Maybe now we can finally say it out loud — poverty is in decline

Posted on in Social Security Debates

Source: — Authors: – Opinion/Full Comment – A vast media-academic industry had grown up around the notion that poverty was steadily getting worse — and could not get better, absent radical changes in policy
Andrew Coyne

Pssst. Can I let you in on a little secret? Keep it under your hat, but — the poverty rate has fallen again. In fact, it’s at a new all-time low. Statistics Canada reports that the percentage of Canadians falling below the official poverty line in 2017 fell to 9.5 per cent, down from 15.6 per cent in 2006. That still leaves much room for improvement. But this is remarkable progress.

Of course, the official measure of poverty, known as the Market Basket Measure, has only been around for a few years. But an earlier, unofficial measure, known as the Low Income Cut Off, goes back much further. It, too, is at an all-time low, after a steady, two decades-long decline. Indeed, at 7.8 per cent, it’s barely half what it was in 1996.

So why do I call it a secret? Because for the longest time it was, if not impermissible to admit that poverty was in decline, certainly not the done thing. A vast media-academic industry had grown up around the notion that poverty was steadily getting worse, or leastways was not getting better — and could not, absent radical changes in policy.

That was at least a tenable position, when poverty was getting worse, as it was in the early 1980s and early 1990s — unsurprisingly, given the deep recessions of those two periods. But old habits die hard, and so the same story continued to be told long afterward, even in the face of a growing pile of statistical evidence to the contrary.

It’s a familiar pattern: remember the great crisis of middle-class stagnation, the basis of the Liberals’ winning election campaign in 2015? The same StatsCan release that shows poverty at an all-time low also shows median incomes at an all-time high — at about $60,000 (in 2017 dollars) after tax, fully one-third higher, after inflation, than in the mid-1990s.

The sources of this amazing success story are not hard to find — and no, it is not quite as simple a matter as replacing the Conservatives with the Liberals. The trendlines on both low and median incomes, I repeat, go back to the mid-1990s: when the economy, after the long recession, began to grow again.

It turns out — who knew — that poverty tends to fall, and incomes to rise, in periods of economic growth, such as we have enjoyed, almost without interruption, since then. Even the 2009 recession, a relatively mild one in Canada, barely made a dent in either trend.

Still, the Liberals deserve some credit for the continuing decline in poverty since they were elected. If the overall rate has dropped appreciably, it has fallen even more among children — especially welcome, given the lasting effects poverty can have on life chances. At nine per cent, it is down a third from just two years ago.

That’s almost certainly due, at least in part, to the Liberals’ first and most significant policy reform: the rationalization of several existing child benefits and credits into a single income-tested Canada Child Benefit, with increased amounts going to low-income families. It turns out — who knew — that if you give people more money, they are less likely to be in poverty.

It turns out — who knew — that poverty tends to fall, and incomes to rise, in periods of economic growth

That policy success is a repeat of an earlier triumph, the near-conquest of poverty among the elderly — just 3.9 per cent of those over 65 now live below the poverty line — thanks again to broad-based, income-tested support programs like Old Age Security and the Guaranteed Income Supplement. In effect, we now have a basic income guarantee for kids and old folks; all that remains, though admittedly the toughest part, is to extend it to people of working age.

But there is a third explanation for the progress against poverty. That is the choice of a poverty line that actually allows for the possibility of progress. As the name implies, the Market Basket Measure is based on the cost of a basket of necessities; StatsCan tracks this over time, together with how many people lack sufficient income to cover it. It turns out — who knew — that as incomes rise, poverty falls.

That is, they do, if you use a so-called “absolute” measure like the MBM. Another measure tracked by StatsCan, the Low Income Measure, is set at one-half of the median income: it is a “relative” measure. As such, even if everyone’s incomes rise, poverty does not necessarily fall: it depends whether incomes rise faster at the bottom rise than at the median. And indeed, all the while poverty has been falling, measured by the MBM and LICO, over the past two decades, it has been rising, measured by the LIM. Only very recently has it begun to fall.

Of course, absolute and relative are not so easily separated. What goes into the “basket” at any given time will depend, as Adam Smith observed, on what “the customs of the country renders it indecent … to be without” — i.e., on relative considerations. The choice of half the median, likewise — why a half, rather than a third, or three-quarters? — has an absolute element to it. (The LICO is even more tangled, in ways that would take another column to explain: suffice to say it was once notoriously relativistic, but has since become more absolute.)

Both measures have something to tell us. Some of the impact of poverty is relative — to be unable to afford the sorts of things most people take for granted is demoralizing, especially for children, in ways that show up clearly in the data. But it’s surely at least as important to know whether people can afford the basic necessities of life, and whether we are having any success in reducing the numbers of those who cannot.

The good news is that we are. Maybe now we can say so out loud.

Andrew Coyne: Maybe now we can finally say it out loud — poverty is in decline

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