Carlito Pablo, Georgia Straight
Doing nothing to eliminate poverty isn’t free. It’s actually at least twice as costly to keep people poor as to improve their lives.
A new study that quantifies the price of poverty in British Columbia arrives at this conclusion, making a solid economic argument for why society needs to take care of its most vulnerable members.
The groundbreaking report was published by the B.C. office of the Canadian Centre for Policy Alternatives (CCPA), the Social Planning and Research Council of B.C., and the Public Health Association of B.C.
“It provides a new opportunity to look at poverty in a different light,” author and CCPA economist and researcher Iglika Ivanova told the Georgia Straight in a phone interview. “We’ve always looked at it from a moral lens like, ‘It’s not fair for people to live in poverty in this rich province,’ and I think that’s very valid. But now we have an additional argument. And it is that ‘It doesn’t make economic sense to keep people in poverty.’ ”
Economist Iglika Ivanova crunches the poverty numbers.
The 45-page study determines that poverty represents a direct cost to the government of $2.2 billion to $2.3 billion a year, or about six percent of the provincial budget. This covers additional costs for health care, policing, and the justice system, as well as forgone income taxes and higher transfer payments to people with low incomes.
But the overall cost to society is much higher. The report estimates potential public costs—including from additional crime health care, and forgone productivity and economic activity resulting from poverty—at $8.1 billion to $9.2 billion a year.
These amounts tally up to between 4.1 percent and 4.7 percent of the province’s gross domestic product, or the overall economy.
“That is as much as $2,100 for every man, woman, and child in B.C., or $8,400 for a family of four, every year,” the report states. “In contrast, the estimated cost of a comprehensive poverty-reduction plan in B.C is $3 [billion] to $4 billion per year.”
Ivanova said the government needs to show leadership and vision.
“You can kind of understand where they’re coming from, because all the programs that are necessary to solve poverty are expensive,” Ivanova said. “So if you don’t know how much it’s costing you right now and you know very well how much it’s going to cost you to do something, then of course you wouldn’t want to do anything. The other barrier to government action, and I hope we can overcome it, is that a lot of the costs that they need are up-front, while some of the benefits take a few years to get realized. And this presents a problem with the electoral cycle because you would have to spend the money, and then in four years when you go to the polls, maybe you haven’t realized the benefits.”
The study notes that B.C. has the highest poverty rate in the country. Twelve percent of British Columbians, or more than half a million, are poor. The province has the worst record for child poverty in Canada.
Despite all this, B.C. is one of the few provinces that do not have a legislated poverty-reduction program that contains specific targets and time lines. Seven provinces either have such a program or are in the process of developing one.
According to Ivanova, most of these poverty-reduction plans, like those in Quebec and Newfoundland, either have been introduced with all-party support or have attained all-party support. “This is key because poverty-reduction strategy requires a sustained investment that should continue regardless of the particular government in power at any given time,” she said.
The study shows that if the incomes of the poorest 20 percent of British Columbians were improved, that would save the public health-care system $1.2 billion a year, or 0.6 percent of B.C.’s GDP.
It also calculates the poverty-related costs of crime in the province at $745 million annually.
The biggest cost of poverty comes from lost productivity, forgone earnings and potential government income from income taxes, and social assistance, employment insurance, and other income transfers to low-income people. The study places this cost at $6.2 billion to $7.3 billion per year.
“Purely on economic grounds, it makes more sense to tackle poverty directly than to continue to pay out year after year for its long-term consequences,” Ivanova’s study argues. “The real question is not ‘Can we afford to reduce poverty?’ but ‘Can we afford not to?’ ”