The economic case for tackling poverty

Posted on in Social Security Debates

TheGlobeandMail.com – ROB/Economic Insight
Oct. 23, 2015.   Todd Hirsch

It’s finally over! The marathon of Election 2015 with its campaign speeches, televised debates and endless attack ads is behind us. And as the verbal dust settles on Ottawa, the government must now figure out how it will manage to fulfill all of the promises made over the past eight weeks.

The campaign covered a lot of ground – mostly on taxes, the importance (or not) of balancing the budget, and the niqab. But at the same time, lots of other troubling policy concerns were completely left out of the conversation. Unfortunately, one of those ignored was the issue of poverty.

Perhaps it’s no surprise why poverty wasn’t a hot election topic. Sadly, politicians may feel they have few votes to gain by talking about anti-poverty strategies. Rightly or wrongly, the perception is that low-income individuals – and certainly the homeless – don’t vote. And politicians may cynically conclude from polling research that middle-class Canadians care only about taxes and jobs. Poverty never seems to climb the rungs of things most Canadians worry about.

That needs to change. There are strong economic arguments why Canadians and our political leaders should take swift action to fight poverty.

The first is that if more Canadians were better able to financially support themselves and their families, there would be higher consumer spending. Simply put, fewer low-income individuals would boost the GDP. But while this is indeed true, it’s not the strongest argument to be made for poverty reduction. Individuals are more than just contributors to national output, and GDP growth is not (nor should it be) the ultimate measure of societal success.

A better economic reason is that fewer Canadians ensnared in poverty would free up scarce public resources for more productive purposes. If publicly funded housing projects, welfare programs and other tax supported social agencies had fewer low-income clients to serve, more dollars could be directed toward other programs that are true investments in the future. Education springs to mind.

Another economic argument in favour of tackling poverty is to liberate an untapped source of labour. Once again, human beings are more than “economic agents,” and it’s not right to regard people only as resources for employers to utilize. Nonetheless, labour shortages are a pressing economic concern. We bring in temporary foreign workers to fill many jobs that Canadians don’t want, but some Canadians just might want those jobs if they had food in their stomachs, a good night’s sleep and an address to fill out on a job application.

A fourth reason has to do with social and economic stability. Plenty of research shows the most prosperous economies are often those with lower rates of income disparity. The GINI co-efficient, which is one measure of the gap between the rich and the poor, is often lowest in countries boasting strong economies and high living standards, such as Sweden, Finland and Germany. These economies are also socially stable, with high levels of education, health and democratic freedom.

But finally, the best reason to eradicate poverty is simply because it is the right thing to do. Economists don’t need to prove this with a fancy cost-benefit model. Nor should issues of poverty be reduced to fodder for debates between the political left and right. Anti-poverty strategies should be a priority in Ottawa and all provincial capitals simply because we don’t ignore the weak, the economically powerless and the socially disenfranchised. It’s not in our Canadian DNA do to so.

With the election behind us, Canadians and our federal government must refocus on the pressing issues at hand. Poverty is something that affects us all, even those of us fortunate enough not to worry about whether we will have a place to sleep tonight. It’s an economic problem, a national problem and social problem. But it is one that can be addressed through practical measures.

To gain a deeper understanding about poverty, www.makethemonth.ca includes an online simulation that will challenge your perspectives and assumptions of low-income Canadians.

Todd Hirsch is the Calgary-based chief economist of ATB Financial, and author of The Boiling Frog Dilemma: Saving Canada from Economic Decline.

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