Lars Osberg Economics Department Dalhousie University April 19, 2009 Poverty and Recessions: Nova Scotia's Vulnerable in Tough Times

The Poverty Rate in Nova Scotia & Canada rises & falls at the same time

Because unemployment rises and falls with the business cycle

In Nova Scotia, as elsewhere, unemployment drives poverty

But there has been a big change - Poverty is much deeper now in Nova Scotia

So what’s happening to unemployment?

And now that we need a safety net… OECD Economic Outlook March Canada - Unemployment6.3%6.0%6.1%8.8%10.5%

What’s there ?

UI/EI Replacement Rate – 38 years of decline The average of the gross unemployment benefit replacement rates for two earnings levels, three family situations Source: OECD, Tax-Benefit Models. ; The Canadian Labour Force Participation Rate Revisited: Cohort and Wealth Effects Take Hold Steven James, Tim Sargent, Russell Barnett and Claude Lavoie Working Paper 2007 ‐ 01, Finance Canada, Page 11

EI Replacement Rate: Relatively low by OECD standards

Only insurable earnings up to the MIE covered by the Employment Insurance REPORT OF THE CHIEF ACTUARY TO THE EMPLOYMENT INSURANCE COMMISSION ON THE EMPLOYMENT INSURANCE PREMIUM RATE AND MAXIMUM INSURABLE EARNINGS, 2009: Maximum EI insurable earnings $40,00041,10042,300 Proportion of claims at maximum42.9%43.5%44.2% Maximum weekly benefits $ Average weekly benefits $ CANSIM, table % of insurable earnings below MIE41.5%40.9%40.4% % of insurable earnings above MIE58.5%59.1%59.6% 2007 actual: 2008, 2009 estimated

The Big Problem – EI is much harder to get, especially since 1996

Responding to Need (a bit) EI Eligibility & Benefit Duration March 15 - April 11, 2009 EI Regular Benefits TorontoMontrealWindsorHalifax Unemployment Rate Number of Insured Hours Required to Qualify Minimum Weeks Payable Maximum Weeks Payable Unemployed Persons February ,80098,10038,70013,400

Social Assistance – low & falling ATIONAL COUNCIL OF WELFARE: WELFARE INCOMES 2005

Poverty is NOT inevitable How much of market income would it take to completely eliminate the poverty gap ? Canada – 1.7% Nova Scotia – 1.7% Halifax – 2.1% V , v , v ; Low income cut-offs after tax, 1992 base; Aggregate low income gap as a percentage of market income (Percent); All family units For people who do not have much, it does not take much to make a big difference in their lives. Canada’s total poverty gap – approximately equal to foregone revenue of 2% cut in HST/GST

Appendix G Page 81 Low Income in Canada: Using the Market Basket Measure HRSDC. October 2008; Table 1, page 12 The Evolution of Poverty Measurement - with special reference to Canada Osberg (2007) Poverty Line for 2 adult 2 child family (boy 13, girl 9) $2006 Market Basket Method LICO IAT rural = 21, K = 28, K+ = 30,000 LIM after tax = 29,600

So where is the NDP? What Policies are proposed? Nova Scotia – Total buy-in to “Targeted Tax Cut” Politics “Conservative tax hike on electricity makes life more expensive for families” “NDP will invest in jobs for Nova Scotians by introducing a 10 per cent Nova Scotia manufacturing and processing tax credit” Balanced Budgets ? Tax-free Electric Energy Biggest benefits if you turn up thermostat, have huge house Bad for environment, equity and efficiency Tax credits have nil impact on job creation in a recession