February 24, 2011

Fixing the poverty escalator

When the Collectif pour un Quebec sans Pauvrete held meetings across the province to craft a citizens Bill to Combat Poverty more than a decade ago, someone said living in poverty is like being on a down escalator. The people on the up escalator tell you to just try harder to climb out of poverty. But with every step you take to climb up, the escalator carries you down.

If we are to end poverty in Ontario and in Canada, we have to focus on the escalators. That means looking at the things that make that down escalator go down and reversing them. Equally important, we need to examine the up escalator, which has a rapid and steep incline the further up you go. The movement of those two escalators -- down and up -- is driving the growth in inequality in Ontario and in Canada.

Thinking about sustainable incomes gives a glimpse into how the escalators function. Several years ago, the Tamarack Institute launched community initiatives aimed at helping low income household achieve sustainable incomes. The inititiatives identified four pathways to sustainable income:
  1. Market-based pathways that involve progressive workplace practices, education and training opportunities, and opportunities for self-employment income;
  2. Income support pathways that link residents with serious barriers to full employment to government programs that top up their modest incomes through existing programs;
  3. Income from Financial Assets pathways that provide opportunities for people to create, expand and manage financial assets that strengthen their financial security and establish a complementary income stream;
  4. Saved Income pathways that assist low income residents to reduce the costs of major household expenditures (e.g. housing, medical benefits, transportation, education) and allowing them to stretch their limited budget.
Here is one example of how the two escalators can help drive inequality. When you are living in poverty, you do not have a cushion of financial assets either to provide income or serve as a buffer, not just for emergencies but to cover day to day costs. (Indeed, social assistance policies in Ontario require you to use up almost of all of the financial assets you may have saved before you can get Ontario Works.) People  in this class often find relatively low-paid work, that is often temporary, part-time or casual. If you have a bank account, when you get paid the bank will hold the check for a few days for the cheque to clear before they will release the money. As a result, many people turn to cheque cashing places who will readily cash those cheques, for a fee. And those fees are much higher than typical bank charges.

On the up escalator, savings and lines of credit mean that waiting for a cheque to clear does not entail exorbitant fees. And those savings themselves can become a sources of income. Government policy helps make the accumulation of financial assets easier by allowing some forms of savings to be deducted from your taxable income (in the case of Registered Retirement Savings Plans) or to put savings in tax free accounts.

Two of the essential steps to get people off the down escalator are:

  • to ensure that income security programs (like social assistance, old age security and child benefits) are at least sufficient to cover basic needs (couvrir ses besoins): nutritious food, decent housing, transportation, household needs, clothing, etc., and 
  • that paid work provides a pathway exit poverty (sortir de la pauvrete). That means more than just covering basic needs. It means enabling people to have a real chance to get ahead.
Those are important points to bear in mind as Ontario prepares for a social assistance review and in light of the Ontario's Government's decision not to adjust the minimum wage in 2011 for the cost of living. (Although we must recognize the positive steps taken over the past seven years to raise the minimum wage from $6.85 to $10.25 -- almost enough to reach the poverty line if you work full time at the minimum.)

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