Poverty rates that were 11 per cent in the 1970s are down to three to four per cent now. That’s real progress
It shows the evolution of a common measure of poverty — the percentage of people with incomes less than the “low-income cut-off” (LICO) — in two provinces, Alberta and Ontario, from 1976 to 2020. Margarita Wilkins and Ron Kneebone, the article’s authors, are primarily interested in how the two provinces’ experiences differed.
They started off and ended up in the same places: 11 per cent poverty rates to begin with and three to four per cent to finish up. But they got there by different routes. Alberta had a rougher 1980s before starting a remarkably steady decline, while Ontario had a more difficult early ’90s before seeing its poverty rate start to fall, albeit not so steadily as Alberta’s.
How many people are poor is affected by many things, of course. For reasons that could be the subject of its own interesting psycho-socio-historical study, we tend these days to jump directly to the effectiveness of anti-poverty policies as an explanation. Wilkins and Kneebone want us to focus as well, maybe even instead, on an economy’s ability to generate jobs for people at the lower end of the income distribution, which they imply Alberta has done especially well in recent decades.
That’s a very good point and one worth exploring further with a detailed comparison of the two provinces’ labour markets over the last few decades. But what struck me about the chart was how the two provinces started out with much higher poverty rates than they ended up with. Granted, 2020 was a special year — a one-in-100 year because of the pandemic — but by the LICO measure, poverty has been trending more or less downward for 30 years.
The LICO was developed in the ’60s by Statistics Canada. It defined families as being in “straitened circumstances” if they spent 20 percentage points more of their income on necessities than the average family did. The income at which, on average, families did spend that much on necessities became the “poverty line,” while the “poverty rate” was the percentage of families and individuals falling below that line — though Statistics Canada denied official blessing to the nomenclature until 2018, when Ottawa formally adopted a poverty line (not the LICO).
During the ’90s, when LICO poverty was running high, there was lots of discussion, especially among economists who liked the “neoliberal” fiscal, social and trade policies governments were pursuing at the time, about the drawbacks and pitfalls of relative measures of poverty like LICO. In the 23rd century, when we all will spend just two per cent of our incomes on necessities, will those spending 22 per cent really be poor? Fully 78 per cent of their spending will be discretionary. In what way could they be considered impoverished? (If I had a dollar for every column I wrote about that, especially a 1995 dollar, my own personal anti-poverty campaign would be much farther along!)
That critique, led by Christopher Sarlo of Nipissing University in a number of Fraser Institute studies, eventually led to greater emphasis on absolute measures of poverty — those looking, as the now-official “Market Basket Measure” does, at a basket of items considered essential. At a time when the LICO was showing high and rising rates of poverty, Sarlo painstakingly constructed his own consumption-basket measures that showed true poverty was much lower, which accorded with most Canadians’ intuition that Canada was a rich country (as it remains).
If the basket measure of poverty is done right, its advantage is that most people will agree that if you can’t afford what’s in it, you really are poor — not relatively but absolutely. Granted, what’s in the basket will change over time and so will the absolute measure, which makes it relative to its own era. But that seems sensible.
Looking at Wilkins and Kneebone’s chart makes me think that if we’d known how the LICO poverty rate was going to evolve, maybe we conservative economists wouldn’t have been quite so hard on it. From rates in the high teens three and four decades ago, it’s now down to three and four per cent.
As mentioned, we should probably throw out the data for 2020. The table the chart is based on shows that for every Canadian province, 2020 marked an all-time low for LICO poverty. The reason’s pretty simple: a government that goes deep into debt and writes generous emergency cheques to just about everybody can take a big bite out of poverty. But to keep that up would require much higher taxes — and might in fact be impossible, since high taxes would dry up the money fountain.
But even if you look at pre-pandemic LICO poverty rates, big progress has been made. In a world in which most people seem to think nothing ever gets better, that should be big news.
Source : FINANCIALPOST