Trudeau’s Poverty Reduction Strategy – An Important Element is Still Missing

On August 21, 2018 the federal government introduced what it labelled as Opportunity For All: Canada’s First Poverty Reduction Strategy, a product of lengthy public consultations over two years.  The document repeats the Liberal mantra of “strengthening the middle class and helping those working hard to join it” from the federal election campaign and the first throne speech, although the focus here would presumably be on helping those working hard to join the middle class.  It cites numerous measures, accomplished and intended, that will contribute to poverty reduction: the Canada Child Benefit, the Guaranteed Income Supplement, the National Housing Strategy, Indigenous Housing, Public Transit Infrastructure, Early Learning and Child Care, Labour Market Transfer Agreements, an Indigenous Skills and Employment Training Program, the Canada Workers Benefit, and Home Care and Mental Health.  What seems to be missing is any careful assessment of these programs and how they, or their close antecedents, have made much of a dent in Canadian poverty, which remains entrenched at more than 10% of the population.

But is this really Canada’s first poverty reduction strategy?  The Guaranteed Income Supplement dates back to 1966 as what has been considered an effective program to combat poverty among the elderly.  And the Canada Child Benefit dates back to the parliamentary resolution to eliminate child poverty that produced the National Child Benefit in 1998 and expanded transfers to low-income families with children.  In some sense, these programs are relatively successful poverty reduction strategies of their own but limited to a particular demographic group.  The new federal strategy builds on these initiatives but adds a host of other programs whose connection to poverty alleviation seems more tangential than effective, with the exception of the Canada Workers Benefit, a modest earned income supplement for low-income workers that only slightly improves on the previous Working Income Tax Benefit.

What, then, is truly innovative in this new poverty reduction strategy document?  There is some new money for programs, spread out over five to eleven years, but little that would constitute new or innovative programming.  What is new, and a first, is the introduction of an official mechanism to measure poverty and evaluate Canada’s progress in alleviating it.  The document specifies Canada’s first Official Poverty Line, currently known as the Market Basket Measure, expanded and updated regularly to capture the cost of a basket of basic needs for 50 regions and 19 communities.  This measure would replace the unofficial poverty standard, the Low Income Cutoff, which has been criticized in many circles in recent years, and would be the basis for the establishment of poverty reduction targets and assessment of success in achieving them.

The poverty reduction targets are ambitious.  Using 2015 as a baseline, the goal is to reduce poverty, as measured by the new official yardstick, by 20% in five years and 50% in 15 years, targets which align with United Nations Sustainable Development Goals.  Those ambitious objectives are assisted by the success already trumpeted in Opportunity For All, since the poverty rate fell from 12.1% to 10.6%, or by about 12% between 2015 and 2016, but achieving the targets will still be challenging.  An independent National Advisory Council on Poverty is to be established to monitor progress in attaining these goals and provide an annual report to Parliament.  The Council will also be charged with providing advice on poverty reduction to the Minister of Families, Children and Social Development and continuing the dialogue with Canadians on poverty issues.  Moreover, these proposed pillars of poverty evaluation–the Official Poverty Line, the targets, and the National Advisory Council on Poverty–are to be entrenched in legislation.

Opportunity For All signifies an important new step in achieving poverty reduction in Canada, reminiscent of the initiatives to eliminate child poverty three decades ago.  What is missing from the plan is an effective vision to achieve the ambitious poverty reduction targets.  The Official Poverty Line imposes a fairly conventional money metric on the determination of success or failure in alleviating poverty.  To achieve success, then, an effective poverty reduction strategy must transfer money to low-income households to assist them in surpassing the Poverty Line, since training and employment strategies will only help a little, especially in the short term.  But there is little new money in the current strategy that is specifically targeted to poor households.  The successful poverty reduction mechanisms of the past—the Guaranteed Income Supplement, the Canada Child Benefit and the Canada Workers Benefit—are targeted transfers along the lines of a refundable tax credit.  As Harvey Stevens and I have shown, it would be possible to convert existing non-refundable tax credits to refundable credits to constitute a modern negative income tax or means tested basic income that would effectively reduce poverty for all Canadian households at minimal disruption to the economy, but that type of initiative is missing from Opportunities For All.  As it stands, there seems little chance of achieving the targets until an effective universal income transfer program of this nature is enacted.

Wayne Simpson

University of Manitoba

October 11, 2018