Poverty costs Alberta up to $9.5B a year, report suggests

CalgaryHerald.com – business – Expenses for social services, subsidies extra
February 6, 2012.   By Bryce Forbes, Calgary Herald

In a province where billiondollar energy deals happen regularly, a Calgary agency has tried to put a price tag on the cost of poverty.

In a report being released today, Vibrant Communities Calgary estimates poverty costs the Alberta government between $2 billion and $2.4 billion and the overall Alberta economy between $5.1 billion and $7.2 billion – for a total of up to $9.5 billion annually.

“This big $9 billion number doesn’t include the cost the government pays in social services or subsidies,” said Dan Meades, director of Vibrant Communities Calgary. “We were kind of surprised this was the number of just the external cost of poverty and it’s that big. We were surprised nobody fixed this yet.”

Specifically, poverty costs the government $1.2 billion in health care, between $636 million and $1 billion in tax revenue, and $96 million in crime. It also costs the overall Alberta economy.

The report, however, suggest it’s difficult to determine the exact cost of poverty, particularly since it doesn’t take into account social services, welfare, tax or fee subsidies, affordable housing and other government costs.

“As with other provincial studies of this kind,” says the report, “our purpose is not to provide a definitive price tag on the cost of poverty, but to prove economic evidence of the scale of the costs associated with poverty in public services like health care, crime, and in lost economic opportunities for children and people living in poverty.”

One of the first challenges in the report, however, is determining the official poverty line.

Because there is no official poverty line in Canada, each report uses different numbers.

For the basis of Vibrant Calgary’s report, they used the Low-Income Cut-Off model, which includes families who would have to spend a greater proportion of their income on the basics than the average family in their community. Using that model, there are approximately 388,145 people living in poverty, which works out to about 10 per cent of Alberta’s population.

However, the Fraser Institute defines poverty as not being able to meet your basic needs in life.

Senior economist Niels Veldhuis says there are approximately 32,000 Albertans living under that burden where they can’t meet those basic needs – less than one per cent of the population.

“We have to be extremely careful on what we are deeming to be poverty,” he said. “Most of the folks who use poverty numbers use them incorrectly.”

Veldhuis said studies show that 45 per cent of people in the low-income cut-off move into a better position within five years.

“If you are in the bottom 20 per cent, more likely than not, you are a young individual,” he said. “You are either uneducated or (don’t have) a lot of experience, and a lot of those folks are getting education and experience.”

Meades, though, stands by the methodology of the report.

“It’s a difficult piece of work, but the methodology is really well proven,” Meades said. “It’s been done in other provinces . . . We didn’t come up with the methodology on our own.

“Doing the work was tough, but we had the methodology that is pretty irrefutable.”

Jacqueline Ismael, a University of Calgary social-work professor, says the report is on the right track, although likely on the conservative side.

Although she agrees the measurement of poverty is difficult, Ismael said it was time for such a study.

“Poverty is increasing, we know it is increasing,” she said. “The poor are getting poorer and the rich are getting richer.

“Whether we measure it widely (like Vibrant Communities Calgary) or narrowly (like the Fraser Institute), their numbers are increasing and conditions are getting worse off.”

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