John Richards tells us “tough love” was the right public policy stance for governments to take in the mid 1990s. In his report released today by the C.D.Howe Institute, Reducing Lone Parent Poverty: A Canadian Success Story,Richards tells us that the tightening of access to welfare and the imposition of workfare was the kick-in-the-butt that lone parents needed to move themselves out of poverty. He says: “Large reductions in lone-parent poverty demonstrate that the generous social assistance regimes pre-1995 were a bad investment from the perspective of both the poor and taxpayers.”
Looking at the reduction in poverty rates since 1995, one could only see success stories nomatter what group you look at. That is because poverty rates, however you measure them, reached their highest levels in 1996 for every group except seniors who have seen nothing but declines in poverty rates since such data started being kept, in 1976. Indeed seniors are the true success story when it comes to poverty reduction.
Richards is right on two points. There was an important reduction of poverty rates for lone parents, and they did work more. It may not be because of public policy. Lone parents worked more primarily because of the extra work effort put into the paid labour force by women, and that is as true among two-parent families as lone-parent families. The fact that more people were working, and working longer hours, is less a function of public policies that smiled upon workfare and the destitution of those turning to public support than the fact that Canada created more jobs in the decade 1997 to 2007 than any other G7 nation. When there are jobs, people take them.
If anything, Richards’ work should be a wake-up call on the limits of this approach to poverty reduction, given the scale of job loss that occurred in the opening six months of this recession, unrivalled by anything in the post-war period.
A quick glance at the following charts will show that, whether lone parent or two-parent family, families with children were working considerably more than in the mid 1990s, or even in comparison to the mid 1970s and mid 1980s, until the Great Recession came along in 2008. (The vast majority of lone parent families are headed by single mothers. About 2% of all families with children are raised by single fathers. The earnings gains that have been made in all families with children in the bottom half of the income distribution have mostly come by way of the extra paid labour of women. The real “success” story of lone parent poverty reduction Richards writes about is the reduction in the poverty rates faced by single mothers. That is partly a function of single mothers working more, and partly a function of more affluent women either breaking up with their partners or having kids on their own. Neither factor that might explain increase in median incomes of single mothers are attributable to public policy.)
Since, with rare exceptions, it takes two to get and stay in the comfortable middle, whether a single mom works or not is a indeed critical factor in her family’s finances. The fact is, though, working may not be her ticket out of poverty. Many of the jobs created in during the job juggernaut of the decade 1997 to 2007 paid less than $10 an hour. Ontario actually grew its share of such jobs in that decade. As the single biggest labour market in the country, this is reason for concern.
Richards may discount the need for interventionist state supports to help reduce poverty among those who can work, but there has been a second notable factor behind the reduction of poverty among lone parents since the mid 1990s: the important increase in Canada Child Tax Benefits and the National Child Benefit Supplement, which has significantly raised the incomes of the poorest families raising children in every jurisdiction in Canada without income testing or variability across jurisdictions. (I’d add another graph here, but it’s getting a little unweildly!)
Instead of cutting back income supports to reduce “dependency” as virtually every province did in the mid 1990s, the federal program simply said: If you have children under 18, you need some support. The poorer you are, the more support you need. This is not “soft” love. This is common sense. From 1998 until 2006, when the current government took office, there were important improvements to this program, notwithstanding the fact that more and more people were working. That’s because working may move you out of brutish poverty, but not out of a life filled with endless struggle to make ends meet.
Many analysts and politicians view a job as the best social policy. While there is much to be said for the virtues of work, it does not replace sensible and supportive social policy.
We have yet to see the impact of the Great Recession on household incomes, but if past recessions are any example, we will see up to 2 million nouveau poor added to the 3 million who were deja poor when the recession hit. (I’ll be publishing a report on this in the coming week.) As the Age of Austerity approacheth, let us hope that reports like this help define the limits of tough love, and provide incentives to gear up the many poverty reduction strategies in Canada. It is both achievable and affordable to reduce poverty for every group in Canada. Now that would be a success story worth writing about.
- Update: A Petition of Academics Against the CCPA Audit (September 11th, 2014)
- Do C. D. Howe’s Numbers Support its Policies? (November 6th, 2013)
- Inflation Collapse Confounds Monetary Hawks (May 17th, 2013)
- BMO Professor vs. Bank Regulation (April 18th, 2012)
- Canada Goose Egg (December 23rd, 2011)