We’re winning the war on poverty

The proportion of households below the LICO has been falling for two decades and is now at its lowest level ever at 7.8%

Roslyn KuninDonald Trump isn’t the only American president to say dumb things.

Lyndon Johnson, expressing his concern for the well-being of the American people, said that he thought it was a shame that half the U.S. population lived at a below-average income.

As anyone who ever stayed awake in math class knows, an average is a way to use one number to describe a group and that number will always be in the middle of the group. The below average are always with us.

Johnson wasn’t alone in using averages to define poverty in such a way that the poor will always be with us no matter how high incomes go. Statistics Canada’s Low Income Measure (LIM) defines low income as one half the median income. Median, of course, is defined as the number that divides the population in half. Fifty per cent are always below the median, so there are always people in the bottom half. This is the result of using a relative rather than an absolute measure.

However, recently even the LIM has been declining.

And more good news comes when we look at absolute measures of income and poverty. Statistics Canada has two such measures. One is relatively new. The Market Basket Measure (MBM), as the name implies, defines low income based on the cost of a specified basket of goods and services representing a modest, basic standard of living across different communities.

Between 2006 and 2017, households under this cutoff fell from 15.6 per cent 9.5 per cent. In 2006, one household in seven wasn’t meeting basic needs. By 2017, this had fallen to less than one in 10.

It’s still not ideal but definitely moving in the right direction.

If we want to look back before 2006, we have to use an older metric called the Low Income Cut-Off (LICO). It’s where a family of a particular size and living in a particular community size spends 63 per cent of their income or more on food, shelter and clothing. The proportion of households below the LICO has been falling for two decades and is now at its lowest level ever at 7.8 per cent.

Why?

Apart from a brief dip in 2009, our overall economy has been enjoying positive growth for more than two decades.

And the benefits have been widely shared with ordinary people who need jobs.

I’ve spent my career analyzing labour markets. When I started, the big questions were where are jobs and what can we do for the unemployed? Last year, Canada’s unemployment rate hit a 40-year low at 5.6 per cent. Now, the big labour market question is where are the workers?

Full employment means rising incomes. In 2017, median income in Canada, after correcting for inflation and taxes, was at an all-time high.

Canada now has good policies in place to protect two vulnerable groups: the old and the young. Being old and poor used to be a cliche. It no longer is.

Less than 3.6 per cent of those over 65 are now poor. The means-tested guaranteed income supplement for seniors and the universal old age pension (not quite universal because it’s clawed back for wealthier people) provide an income floor.

The Canada Child Benefit provides one unified means-tested income transfer to families with children. It’s reduced the child poverty rate, now at nine per cent, by one-third over the last two years.

All the good news about poverty rates falling and incomes rising makes one wonder why we’re hearing more calls for a universal basic income. At no time in history did we ever need it less. Over 90 per cent of the population is now where most Canadians like to be, in the middle class or above. Kids and old people are covered.

Basic income programs have been tried in different places and times. Never have they been found sufficiently beneficial to continue after the trial. A recent program in Finland found no significant behavioural changes in work habits or other factors as a result of giving people money with no strings attached. Even if benefits are clawed back from higher income recipients, the costs of basic income for both the grants and the administration are enormous.

Canadians should be very proud of how well we treat our more vulnerable citizens, and of our low and falling poverty rate. We don’t need a universal benefit package because most of us are managing well enough and many of the vulnerable are already protected. If some aren’t, such as the disabled, then specifically-targeted programs should be designed and implemented.

In the meantime, a gentle pat on the back is in order.

The news of Canada’s success in the war on poverty has been out for a while but this may be the first time you’ve seen it. May we all get more good news.

Troy Media columnist Roslyn Kunin is a consulting economist and speaker.


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