Charities under pressure

Posted on December 10, 2011 in Social Security Debates

Source: — Authors: – opinion/editorialopinion
Published On Fri Dec 09 2011.   Craig Alexander

As the year draws toward a close, there is a call for increased generosity through charitable donations. Financial contributions are badly needed by Canada’s charitable sector, which is struggling under strong demand for their services.

This plea may seem odd, given Canada’s recent economic performance. The economy has recouped all of the output that was lost during the recession, including the overall number of jobs, and has advanced moderately further. Furthermore, we’re not facing the same severe challenges as in Europe or in the United States. However, this better relative performance masks the fact that the economic recovery has not lifted all Canadians equally and many are being left behind.

The national unemployment rate is 7.4 per cent (equalling almost 1.4 million Canadians), well above the pre-recession low of 5.9 per cent. This is compounded by a declining trend in labour force participation, an increased duration of unemployment close to double what it was before the recession, and a three-year decrease in the annual pace of hourly wage growth from 4.4 per cent to an average below 2 per cent this year.

The macroeconomic statistics can’t convey the stress that many Canadians are experiencing. So, let’s look at some stats that do:

Food Banks Canada reported a shocking 851,014 people received sustenance from a food bank in March 2011, virtually identical to 2010, and 26 per cent higher than before the 2008-2009 recession. Reported cases for social assistance in Ontario also jumped more than 30,000 in the past 18 months, proving that despite the economic recovery, there are many in need.

More troubling, the economic prospects ahead are not going to alleviate the current heightened demand for charitable services. The global economy is headed into a period of weaker growth. Europe is going back into recession, while the U.S. economy is fragile. Emerging market economies are slowing.

Canada is not immune to these economic contagions. In the coming year, and under a scenario where slow economic growth continues, the unemployment rate is likely to rise by about half a percentage point. This will put more pressure on food banks and other charitable services that are struggling to make ends meet at the moment.

Unfortunately, while demand may rise, the supply of charitable support will likely prove constrained. The majority of charities rely heavily on government financial support, and governments across Canada are turning their attention to deficit reduction. This is responsible fiscal policy. However, it means that public officials will have to make tough decisions on how to prioritize their limited funds. Charities will have to fight hard for the financial transfers that are critical to sustaining their activities.

Individuals can make a difference. The fact is that the bulk of Canadians experience a very high standard of living. The end of the calendar year is a good time to share some of that good fortune with those serving the less fortunate.

There are roughly 3.5 million Canadians living in poverty today. That is close to one in 10. Surely, the other 90 per cent can lend a helping hand. Charitable giving is truly good for the donor as well as the recipient. And the tax credit on donations made before the end of this year means that governments are providing a generous incentive to give, whether that comes from money, stocks or even time in the form of volunteering. Don’t underestimate the difference you can make.

Craig Alexander is senior vice-president and chief economist of TD Bank Group.

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