They can't, but we can

Submitted by John Stapleton on January 21, 2014 - 7:49am
So why do we want the poor to eliminate poverty themselves?

"Canada does not accept recommendation 17 or the related recommendation ... to develop a national strategy to eliminate poverty. Provinces and territories have jurisdiction in this area of social policy and have developed their own programs to address poverty. (1)" – Federal Government statement - 2009 

On the Canadian Heritage website, the Canadian government’s response to the Universal Periodic Review of Canada could not be clearer.

The federal government owns, controls, administers or otherwise funds over 80% of Canada’s income security programs that greatly influence who is and who is not poor. But they have just two things to say: we don’t need a national strategy and the provinces and territories have jurisdiction.

So could the Ontario government go it alone?

The simple answer is ‘yes’ but it could use some help from the federal government – more about that later.

Let’s take a look at how much money it would take to bring  everyone out of poverty in Ontario. It sounds like a lot but it’s actually not that much. Former Senator Hugh Segal got me thinking when he said the up-front price tag to eliminate poverty in Canada would be about $30 billion. (2)

Ontario’s population comprises 39% of Canada’s population making its nominal share about $11.7 billion. But Ontario is a bit more well to do than the rest of Canada and our seniors are better off than seniors in other provinces. (3)

I put the cost at a minimum of about $7.4 billion in 2011 and $7.5 billion in 2013. Perhaps it’s a bit higher. The following table shows how I arrive at that figure for 2013 using the after tax low income measure (LIM). (4)

These are my lowest ‘back of the envelope’ numbers. The social assistance numbers reflect current stable caseloads. The working poor are estimated based on my Working poverty piece for Metcalf. The seniors’ poverty is based on several estimates of seniors’ poverty and my Retiring on a low income series. The seniors’ numbers are the most speculative due lack of data on seniors with partial OAS.

There are no program design elements taken into account in these calculations. They simply assume the transfer of dollars to poor people (however undertaken)  in the amounts they would need to take them up to the after tax LIM. The gaps are based on the dollar gaps for typical working poor, social assistance and seniors. The cost of child poverty is not separated out as a separate number.

Other factors (e.g. raising the median, service requirements, debt and assets) would all have an effect on real poverty rates and the amounts required.

 

 

It is important to realize that $7.5 billion is equal to an increase of 5.8% to the Ontario Provincial budget or 1.1% of Ontario’s share of GDP (6).  This makes it hard (but not impossible) for Ontario to go it alone.

But let’s assume for a moment that Ottawa would pay its fair share of the cost. The federal government is on track to spend $282 billion this year (7) and given that Ontario’s poverty elimination bill comes to 25% of Canada’s bill, Ontario’s nominal share of federal funds would come to about  to about $3.0 billion  in round numbers taking Ontario’s share down to $4.5 billion.

This is a good deal, since under the Canada Assistance Plan, the federal government contributed 50% to programs for the poor. Under this scheme, they would only pay 40%.

The $4.5 billion Ontario share would now represent just 3.5% of the Provincial budget and a measly 0.6% of Provincial GDP.

But the more interesting point is that you get something back for the money. Savings to the health care system, the criminal justice system, and other support and services could be very high. I was part of an advisory group to a report called The Cost of Poverty (8) that estimated the cost at a minimum of $10.4 billion a year in 2008.

This report also noted that:

“Poverty has a very significant total economic cost in Ontario. When both private and public (or social) costs are combined, the total cost of poverty in Ontario is equal to 5.5 to 6.6 per cent of Ontario’s Gross Domestic Product (GDP).”

And

“Federal and provincial governments across Canada lose between $8.6 billion and $13 billion in income tax revenue to poverty every year; in the case of Ontario, Ottawa and Queen’s Park lose a combined $4 billion to $6.1 billion.”

In 2014, the $4 billion to $6.1 billion figures creep up to savings of $4.3 billion to $6.5 billion.

In other words, governments would eventually recoup almost all the money they would spend. That’s a good deal!

But there’s more. A minimum wage increase to $14 an hour would virtually eliminate the $1.16 billion price tag of working poverty in Ontario as it would add over $5,000 a year to full time minimum wage paycheques covering their poverty gap of roughly $4,000 a year.

This means the overall bill would be even lower and that eliminating poverty would be one of the great bargains of the new millennium.

Just think. We could eliminate poverty in Ontario, pay for the investment, reduce inequality and have a better society and nation.

But poverty persists – not because it wouldn’t be economical to eradicate it. We just seem to want poor people to do it on their own. The idea is that poverty is an individual deficit that the poor should overcome ‘on their own’.

Imagine if we took that attitude when it comes to health care, policing or firefighting. No hospitals or doctors, no police or fire halls. If you get sick, it would be up to you to cure yourself, if you need protection, hire your own and if your house catches fire, put it out yourself. 

We pay an awful lot for our collective attitudes towards many things: things like homelessness, crime, and poverty. Governments are sending all of us a very large invoice to ensure that the poor remain responsible for the elimination of poverty largely on their own.

But if you do want the poor to eliminate poverty on their own, I hope you don’t mind paying to get your way…

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