Social Policy in Ontario

Poverty no worse for crisis

Posted on June 20, 2012 in Inclusion Delivery System

Source: National Post — Authors: William Watson

NationalPost.com – business/FPComment
Jun 20, 2012.    William Watson

OK, so we’re four years into the worst financial and economic crisis since the 1930s. The Occupy movement has persuaded virtually the entire media that inequality is the number one policy issue of the day. Quebec students have now decided it’s not just tuition fees they don’t like but also capitalism, neo-liberalism, Formula One racing and their province’s corporate-toady political class. Europe is stressing out in ways not seen since the 1940s. At times it seems our whole way of life is under siege. With everything unravelling fast, poverty must be skyrocketing. Right?

Wrong! On Monday Statistics Canada published the latest edition of its annual publication “Income of Canadians,” which looks at income data for 2010. Hold on to your paper/tablet/smartphone: In 2010 the percentage of Canadians who earned less than Statistics Canada’s “low-income cut-off” and therefore by universal practice are defined as poor actually fell.

It went from 9.5% to 9.0%. True, it didn’t go to zero. But still: The world is falling apart, inequality (and unfairness reportedly are soaring) and yet Canada’s poverty numbers are getting better?

In fact, by this measure Canada’s poverty rate was at an all-time low in 2010, if you accept that in this context “all-time” means back to 1976, the earliest date for which this calculation appears on StatsCan’s books (now webpage). Yes, the rate for 2010 is even lower than in 2007, the previous best year, when it was 9.1%. It’s true that, in terms of absolute numbers of Canadians falling below the low-income cut-off, 2007 was a better year, by 70,000 people. But even so, 2010 represented an improvement of 120,000 from 2009.

Other numbers are equally surprising — and encouraging. The number of people living in families headed by single moms and making less than the low-income cut-off did rise slightly (by 3,000) in 2010. But that’s 20,000 fewer than in 2008 and more than 75,000 fewer than in 2007. In total in 2010, the overall number of moms and kids in that situation was less than half what it had been in 2002 (just 323,000 in 2010 compared to 647,000 in 2002). In terms of percentages, the rate of low income among single-mom families was 20.6% in 2010, the second lowest it has ever been, exceeding only the rate for 2009, also a post-crash year.

By comparison, the rate of low income among people (kids included) who live in two-parent families was just 5.1% in 2010, and that really is an “all-time” low, at least going back to 1976 — despite the ongoing end of the world. Note that if we don’t want kids to grow up poor, two-parent families are clearly best. (Note also that StatCan warns that because of smaller sampling sizes these low-income numbers for different demographic groups have to be regarded as only “acceptable” approximations rather than “very good” or “excellent” counts.)

Now, in the interests of full disclosure, it must be said that back in the 1990s, when most of these “low-income cut-off” or “LICO” numbers were rising, many of us at the Post spent a lot of time pointing out the inadequacies of a definition of poverty — or, as StatsCan preferred, “straitened circumstances” — where the cut-off was the income at which people spent 20% more of their income than the median family did on food, clothing and shelter. Because of all the criticism of LICO, StatsCan now publishes a number of indicators of low income. But while the exact numbers differ, they do all show essentially the same pattern: that poverty has not taken off post-crash in the way most observers thought it would. And that, in most cases, 2010 was a better year than 2009.

Not all the news is good, however. In dollar terms, the basic message of “Incomes of Canadians 2010” is that, after adjusting for inflation, the incomes of Canadians were essentially flat in 2010, as they had been in 2009. And more Canadians (47.2%) saw their incomes fall from 2009 to 2010 than had between 2008 and 2009 (42.3%) — though that was still not a majority: In 2010 52.8% of Canadians actually experienced an increase in their income.

All the income numbers mentioned so far are after-tax incomes, which in this context means after income taxes to governments have been paid and cash transfers from governments have been received. In general, Canadians’ “market incomes,” that is, the incomes they earn before receiving payouts from or paying taxes to governments, have fallen slightly since the crash. (They had been rising before it.) Payments from government, including unemployment insurance, have largely made up the difference.

Does that mean Ottawa should back off its reform of EI until after the unemployment rate is back down to where it was before 2008? Not at all. You do want to spend more on unemployment insurance in a downturn, as we have. What the reform mainly aims at is people who year after year after year use unemployment insurance to complement seasonal jobs that probably wouldn’t be sustainable without the EI subsidy. Those are unemployment insurance payouts that don’t vary with the cycle: they’re made no matter what the state of the economy. The unemployment they insure against isn’t random or unpredictable. It’s absolutely certain. A basic tenet of insurance, of course, is that you don’t write insurance against certain events.

One final surprising result from this year’s income data: Even people who don’t particularly worry about how much money rich people make do care about income mobility — that is, people’s ability to get out of their current income class and into another. The data for 2010 show that income mobility is higher than conventional wisdom has it: In the six years from 2005 through 2010 only 1.5% of Canadians were “in low income” for all six years. By contrast, 82.7% were never in low income at all. Those are the best numbers for that statistic since 1993, when StatsCan first started tracking it.

Let’s not give up on our way of life just yet.

< http://opinion.financialpost.com/2012/06/20/william-watson-poverty-no-worse-for-crisis/ >

Tags: economy, globalization, poverty, standard of living

This entry was posted on Wednesday, June 20th, 2012 at 11:29 pm and is filed under Inclusion Delivery System. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.