Poverty Falling Dramatically In Canada

Commentary, Poverty, Frontier Centre

Christopher Sarlo, a professor at Nipissing University, has carved out an interesting academic niche by measuring living standards in Canada. His most recent research confirms that Canadians are doing very well in improving their material well being.

This message upsets what many call the "poverty industry", that sprawling series of organized groups with a vested interest in defining the term as broadly as possible to maximize funding for their activities. They include various social action organizations, government agencies and problem-finding elites in academia, groups who benefit directly by stoking public perceptions that poverty is growing.

This sector routinely uses measures that wildly overstate the number of poor people. One of these, Statistics Canada’s "low-income cut-off" (LICO) calculates the level of inequality in Canada or the relative difference between income groups. Despite warnings from the agency that LICO should not be used to measure poverty, various groups continue to misuse these numbers to support overblown estimates of the problem.

Why not? A gullible media swallows the numbers up and reports them as gospel. If Joe Schmoe thinks that Canada is full of poor people, he will be more willing to take out his wallet and jump on the bandwagon of big income transfers, big taxes, and more publicly funded anti-poverty initiatives.

Equating relative differences in incomes with poverty ignores important considerations like family assets and accumulated wealth. Even the well off who choose not to work and therefore report no income fall into the LICO stats. So do all families who earn less than half of the average family’s income, even though that income can provide them with a comfortable standard of living.

Sarlo strips the ideological baggage from this debate by using a simple, absolute measure of poverty. He calculates a basic-needs index based on the reasonable premise that poverty is mostly a problem of physical deprivation. It assumes people are poor if they have incomes that can not support adequate levels of shelter, food, transportation, clothing and health care. Using the basic needs index, a family of four in Canada would be considered in distress if it had less than $17,000 in income. By this measure, just under 5% of the population is truly poor.

Child poverty, a lightning rod for anti-poverty groups, has also declined dramatically since 1973 according to Sarlo’s research. Again, using the basic needs index, the child poverty rate declined by almost half from 9.06% in 1973 to 5.61% in 1994. These numbers are a far cry from the ones routinely trumpeted by the poverty lobby. Remember their questionable claim that one in four children in Canada lives in poverty?

Sarlo’s work is politically incorrect but basically on track with what most disinterested observers report. In a recent Fraser Institute study of living standards in Canada, Sarlo uses objective measures to point to dramatic improvement over the last several decades.

Canadians now live 31% longer than they did 70 years ago. Only 14% of the adult population have less than a grade nine education, compared with 43% in the early 1960s. "Basic needs" poverty has fallen from 35% of the population in 1951 to just under 5% in 1994. Real family incomes are two and-a-half times those of the early 1950s, progress produced mainly by technology-driven increases in productivity and a relatively open market-driven economy.

There is a cloud in Sarlo’s analysis. The numbers reveal that the improvements in our living standards slowed dramatically in the 1980s. Not coincidentally, this was the time when governments rapidly absorbed more of the economy with spending and taxes much of that dedicated to helping the phantom poor.

There’s an obvious lesson here.