Why Our Governments Need to Address Poverty Now

August 1, 2014 10:00 am

Canadians might be surprised to learn that 86 families now hold more wealth than the poorest 11.4 million Canadians. Is this a Canada to be proud of? Hardly.

According to many studies, the Canadian poverty rate remains high. A recent OECD report shows that the very rich are taking an ever greater share of income. And a new study from three leading Canadian academics shows the rich obscure the total extent of their individual wealth through private companies, which means they are even richer than we thought.

Why should we care?

Because poverty and inequities hurt all of us in the long run. They erode social cohesion and create a burden on all taxpayers to pay for poverty reduction, healthcare services, unemployment, crime and homelessness.

Our economic system and well-being are at risk of serious deterioration unless we take action now.

Here’s what the evidence says about the devastating outcomes of poverty: poorer health, more chronic disease, more avoidable deaths, social injustice, increasing demand and costs for healthcare services and reduced productivity of the workforce. On a large scale and over the long-term, inequality can also slow the economy and erode democracy, political and social stability.

Those in the bottom half of the economic pecking order with stagnant incomes grow resentful, envious, hopeless and distrustful of business leaders and governments. And so we have social unrest such as the Occupy movement.

How did we get here?

For years, most Canadian governments have followed an agenda based on austerity. They have lowered taxes and cut social programs to balance budgets with a focus on economic growth and “trickle down” economics. The 2014 report of the Office of the Parliamentary Budget Officer shows that cuts to income tax, GST, corporate taxes and others amount to governments having $30 billion less to spend per year. For the most part, this has meant fewer income supports for the poor and inadequate investments in social housing, early child development, education, healthcare and infrastructure development (with the exception of the federal stimulus program in response to the 2008 recession).

The wealthy have become wealthier with the help of a higher rate of returns on capital (over incomes), tax breaks for capital gains and wealthy estates, and inadequately controlled offshore banking.

Economist superstar Thomas Piketty points out that these flaws in our economic system are not a reason to abandon the system itself, which has also led to abundant innovation and wealth creation. The solution is rather to moderate the excesses of the system so that prosperity is more equitably shared by the entire population. Even the IMF, which has pushed austerity agendas for decades, has recently stated that growing inequity is bad for economies and judicious redistribution is beneficial for economic growth.

Research has shown that countries such as Iceland, Poland and Sweden, which have invested in social programs like health and education in the last decade, have made better recoveries following the recession than those that followed an “austerity” agenda.

Economists call what we need “a judicious redistributive approach” — that is, to raise government revenues via natural resources, taxes on the wealthy (income, estates, capital), regulation of offshore tax havens, and taxes on externalities, such as pollution, tobacco, alcohol and sugar. Governments should direct these revenues toward social investments such as income support, education, healthcare and infrastructure.

The business community also has a role. Businesses can help reduce poverty and inequities by paying their share of corporate taxes and having a triple bottom line — people, planet and profits — with a living wage for their staff, co-ownership and profit sharing policies. The public as consumers can vote with their wallets and support such progressive businesses.

We are paying dearly for inaction. It would cost taxpayers less to eradicate poverty than to continue to pay for poverty-related policing, corrections, housing and healthcare. In B.C., the estimated cost to implement a poverty reduction plan is $4 billion annually, according to the Canadian Centre for Policy Alternatives. Right now, poverty costs the province up to $9.2 billion per year. Businesses and governments must take measures now to reduce poverty and inequities. It is time for concerned citizens to demand action.

By: John Millar

Millar_JohnJohn Millar is an expert advisor with EvidenceNetwork.ca and a Clinical Professor at the School of Population and Public Health, University of British Columbia. He is also the vice president of the Public Health Association of BC (PHABC). For more information, please see the PHABC’s position statement on poverty and inequity.

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