Research, Reviews, & Updates

The ESPC provides research, reviews, and updates on a range of social issues

Review in December 2008 Research Update of:

The Cost of Poverty: an analysis of the economic cost of poverty in Ontario. Report by Nathan Laurie, Ontario Association of Food Banks, November 2008.

The Costs of Child Poverty for Individuals and Society: a literature review. Report by Julia Griggs and Robert Walker, Joseph Rowntree Foundation, October 2008.

Estimating the Costs of Child Poverty. Report by Donald Hirsch, Joseph Rowntree Foundation, October 2008.

The Economic Costs of Poverty in the United States: subsequent effects of children growing up poor. Report by Harry Holzer et al., Center for American Progress, January 2007.

Poverty is expensive. Some new reports, from the UK, the US, and across Canada, are demonstrating that the costs of poverty over the long term are far greater than the costs of prevention. What‟s more, these studies have deliberately used conservative measures in estimating the financial costs of poverty to ensure that the cost of poverty is not exaggerated or overstated – which means that in all likelihood, the true costs of poverty are even greater. The numbers below are summarized from 4 reports that have recently been added to our library on the costs of poverty to society. Note that there are, inevitably, great challenges in calculating the financial costs of poverty – while the various reports are useful tools and give an idea of how poverty reduction programs could save money, the different methodological approaches yield different cost estimates and are not directly comparable.

  • Overall: Overall cost of poverty in Ontario: $10.4 billion to $13.1 billion per year, which is equal to $2299 to $2895 per household in Ontario per year, or 5.5 to 6.6% of Ontario‟s GDP. Overall cost of child poverty in the US: $500 billion per year, or 4% of GDP.
  • Intergenerational Effects: Children are not poor by their own making, and there is evidence demonstrating that children who grow up poor are less able to escape poverty later in life. Lost income tax revenues created by lower incomes of adults who grew up in poverty: in Ontario, $1.3 billion to $1.6 billion per year; in Canada, $3.1 billion to $3.8 billion per year. Lost productivity resulting from the experience of growing up in poverty or near poverty in the US: $170 billion per year, or 1.3% of GDP.
  • Health: Growing up in poverty negatively affects health – this conclusion is supported by well-documented and peer reviewed studies that have examined the relationship between socio-economic status and a variety of health indicators throughout the life cycle. Cost of increased health expenditure and reduced value of health in the USA: more than $150 billion, or 1.2% of GDP per year. Cost of additional primary healthcare expenditure resulting from child poverty in the UK: approximately £859 million per year. Cost of additional acute healthcare expenditure resulting from child poverty in the UK: £1.2 billion per year. Potential health care savings of raising the incomes of those in the lowest quintile to be equivalent to the income of the second-lowest quintile: in Ontario, $2.9 billion per year; in Canada, $7.6 billion per year.
  • Crime: Although crime is correlated with poverty, it is difficult to establish definitive causal links between the two. A number of studies, however, demonstrate links between crime and other indicators of poverty, such as educational attainment, literacy levels, and neighbourhood inequality. Additional costs of crime created by child poverty in the US: $170 billion per year, or 1.3% of their GDP. Cost of child poverty for additional police and criminal justice services in the UK: £1.2 to £2.9 billion per year. Potential savings in the cost of crime by reducing poverty and raising literacy levels: in Ontario, $250 to $550 million per year; in Canada, $1 to $2 billion per year.