An article from the May 6, 2011 Globe & Mail (Anna Mehler Paperny & Tavia Grant)
When people are poor, unemployed or homeless, it hurts that bottom line of all Canadians. A growing number of studies, and even the country's wealthiest citizens, are urging a new way of thinking: Eliminate crushing poverty among the lowest earners, and the wealth will trickle up
Behind corridors lined with contemporary Canadian art, sitting at a dark wooden table in his downtown Toronto office, Ed Clark offers some economic advice that might not typically com from Bay Street.
Give the poor a tax break.
"I say, 'Why don't you cut the taxes of the most overtaxed people' It isn't Ed Clark," the Toronto-Dominion Bank CEO said in an interview earlier this year. "It's the people at the low end, because they face the highest marginal tax rates."
It may seem an uncommon prescription in his neck of the woods. But there's an increasing awareness, among even the country's most wealthy, the poverty reaches beyond the tables of the hungry and digs into their own pocketbooks.
When people are poor, out of work or homeless, it hurts the bottom line of all Canadians. And as the country struggles to maintain a shaky recovery amid growing global economic uncertainty that's not a hit they can afford to take.
If Ottawa and the provinces fail to make this a priority, Tory Senator Hugh Segal predicts, "over time, we will begin to run out of the money that we need to deal with the demographic bulge because it will be consumed in the health care requirements of the poor, which will increase. It will be consumed in the costs of the illiteracy and unemployment which relate to poverty. ... And it'll be unsustainable."
It's not just Canada's problem: Income inequality is sparking social unrest in the Middle East, North Africa and China.
It rang alarm bells at the Organization for Economic Co-operation and Development's conference in Paris this week, where the think tank warned that if a slew of countries - from Sweden to Canada to the United Kingdom - don't take drastic action by raising taxes for the riches, they will risk runaway increases in inequality.
That growing polarization hasn't been lost on Canada's neighbour to the south: In unveiling his deficit-cutting plan last month, U.S. President Barack Obama included significant tax increases for America's richest.
Canada's polarized 41st Parliament reflects the country's growing income gap. And Prime Minister Stephen Harper's success in this election hinged in large part on his ability to play off fears of unstable prosperity.
Now, these 308 denizens of a redrawn House of Commons have their work cut out for them: Mind the income gap, or pay the economic penalty.
It's already on the radar of some provinces: One of Christy Clark's first action as B.C. Premier was to raise the province's minimum wage for the first time in a decade and offer a tax cut for low-income families. Ontario has launched a sweeping review of social assistance programs that Community and Social Services Minister Madeleine Meilleur has admitted are failing the provinces neediest.
"It's not in our intereste to have a mortgage-holder foreclose," said Tamara Vrooman, CEO of Vancouver-based VanCity credit union.
"The way we do business affects the economy not only in terms of profitability," she said, "but...how able the people who use our services are to continue to do that in the future."
Despite Canada's reputation for a strong social safety net, the country is becoming economically polarized. And the decades-old dominant economic dogma that growing wealth among society's highest earners would trickle down to those less fortunate is being challenged by an alternative approach: Eliminate crushing poverty among the lowest earners, and wealth will trickle up.
As the incomes of the country's top earners have risen, the incomes of Canada's lower- and middles-income earners have stagnated.
The recession widened the chasm, and a subsequent recovery hasn't closed it.
While economic slumps tend to hurt those already vulnerable, this one has been especially deep and especially unequal in who recovers: On paper, almost as many jobs have been added as were lost during the financial crisis. But they offer fewer hours and less pay = and some of the hardest-hit sectors aren't coming back.
Food bank use hit a record high in 2010. Tellingly, more of the people using those food banks have jobs - they just don't make enough to pay the bills or feed their families.
The ranks of the working poor have swelled as minimum wages fail to keep pace with rising costs and social assistance levels drop.
"The economy took a hit and then is coming back up," TD's Mr. Clark said. "but what Canada's economy will look like coming out of this is different than when we were coming into it. The result of the shift in world economic conditions ... all means that the skill sets you need are shifting. Globalization is good for the world as a whole, but its benefits are not equally distributed."
The ripple effects: how homelessness hurts your bottom line
From TransAlta CEO Stephen Snyder's office in a gentrifying downtown Calgary neighbourhood, you can look out and see the trendy Hotel Arts and St. Germain restaurant - and, kitting corner, a cluster of under-resourced and overflowing emergency shelters and drop-in programs.
Boomtown Calgary, which for years led Canadian cities in economic growth, also had the dubious distinction of having the country's fastest growing homeless population in 2008. From 2004 to 2006, homelessness jumped by 30 per cent. Homelessness costs taxpayers money - in forgone wealth and social service spending. As evidence of the social and financial costs of in-equality mounts, a growing body of research indicates paying to get people out of poverty can be an economic boom. Calgary's business community crunched the numbers: It costs four times more to pay for a year's worth of emergency shelter, emergency room medical care and law-enforcement for one homeless person than it costs to fund that person's supportive housing for a year.
More recent figures have back them up when it comes to the cost of poverty: A study earlier this year from Toronto's St. Michael's Hospital found homeless patients cost hospitals an average of $2,599 more than their housed counterparts.
At the same time, research into projects that guarantee people a minimum annual income indicated savings in everything from social services and health care to law enforcement.
Some see a solution in a 40-year-old experiment: In the 1970s, Manitoba wanted to see what would happen if it guaranteed poor people in a few communities a set annual income.
The results are striking, said University of Manitoba professor Evelyn Forget, who's now studying the program's effects.
The philosophy behind this is simple: People are more likely to stay in school, out of emergency rooms and out of jail; they contribute to the economy through their purchases; they're more likely to move eventually above the poverty line and pay taxes.
For years, Senator Segal has been campaigning for the country to implement something similar - replacing welfare programs by giving a top-up to bring low-income families above the poverty line.
The issue came into the fore in last month's election campaign: The parties squared off on a guaranteed income program for low-income seniors.
The irony is that Canada already scores high cmopared to other OECD countries when it comes to helping the elderly. Where it falls short is where it matters: The working-age poor - the ones who should be contributing to the economy.
"With respect to working-age poverty, our numbers are really bad," Mr. Segal said. "And that's where we need to do more."
"I don't think we should under-estimate the uneven effect of this recession," said Anne Golden, CEO of the Conference Board of Canada. "The gap is growing. If the gap gets too big, that affects the quality of life for all of us."
