The goal of the Anti-poverty Project is to develop new ideas for dealing with the issue of poverty in Canada. Both policy and action in the dialogue over this issue remain stuck in a rut, with stakeholders recycling old, generally ineffective approaches that 1) waste assistance that should be going to low-income target groups, or 2) or overly rely on interventionist ideas and policy models that disempower people in the local economy while pouring government subsidies into communities without dealing with the root causes of poverty.
By almost any measure, Canada has been one of the most successful countries in the world at reducing poverty. Here are just a few measures from the World Health Organisation, comparing Canada to a country that is poor but developing rapidly, and two of the most unsuccessful countries in the world today. In the early 20th century, tuberculosis was a serious public health problem in North America. In 2006, there were five cases for every 100,000 Canadians, down from ten in 1990.
That is an extraordinary achievement compared to Zimbabwe (557 cases per 100,000 people), North Korea(178), and Mexico (21). The WHO reports that all Canadian births are attended by skilled personnel compared to 97 per cent in North Korea, 94 in Mexico and 69 in Zimbabwe. The North Korean statistic for attending births sounds impressive though one should take it with a large grain of salt but even if true, North Korean children are still ten times more likely to die before age five than are Canadian children. Mexican children are six times more likely and Zimbabweans fourteen times more likely.
Perhaps the ultimate measure is that Canadians born today can expect to live 81 years, compared to 74, 66, and 43 in Mexico, North Korea, and Zimbabwe. No doubt some readers will find it harshly boastful to talk about Canada's extraordinary achievements compared to the suffering in other countries. But the comparisons are necessary because we may be so used to being one of the world s richest countries that we take prosperity for granted. Poverty has been dealt a severe blow over the past centurythanks to extraordinary economic growth, and that has resulted in a poverty debate largely morphing into an income distribution debate.
While there are certainly some in Canada who lack the means to physically sustain themselves, this group is significantly smaller than the various groupings that some commentators claim are in poverty. These latter groups are usually defined by having incomes some arbitrary amount less than the average. Take this quote from another Canadian think tank: it is inexcusable that 546,000 British Columbians, 13 per cent of the total population, live in poverty.
Really? The figure they quote (Statistics Canada s Low Income Cut-off) actually measures the number of people who spend twenty percentage points more of their income on food, clothing, and shelter than the average similar household in a similar sized community. If that last sentence is a mouthful, then it's easy to see why some say poverty when they really mean income inequality. But people who propagate this confusion, whether it be out of ignorance, deviousness, or just sheer laziness, do a great disservice to the people who really do lack the ability to physically sustain themselves.
If they want a debate about income distribution, they should have one, rather than hijack the poverty debate with relative measurements that reveal little about actual poverty and how to solve it. The most urgent need in Canada's effort to reduce poverty is to separate the debate on income distribution from the debate on how to help people who genuinely lack the ability to sustain themselves. We must focus on that if there is any hope of making more progress on poverty reduction.
Bad government policy hurts the poor more often than do frequently trumpeted market economy depredations as free trade, technological progress or globalization in general.
Poor policy hurts the poor in at least two ways. First, it creates artificial barriers to opportunity. Second, it raises costs or degrades services for those at the bottom.
Regressive taxes, labour market regulations, rent control, land use restrictions, marketing boards, subsidies for climate change, and provider focused education and healthcare systems are policies that hit the poor harder than the rest.
We need to remove barriers to participation in the economy and to change policies that disproportionately penalize and harm the low-income community.
Poverty Policies Tend to Impoverish
While poverty continues to decline in Canada and in Manitoba, there is still ample room to bring some new thinking to this important subject. For many years, the poverty debate has been stale and predictable because old ideas are continually recycled with little or no result. We need to break the mould and to confront one usually unmentioned fact – bad government policy hurts the poor more often than do frequently trumpeted market economy depredations as free trade, technological progress or globalization in general.
How does poor government policy harm the poor? It harms them when it embraces policies that stunt economic growth. In Canada, and especially Manitoba, these include high taxes, a growing dependence on transfer payments, and regulatory policies that discourage investment and job creation. Ironically, many old-school thinkers embrace high taxes, expansive government, extensive labour market regulation and protectionism as the path to less poverty. Extensive research, however, shows that the opposite policies reduce poverty by expanding economic growth and opportunity. Climate change politics is the latest blip on the policy radar screen with great potential to hurt the poor by artificially raising energy costs and shifting jobs to countries such as China and India.
Governments frequently use tax policy to discourage consumption of certain goods, but these policies are regressive. Taxes on energy, alcohol and tobacco disproportionately affect low-income earners. A study from the National Center for Policy Analysis, in Dallas, shows that people who earn $24,000 a year spend proportionately more than twice as much on gasoline as those who earn $120,000. The researchers also found that the bottom fifth of earners who buy alcohol spend three times as much proportionately on alcohol than do the highest earners. Canadian low-income earners, facing even more onerous gasoline and alcohol taxes, are worse off.
Let us take the discussion down to a more micro, person-on-the-street level. Poor government policy hurts the poor in at least two ways. First, it creates artificial barriers to opportunity. Second, it raises costs or degrades services for those at the bottom. Both are ironic side products of increasingly politicized policy structures wherein government spending flows into programs and policies that cater to, or have been captured by, narrow voting interests.
Unfair barriers include occupational licensing and regulation, which limit entry into a profession or job area. Unions influence rules around apprenticing to limit the number of jobs “open” in the skilled building trades. Business interests use regulations to cartelize the taxi industry, effectively blocking entrance into an activity ideally suited to small-business entrepreneurs. The price of a taxi shield is about $280,000 in Winnipeg and rising. How many poor people can pay that? In addition, lower income people without cars pay disproportionately more for artificially high taxi fares.
Something similar occurs with supply-managed marketing boards. Forget farming in any of the cartelized sectors. When the “licence” to own a cow is close to $30,000, it takes millions of dollars just to get permission to be in business. More damagingly, these cartels artificially raise the price of healthy foods, again disproportionately affecting lower income people.
Consider the impact of badly conceived zoning, housing-market interventions and land-use regulations. When a discount, big box store such as Wal-Mart arrives, it benefits lower income earners because cheaper prices increase their spending power. Yet, interest groups frequently use zoning rules to block or stymie the latest retail concepts. Restrictive land-use regulations and planning fads such as Smart Growth jack up house prices and remove home ownership options for lower income groups. Rent control hurts the poor by freezing and then shrinking the supply of affordable housing, while subsidizing the middle-class renters who happened to be around when the controls were imposed.
Manitoba’s artificially cheap electricity prices disproportionately subsidize the middle- and upper-class owners of large homes.
Low-income people are hit disproportionately hard by expensive public sector monopolies in health care and education. Often politically inactive, with little education, they lack the middle-class networks that assist queue jumping in the health system. They are stuck with public schools that are frequently more enamored of the latest social engineering fads than imparting solid numeracy and literacy skills that are the key to rising incomes later in life.
The poor also pay in other ways for monopoly services. By spending more than is needed to produce goods and services, for example, expensive health and education systems or unionized floodway projects, governments waste money that could be invested to help the poor. Likewise, squandering money trying to change the weather by mandating expensive energy forms or spending billions to pump CO2 into the ground will use up resources that could be targeted at low-income groups.
More than anybody, the poor have a stake in quality public policy; lower, less regressive taxes; fewer regulations; and more efficient, effective service delivery that focuses on the broad interests of the consumer, not the narrow interests of politically organized provider groups. We need fresh, more effective approaches to helping the poor. We need to remove barriers to participation in the economy and to change policies that disproportionately penalize and harm the low-income community.