Budget Makers Should Target Efforts To Fight Poverty, Economist Says

from the CEP News

Ottawa – The author of a report that says Canadian household incomes aren’t keeping up with debts says politicians should take a targetted approach to dealing with poverty rather than announcing further across -the-board tax cuts.

“Let’s try and target those groups that are the most disadvantaged without destroying those who have the advantages,” says Roger Sauvé, an economist and the author of a report on the finances of Canadian families comissioned by the Vanier Institute of the Family.

The report entitled simply, The Current State of Canadian Family Finances, says that in 2007 the number of people living in poverty in Canada, about 3.4 million, slightly worse than the 3.2 millionliving in pverty in 1990.

While Sauvé said the number has improved since the high tech bust of the early 2000s when more than 4 million people were in rough financial circumstances, he said Canadians have to decide if its acceptable to have a standing population of impoverished Canadians that rises and falls to the same levels with the tide of the economy.

“A lot of the programs to fight poverty have been directed at seniors and we’ve seen the poverty rate among seniors fall to the lowest of any group. The poverty among married seniors is one percent. We’ve done a good job there let’s start targetting other groups.”

Sauvé said that his research makes it clear that some disadvantaged groups have not been able to get ahead despite the relatively easy employment opportunities provided by Canada’s recent good fortune.

“It’s not enough to build up the economy and reduce unemployment,” he said. “It depends where you stand on the role government has to play in the equitable and fair distribution of incomes.”

Although he found some evidence of good news he also found cause for concern. While real wages have increased by a about one perce1% for the second year in a row household debt has increased by more quickly he says to comprise a record 131% of household income after income taxes and transfers. While he says debt as a percentage of net worth has fallen to 20% versus 22% in 1990.
But while that might make it easier for families to borrow more money it doesn’t help with cashflow.

“People go bankrupt because of cash flow problems,” he said.

While he said he doesn’t have all of the answers Sauvé said he thinks programs such as Quebec’s subsidized daycare program or local programs in the U.S. that help impoverished people acquire cars are examples of targeted programs that can make a big difference.

“Poor people with carrs make more money,” he said. He said affordable quality day care can allow single parents to find employment or pursue higher education and improve their circumstances.

Clarence Lochhead, the executive director of the Vanier Institute said the government could also consider some form of wage supplement to help working poor families. But he said the sturdy by Sauve highlights problems at all rungs of the income ladder.

Pointing to the low savings rates highlighted in the report Lochhead said policy makers need to ask why Canadians are living so close to the edge and not building in a savings shock absorber into their personal finances. Average savings as a percentage of disposable incomes has fallen from 10% in 1990 to 1% in 2007 according to the report.

While he said the problem is something individuals need to address he also said Canadian society as a whole bears some of the blame.

“We are told daily multiple times that we need to have this or that to lead the good life,” he said. “But it’s not just the private sector. I’ve heard on many occasions from governments sometimes when they are looking at the possibility of an economic slowdown we’re encouraged to continue spending.”

While plummetiting consumer confidence is seen as a bad thing by some Lochheed has another take.