Posted on 11/05/2007 5:32:57 AM PST by Clive
Why have anti-poverty groups recently been so obsessed with the allegedly growing gap between rich and poor in Canada? Because it is just about the only bit of "bad" news left on the poverty front. It's the only angle they have left to pressure politicians for more social spending -- and, of course, continued funding for anti-poverty groups.
The past decade has witnessed a tremendous success in the eradication of poverty. Even using Statistics Canada's overly loose definition of poverty, rates have fallen dramatically since 1996. Where a decade ago nearly 16% of Canadians were living with low incomes, today under 11% are.
After accounting for inflation, seniors' incomes have risen 15%, leaving just 6.1% of Canadians over 65 in low income.
The poverty rate for single moms has fallen from 52.7% to 29.1%; still too high, but a vast improvement in just a decade. Their median incomes have risen from $21,900 to $30,400, and the increase has been almost entirely from higher market earnings rather than social payments. Where just 10 years ago 60% of single moms' incomes came from government, now just 25% does.
Even the number of children living in poverty has fallen more than a third since 1996.
To be sure, pockets of dire poverty persist. According to John Richards of Simon Fraser University, who recently analyzed the issue in a study for the C.D. Howe Institute, aboriginals, the undereducated, the mentally ill, the physically handicapped and immigrants trapped in ethnic ghettos remain poor at unacceptably high levels. He also found that high effective tax rates on the "near poor" discourage some from moving from social assistance to work.
But for the vast majority of Canadians, the news is good. Moreover, that good news is even better than official statistics indicate.
StatsCan has no measure of absolute poverty -- the inability to provide life's basics such as food, clothing and shelter. Instead, Canadian poverty numbers are based on the agency's Low-Income Cut-Off, or LICO, which is a measure of relative poverty. Persons who must spend 20% more of their income on necessities than the average family in their area are considered to be "living in low income." While such a life may be difficult, it is likely not what most taxpayers would consider "poor." The real number of poor -- those Canadians who cannot provide the essentials of life--is likely half the official LICO rate.
Which brings us back to the recent focus on the gap between rich and poor.
It is true that the pre-tax, pre-transfer income of the top 20% of earners rose faster than the income of the bottom 20% in the past 10 years. Where the gap in yearly income between the top 20% and bottom 20% was $84,500 in 1996, it was over $105,000 in 2006. The ratio of income from employment, investment and private pensions was approximately 11 to one in 1996. Today it is nearly 13 to one.
This is the number anti-poverty advocates have been focusing on ever since StatsCan released it in the spring.
But it is a phony number. No one lives in a pre-tax, pre-transfer world.
What matters in the real world is how much money you have after governments take their cut and after you have received your GST rebates, child tax credits, public pensions, disability and so on.
The post-tax, post-transfer income gap in Canada -- the real-world income gap -- was 5.6 to one in 1996 and it is 5.6 to one today.
This is the gap that matters, and it hasn't increased even a fraction in the past decade. All the wailing and hand-wringing over the allegedly growing gap between rich and poor is nothing more than a cynical attempt to convince taxpayers and politicians that poverty is still a problem requiring huge government outlays and, of course, well-funded anti-poverty groups.
There might be another reason anti-poverty activists have shied away from the good news: The improvement in poorer Canadians' status had little to do with the social spending they so adamantly endorse.
As Professor Richards points out, "the introduction of new provincial welfare protocols probably explains much of the last decade's increase in the employment rate among groups with high rates of poverty." Provinces made it harder to get welfare, so employable welfare recipients went out and found jobs. As a result, poverty went down.
It's true the economy has been strong for the past decade, producing lots of new jobs and higher pay. Had the economy not been so strong, the poverty picture might not be as rosy. Still, cutting people off welfare probably had more to do with lowering poverty than did the strength of the economy, and far more than any social program.
Remember that in the late 1980s, Ontario had its strongest economy in the past 50 years, yet welfare rates in the province still doubled during that period because the Liberal government of the day kept raising welfare rates. It wasn't until rates were cut --and it made more sense for most recipients to work than live off welfare -- that poverty rates went done.
Work, not welfare, eliminates poverty.
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Of course, there’s always the matter of paying for the pork-barrel programs politicians will claim are responsible for better povery statistics. They’ve got you no matter which way you turn.
To be poor in Canada, apparently, has become infinitely better than to be poor in the United States. And their dollar buys more of the goods and services that everybody so desperately needs.
And now, see what. The Canadian bazillionaires will soon be buying up all of the assets of the US, and we shall be flooded with wealthy and supercilious Quebecois, who expect to be addressed only in French.
With luck, our illegals will go there instead.
I’m not sure how many Robert Kiyosaki (Rich Dad, Poor Dad) fans there are on FR, but he has a different way to look at wealth.
Your “passive income” - the income not derived from your actual work, such as your investments, rentals, and intellectual property - determine your actual wealth.
Your “wealth” is defined as the amount of TIME that you can go without working and sustain your current lifestyle.
With this definition, “the poor” in America are INFINITELY WEALTHY.
nah, too cold up here.
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