Reducing poverty a sound investment in uncertain times : Failing to invest now will lead to higher societal costs down the road

 

by: John Kolkman, ESPC

The provincial budget on Tuesday should invest in a comprehensive strategy for reducing Alberta’s high rates of child and adult poverty. The slowing economy makes such investments even more important. There has been a modest drop in child poverty in recent years due to a strong economy and some reinvestment in social programs. However, even these gains will be put at risk if the Alberta government makes the wrong choices in its budget.

The last time the Alberta economy hit some turbulent waters back in the early 1990s, the government’s response was to make deep cuts to social programs, including social assistance, affordable housing and benefits to Albertans with disabilities. The results were predictable. Homelessness increased. Poverty spiked. So did the number of children in government care.

This time the Alberta government must make better choices. Fortunately, the province is in a much stronger budgetary position today than during the early ’90s. By the time of the deep cuts of 1993, the Getty government had been running multibillion-dollar budget deficits since the mid-1980s. By contrast, until this year, there has been a spectacular run of consecutive multibillion-dollar budget surpluses.

The Stelmach government has not yet had to dip into the $7.7 billion in the Sustainability Fund or the $7 billion in the Capital Account. While this will likely change with next year’s budget, that’s exactly what those accounts were intended for. They were designed as short-term savings accounts to be used to cover sudden or unexpected declines in government revenues as are currently being experienced.

Cutting social supports will only make poverty worse and further depress government revenues. By contrast, investments in poverty reduction will help stimulate the economy. Lower-income Albertans will spend increases in social benefits on necessary goods and services, thus creating jobs and economic activity.

The Stelmach government has made promising beginnings in improving the well-being of low- and modest-income Albertans. The decision to eliminate the health-care premiums tax on Jan. 1, 2009 added $900 million to the bottom lines of employers, employees and all but the lowest-income Albertans. Eliminating health premiums came at an opportune time, acting as a cushion against a slowing economy.

Last month, the provincial government joined several cities, including Edmonton, in committing to a plan to end homelessness in 10 years. We’ll know on Tuesday whether the dollars needed to make this plan work will actually be invested.

But much more can be done to correct a situation that, according to the 2006 federal census, saw more than one in 10 Alberta children (one in six children in the City of Edmonton) living in poverty during the height of Alberta’s recent boom.

There’s still significant room to improve provincial benefit programs for low-income Albertans. For instance, Alberta could join several other provinces that have their own child tax benefits to supplement federal child tax benefits. Child tax benefits (including the supplement for low-income families) already contribute much more to alleviating poverty than provincial social assistance payments. Enhancing child tax benefits, including introduction of a parallel Alberta benefit, is the most important thing that can be done to lift more children out of poverty.

Eligibility for Alberta’s Family Employment Tax Credit should be expanded to mirror the federal Working Income Tax Benefit. These benefits reward work effort by supplementing the income of those earning low wages. Four out of five low-income Albertans work. At present, provincial benefits are restricted to working families with children. They should be available to all low-income earners, including single adults and childless couples.

Provincial low-income benefits should be tied to living costs, and not increased only when the government finds it expedient. Two years ago, the Stelmach government took the commendable step of linking the minimum wage to changes in the Alberta average weekly earnings index. Inflation-proofing should be extended to programs such as Assured Income for the Severely Handicapped, social assistance, and the Alberta Seniors’ Benefit.

Arguably, the Stelmach government has done more in two years to improve the economic well-being of low-income Albertans than the Klein government did in 15 years. What is lacking is a comprehensive approach to tackling poverty.

Last December, the Ontario government released a poverty reduction strategy, following the lead of other provinces, including Quebec and Newfoundland. The Ontario strategy calls for a 25-per-cent reduction in child poverty over five years, lifting 90,000 Ontario children out of poverty. If Ontario — facing a more challenging set of economic circumstances — can make a firm commitment to poverty reduction, surely Alberta can.

The Alberta government already makes extensive use of business planning principles. This involves setting targets, implementing a plan to meet the targets, and then measuring results. The same sound business planning approach is needed for the successful implementation of a strategy to reduce poverty.

The economic slowdown makes the adoption of a comprehensive poverty reduction strategy even more urgent. Doing nothing will cause poverty rates to rise as vulnerable workers lose their jobs and household incomes decline. Failing to invest now will lead to even higher societal costs down the road. Based on studies in Ontario and elsewhere, persistent poverty could be costing Alberta $5 billion to $10 billion a year in lost economic potential and extra costs for things like emergency medical services, child protection and policing.

Political rhetoric and statements of good intentions just don’t cut it. Instead, the upcoming Alberta budget should include strategic investments in poverty reduction that will benefit all Albertans in the long-term.

John Kolkman is the Research and Policy Analysis Co-ordinator of the Edmonton Social Planning Council. www.edmontonsocialplanning.ca