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At Conference Board, poverty is forever

Appeared in the National Post
Authors:
Release Date: October 8, 2009

The Conference Board of Canada's recent media release on its study, How Canada Performs, screams "Canada's Record on Poverty Among The Worst of Developed Countries--And Slipping." But this conclusion is simply not true.

First, consider how the Conference Board measures poverty. An individual is considered "poor" if his or her disposable income is less than 50% of the median income in a country. The Conference Board considers people to be living in poverty "if their income cannot afford them the goods and services that are customary in a given society" [emphasis added].

The problem with this poverty measure is that it is relative --the Conference Board's poverty measure simply shows to what extent some Canadians are less well-off than others. It has nothing to do with whether or not individuals can provide themselves with the basic necessities to maintain a standard of living that is minimally decent in our society.

Furthermore, poverty will likely never actually be alleviated under the Conference Board's poverty measure. There will always be a portion of the population living on less than 50% of the median income. Most young people start out with significantly lower incomes than the median Canadian. In fact, many students (i. e., future doctors, teachers, and nurses) would probably be considered "poor" using the Conference Board's poverty measure. In addition, many immigrant families come to Canada with little in the way of assets and often earn significantly less than the median Canadian during their early days in Canada. Through hard work, saving, and investing, they move up the income ladder, just as students and others do.

Unless Canada significantly ramps up income redistribution, poverty (under the Conference Board's definition) is almost inevitable. Perhaps more income redistribution is what the Conference Board desires. It does, after all, highlight that "leading countries boast strong traditions of wealth distribution." The report also suggests more social spending is in order, along with "national anti-poverty strategies."

This recommendation misses the fact that increased income redistribution will have the opposite effect. Taking more money from successful Canadians and redistributing it to lower income Canadians will only decrease the incentives for lower income Canadians to become successful.

Even more damaging than this inaccurate measure of poverty is the conclusion that poverty is increasing in Canada. Using the Conference Board's measure, poverty among adult Canadians has increased from 9.4% in 1995 to 12.2% in 2005. Child poverty, defined as those children "living in households where disposable income is less than half of the median in a given country," has similarly increased from 12.8% in 1995 to 15.1% in 2005.

"Unacceptable," claims Anne Golden, president and CEO of the Conference Board. "Not only are we not making progress; we are losing ground. Poverty rates among children and working age people are rising."

Are we really losing ground?

Consider a superior, "basic needs" approach to evaluating poverty created by Chris Sarlo, professor of economics at Nipissing University. A "basic need" standard of living is the level of income needed to meet such basic needs as a nutritious diet, satisfactory housing, clothing, health care, public transportation, household insurance, telephone service, and a host of other items. Put differently, a "basic needs" approach counts the number of individuals who cannot provide for their basic necessities, rather than counting those who are less well-off than their neighbours.

Professor Sarlo's poverty calculations show that both the child and overall poverty rates fell substantially between the mid-1990s to the mid-2000s. Specifically, approximately 6.8% of all Canadians were in poverty in the mid-1990s compared to 4.9% in the mid-2000s. Similarly, child poverty is down from 9.1% in the mid-1990s to 5.8% in the mid-2000s.

Many of the Conference Board's other indicators of social performance raise additional red flags. For instance, Canada gets a "C" grade on Gender Income Gap, which is bluntly measured as the ratio of male to female income per capita. Compare that to Statistics Canada figures showing women aged 25 to 29 with a graduate degree or professional diploma earned 96% of the income of their male counterparts in 2005. The male-female income gap depends on factors such as education, occupation, and number of years of experience, which the Conference Board ignores.

Effective public policy requires reality. Overstating poverty estimates, as the Conference Board has done, only hinders us from helping those most in need.



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