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July 19, 2000
The Canadian Fact Book on Poverty 2000
Chapter 10: Conclusion
The evidence in this book demonstrates that larger numbers of Canadians are falling further behind economically. Inequality is growing, and economic growth is not having a positive impact on many lives. Rising levels of inequality and exclusion, marked by higher levels of poverty and income polarization documented in Chapter 3, lead to the marginalization of individuals, families and communities. It effectively places them well "outside" the mainstream of society.
To produce a more healthy and cohesive society, a number of issues highlighted in this book cry out for redress and action.
Issues Needing Redress
The rate and depth of poverty among working-age households is rising
First noted in the 1980s, the rate and depth of poverty among working-age households has increased. This trend likely represents a structural increase in poverty because even at similar peaks in the business cycle, their situation has deteriorated. The labour market is failing to provide enough jobs with living wages and benefits. The growth in poverty among working-age households is explained in large measure by high rates of unemployment, the proliferation of low-wage employment, and barriers to employment. Put simply, the market has let Canadians in working-age households down.
This book's analysis ended with the most recent poverty data, which covered 1997. The fact that the economy improved through 1998 and 1999 - reflected in lower unemployment rates and steady productivity growth - is clearly positive. The number of full-time jobs has finally started to increase in sectors such as manufacturing, educational services and construction after a decade of non-standard employment growth. Canadians are expressing greater economic confidence today than over the past few years. Whether these more recent improvements will turn around the trend towards higher poverty rates among working-age households is open to question.
Looking at the record of the past, working-age poverty and income inequality have proved intractable. Although unemployment is falling, employment growth has not kept up with population growth. Between 1989 and 1997, for instance, the working-age population grew by 10.2 per cent, while total employment grew by only 5.5 per cent. The ratio of the net gain in employment to growth in the working-age population over this period was 1:2.4. Theoretically, 2.4 people competed for each employment position created. The economy is still not generating or distributing enough employment to sustain all Canadians, and secure employment is key to reducing the incidence of poverty and closing the gap between the rich and poor.
Of those who have employment, many are employed in precarious situations - either part-time or temporary situations that have proliferated in the cost-reduction "just-in-time" economy of the 1990s. The rate of self-employment is also very high (around 17 per cent), particularly in comparison to many other countries. Although an elite group of self-employed are among Canada's top earners, the largest increases in this employment category have been among "own account" workers - those working just for themselves - who earn on average much less than paid employees and do not have access to workplace benefits.
Precarious work coupled with low wages has been an impediment to reducing and preventing poverty in Canada. The market incomes of most working-age households, especially among those at the bottom of the income ladder, have not rebounded. The erosion of market incomes is perhaps most graphically revealed in the growth in the rate and depth of market poverty. Between 1981 and 1997, the proportion of families living on market poverty incomes grew by almost half, while the average depth of market poverty increased by 16.9 per cent to $11,982. Canadians' incomes were shrinking as the costs of basics such as housing and transportation continued to rise.
An economic recovery is underway in many areas of Canada, but not all Canadians are enjoying this renewed prosperity. Polarized economic growth masks the fact that not all boats are being lifted by the tide of record corporate profits and spiralling high-tech stock prices. Although records are being broken on stock exchanges, the use of food banks and shelters for the homeless have also hit all-time highs.
Government transfers and services - critical tools for reducing poverty - are threatened
The economic plight of working-age households would have been more pronounced if government transfers had not been in place to partially offset the rise in market poverty. Although average transfer payments to working-age households increased between 1981 and 1997 (by roughly $1,000 in 1997 constant dollars), they did not increase by enough to offset the poor performance of market income. Unless the Canadian economy experiences a spectacular and sustained rebound, working-age households will continue to rely on government assistance. But will government assistance be there to help them? If not, a continuation of the increase in working-age poverty can be expected.
Since 1945, Canada has constructed a modest network of income security programs and social services. Significant increases in social spending were recorded through the 1960s and 1970s with the establishment of major programs including the Canada Assistance Plan, the Canada Pension Plan and Employment Insurance. However, much has changed since the "Golden Age" of 30 years ago.
Although expenditure reductions were evident in the late 1970s, downsizing of the welfare state began in earnest after the election of the Progressive Conservative government in 1984. In relation to Canada's overall economic activity as measured by the gross domestic product (GDP), federal social spending rose in the early 1980s to meet the increased needs caused by the 1981-1982 recession. It peaked in 1983-1984 at 12.3 per cent of GDP, then declined from 12.1 per cent in 1984-1985 to 10.7 per cent in 1990-1991, indicating that social spending was growing more slowly than the Canadian economy.
Through the recession of the early 1990s, social spending by both levels of governments increased again, notably at the provincial level. However, since 1992-93, program spending at both the federal and provincial levels has fallen. Before the onset of the recession, total federal program spending including transfers to individuals and governments was 15.8 per cent of GDP. In 1992-93, it reached 17.5 per cent. It has subsequently fallen to 12.2 per cent in the 1999-2000 fiscal year and is projected to fall further. The federal government claims that program spending is now at a 50-year low. Between 1989-90 and 1999-2000, transfers to individuals have fallen from 4.6 per cent to 4.1 per cent of GDP; transfers to other governments - monies that fund social assistance, health care, post-secondary education and community services - have fallen from 3.6 per cent to 2.2 per cent of GDP.
By international standards, Canada is a low spender on income maintenance, health and education as a proportion of GDP (see Table 9.6). In 1986, social expenditures stood at 22.3 per cent of GDP; in 1995, this had fallen to 18.6 per cent. This low standing is in large measure due to the comparatively impoverished status of the income security system in terms of scope of eligibility, systemic disincentives to take-up, and the degree to which benefits approximate market earnings.
Reforms of the past decade suggest that the situation is going to deteriorate further. On the one hand, increased targeting of Canada's already highly targeted income programs to the poorest of the poor has reduced the redistributional impact of programs among modest- and middle-income Canadians. On the other hand, more highly targeted income support programs have been accompanied by overall cutbacks in transfers to individuals through specific programs such as social assistance and Employment Insurance.
As most Canadians know firsthand, cutbacks have not been confined to income transfer programs. Many families are struggling with federal, provincial and municipal cutbacks in social programs and community services. They face higher user fees for programs such as child care, public transportation, home care, English/French as a Second Language and recreation. These programs - often taken for granted - are critical to the well-being of all families as well as communities. Arguments in favour of tax cuts seem to ignore the critical role that governments play in redistributing income and in providing equitable access to public services that help to create a level playing field for all members of the community. Only a minority of households can afford to purchase all needed goods and services in the private market.
All Canadians suffer the hardships of cutbacks. However, low-income Canadians have no recourse as governments unravel the social safety net. Because a majority of poor households rely on transfers for their income, cutbacks in transfer programs push them further below the poverty line. Canadians who face significant barriers to their labour market participation - lone-parent mothers, Aboriginal peoples, persons with disabilities - are increasingly being consigned to subsistence-level incomes and services.
Young families and children are particularly vulnerable
Many pieces of evidence in this book highlight the importance of governments in reducing poverty and income inequality. The success of income security programs in reducing seniors' poverty stands out as one of Canada's most notable achievements of the past quarter-century. Success in addressing seniors' poverty, however, serves to magnify the country's failure in addressing the problem of poverty among children and young families.
The age distribution of poverty has shifted markedly; in particular, poverty has increased among young households, that is, households where one or both adults are less than 25 years of age. In 1981, a young family faced a 21.7 per cent chance of being poor; by 1997, however, the rate among young families had more than doubled (46.1 per cent). The rate among young unattached individuals rose from 38.9 per cent in 1981 to 60.7 per cent in 1997. Among families in the next age group (those where the oldest member was between 25 and 34 years), poverty rates increased by 58 per cent - from 12.0 per cent in 1981 to 18.9 per cent in 1997.
The marked increase in poverty is related to the difficulties young people continue to have in accessing secure employment at living wages. The majority who are employed hold down one or more part-time or temporary jobs, often while juggling the demands of school. While this situation may well suit a number of people in this group, the fact is that secure employment remains out of reach for many who cannot sustain themselves or young families on a part-time job at the mall. The earnings of young men in particular were much lower than in previous years as traditionally well-paying jobs in the blue-collar sectors declined substantially. The promise of economic autonomy seems further and further out of reach.
In an economy where young people struggle to establish themselves economically, it is perhaps not surprising that one out of five of Canada's youngest citizens - 1.4 million children - are growing up in poverty. Overall, over one-quarter of all the poor people in Canada were children in 1997. The rate of child poverty increased by 38 per cent between 1989 and 1997 to 19.9 per cent.
In 1989, the House of Commons unanimously passed a resolution to eliminate child poverty by the year 2000. After 10 years of persistent effort by grassroots organizations, governments reiterated their concern about poor children but have done little to tackle the roots of child and family poverty. Indeed, Canada stands out by international standards as having no coherent family policy. The patchwork of programs that are in place across the country tend to be highly targeted and of varying quality. Mounting pressures on families struggling to balance family, employment and community obligations is resulting in stress and poor health among parents. It is hard to escape the conclusion that children are thought of more as the "private goods" of parents, rather than as a collective national treasure and responsibility.
One situation in particular must be noted. The rate of poverty among lone-parent mothers with dependent children was 56.0 per cent in 1997, up from 52.9 per cent in 1981 and 1989. The trend is towards more poor children living in lone-parent families. In 1981, 33 per cent of all poor children lived with a lone parent, but by 1997 it had risen to 43 per cent. Relative to the poverty rates among children in other industrial countries, the rates in Canada and other English-speaking countries are high, especially for children in lone-parent families. The facts show that the big differences between poor and non-poor lone-parent mothers are in age and educational attainment. Poor lone-parent mothers are younger and have less formal education. If society cannot provide these young mothers with both the means to pursue their own educational goals and a supportive environment in which to raise their children, the future for these families is bleak.
Young people have responded to the costs and stresses of having children in today's society by delaying childbearing (31 per cent of births in 1997 were to mothers over age 30 compared to 19 per cent a decade earlier) or opting out altogether. Falling birth rates are a clear indicator of the deterioration of economic conditions among young Canadian families. In effect, children are being priced out of the market; children are becoming a luxury that many average income-earners feel they cannot afford.
There are alternatives. Various European countries place a much higher value on achieving social solidarity and cohesion, and consequently, on providing support for children and families as an acknowledgement of society's collective responsibility for its citizens. Canada, on the other hand, is committed to extending public assistance but only to those deemed "most needy." These different social goals are reflected in the policies and programs that countries pursue, and most importantly, in the outcomes of children. It is no surprise that the United States - with the highest levels of child poverty among industrialized countries - also has consistently worse child outcomes, for example, higher infant mortality rates, and higher rates of aggression and obesity.
Canada has shown by its treatment of the elderly that poverty can be substantially reduced. It is now time to reduce the debilitating effects of poverty on the country's most precious resource - our children.
Taking Action
Debates around the definition of poverty have been making headlines in the past few years. Critics argue that Statistics Canada's traditional pre-tax low income cut-offs vastly overestimate the rate of poverty, and that a more objective measure of deprivation is needed. Many of the critics focus on the need to define a bare subsistence minimum, while others argue for a level of income that goes beyond physical subsistence and provides for social inclusion.
In the authors' view, the definition of poverty is about defining an acceptable floor for the distribution of Canada's income. It is about producing an income structure that makes all Canadians feel part of society. It is about social cohesion. It is about providing a level of family income that reduces the chances of bad outcomes for children. Constant polling of Canadians plus the results of empirical research on the impact of low income on a range of child outcomes demonstrate that this floor level of income is around $30,000-$35,000 for a family of four. This is around the level that the traditional Statistics Canada measure suggests, which most users refer to as the poverty line.
Unfortunately, the endless debate deflects attention away from what should be the genuine poverty debate: how to best raise the incomes of low-income Canadians whose incomes are unacceptably low by any modern-day standard. Energies spent on discrediting the LICO are better spent developing new programs and policies for dealing with poverty, especially child poverty. Whether or not the Statistics Canada low-income measure is acceptable as the nation's poverty line is currently irrelevant because the average Canadian poor household is more than $7,000 dollars below the line anyway. This situation represents a level of income below all but one of the many poverty standards surveyed in Chapter 2. So if debate must continue, in the meantime efforts can be made to begin raising the incomes of the lowest-income households before there can be any fear of overshooting any sensible measure of poverty, including Statistics Canada's low income cut-offs.
Canada's Challenge
The findings of this book suggest that government policy has not been successful in lowering rates of poverty, especially among families with children or other working-age adults, or in addressing the challenges facing the modern welfare state. Growing market poverty and income inequality is the pressing problem in Canada today. Across industrialized countries, the OECD notes that poverty and need are shifting towards the working-age population - that is, those groups who are assumed to be self-sufficient. These are precisely the groups who need assistance to offset the pressures and uncertainties of the globalizing economy. At this juncture, Canada's challenge is to build on the success in addressing senior's poverty, and to introduce public and private policies that make paid employment and income protection more compatible among the working-age population. The economic security of this group can no longer be taken for granted.
Canadian Fact Book on Poverty 2000 - Related Material
Canadian Council on Social Development,
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Tel: (613) 236-8977, Fax: (613) 236-2750, Web: www.ccsd.ca, Email: council@ccsd.ca
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