Poverty and Affluence in Canada

Measuring Poverty What does it mean to be poor? What characteristics does poverty involve? Economists disagree as to how they should determine who is poor, why people become poor and what needs to be done to reduce poverty

Absolute Poverty A state of utter destitution Due to Canada’s social welfare system, the incidence of this extreme form of poverty is rare in Canada

Relative Poverty Not necessarily a Canadian that lacks food, safe water, shelter, or clothing A Canadian that feels poor and that other Canadians see as poor compared to (relative to) others

Low-Income Cut-Off Developed by Stats Canada in 1968 Below LICO, household classified as being in a limited income situation

Low-Income Cut-Off Average Canadian household spends about 35% of its before-tax income on food, clothing, and shelter A household that is “relatively worse off” spends more than 55% on these three necessities

Let’s Calculate Tom makes $40,000 / year. Tax owed $5793. CPP approx. $1980, IEP approx. $1980 Net Income $30,247 Net Income $30,247 35% of Gross Income $14,000 OR For food, shelter and clothes each month $1,167 Is that realistic?

Before/After Tax Income LICO’s calculated using both before-tax income and after-tax income Before-tax income is easier, but after-tax income is used more…why?

Before/After Tax Income …truer picture. WHY?

Poverty Line LICO’s used by analysts as indications of poverty Media often refers to LICO’s as “poverty lines”

The Poor Working poor – people who work, but still poor WHY?sence of unions, temporary work etc) The welfare poor – people who do not work and are experiencing poverty (elderly, poor health, single parents, job loss)

Welfare State Early in the 20th century, Canada established a “welfare state” Philosophy – that governments should use social programs and transfers financed out of taxation to help people who are poor, suffer illness, or are otherwise disadvantaged.

Progressive Tax System First step of the welfare state was to allow low-income earners to keep most of the money they make Progressive Tax System – taxes higher-income at a higher percentage. The more you make the more tax you pay.

Why does this imbalance in income Statistics In Canada, there are drastic income inequalities based on gender and race Two parent families - highest incomes Single mothers - lowest incomes (45% live in poverty) Uneducated single mothers – 90% live in poverty Visible minorities have lower average incomes than the rest of society Why does this imbalance in income distribution exist?

Attacking Poverty Programs to combat poverty can be divided into two broad but overlapping categories: Structural Strategies Relief Strategies

Attacking Poverty Structural Strategies – attempt to eliminate the causes of poverty (long term) Relief Strategies – immediate support (food banks, government transfers). Often criticized as “band-aid solutions”

Key Questions Does society have an obligation to individuals/families in poverty – to introduce social change/programs to assist those in need? OR… Should this be a matter for the individuals/ families themselves to deal with?

The Employment Equity Act (1986) Purpose: to tackle systematic discrimination Act identifies four main groups: minorities, Aboriginals, people with mental and physical disabilities Requires employers to provide these groups with equity by setting hiring goals for each group (reflective of these groups in Canadian workforce)

Welfare in Ontario Easiest short-term tool for raising income level of the poor = $ Money required for survival Some people unable to earn money for various reasons - i.e. severely disabled, mentally ill, woman with children who has left an abuse husband, single parent attending school, etc.

How much do you give? To whom? Problems with Welfare How much do you give? To whom? Disincentives: Discourages some recipients from finding employment Functional Repercussions: Logical outcome of “high” payments – people receiving welfare didn’t feel a need to look for work

What are some alternatives to welfare?

Competing Perspectives Does welfare discourage people from looking for work? Or, is it a myth put forward by people unfamiliar with the reality of life on welfare?