottom of the income and wealth continuum.
These same factors also increase racial wealth disparities. One study, called Damages Done: The Longitudinal Impacts of Natural Hazards on Wealth Inequality in the United States, summarizes its findings as follows:
[A]s local hazard damages increase, so does wealth inequality, especially along lines of race, education, and homeownership. At any given level of local damage, the more aid an area receives from the Federal Emergency Management Agency, the more this inequality grows. These findings suggest that two defining social problems of our day – wealth inequality and rising natural hazard damages – are dynamically linked.
It remains to be seen whether FEMA’s overhaul of its policies will unwind this historic advantaging of the rich over the poor. If it does, perhaps there’s hope that post-disaster support won’t forever be a function of the wealth of one’s social network.
One of my goals for 2024 is to write shorter posts, both in order to write regularly and as a forcing mechanism to be brief and to the point. So I’ll leave it there.
This is somewhere between ethically complex and ethically dubious, but it will be a reality in the years ahead so we can’t ignore it.