Poverty in Canada Is Not a Life Sentence

10/09/2015 05:27 EDT | Updated 10/09/2016 05:12 EDT
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The plight of the poorest members of a society is certainly a legitimate cause for concern. It's worth thinking about what more we can do -- and maybe, what we can stop doing -- to help the less fortunate earn a better living.

But the notion that there are a lot of Canadians who are stuck in a cycle of poverty, in this day and age, is simply mistaken. The research is very clear on this question: Social mobility is high in Canada. In other words, despite what you may have heard, the poor are getting richer, too.

First of all, according to Statistics Canada data, just 17 per cent of Canadians found themselves in a low-income situation for at least one year during the six-year period from 2005 to 2010. This is a marked improvement on conditions a decade earlier, from 1993 to 1998, when the proportion was 25 per cent.

Periods of low-income are also becoming shorter and shorter, an indication that social mobility in Canada has grown over time. Over the same interval, the percentage of these low-income people who remained below the low income cut-off for six years fell steadily from 15 per cent to nine per cent. Measured against the population as a whole, just 1.5 per cent of all Canadians had low incomes throughout the whole period from 2005 to 2010.

On a longer time-scale, there are intergenerational studies that measure the influence of family income during an individual's childhood on his or her income as an adult. In a mobile society, family income during childhood has little influence on the income that someone will earn later in life, and everyone has the opportunity to develop his or her talents and succeed economically.

Canada does very well by this measure, ranking fourth among 16 major OECD countries according to one study -- far better than France, the United States, and the United Kingdom, for instance. The data show that only 20 per cent of a Canadian family's economic advantage or disadvantage persists into the next generation. To take a concrete example, in a family with an income that is $10,000 below the median, the members of the following generation can expect to have incomes that are, on average, just $2,000 below the median.

What this all means is that when we talk about "the poor," we're not talking about the same people year after year, decade after decade. Indeed, just 13 per cent of individuals who were in the first income quintile in 1990 (the bottom 1/5 of the population in terms of income) were still in that same quintile twenty years later, in 2009.

Following the same individuals, we see that the average annual income of those who found themselves in the lowest quintile in 1990, just $6,000, had grown to $44,100 in 2009 in constant dollars, an average increase of 635 per cent. As for individuals who found themselves in the top quintile in 1990, their incomes grew by an average of 23 per cent over this same period, from $77,200 to $94,900.

This makes perfect sense when you consider that many people at the bottom of the income ladder are still young, and that income tends to rise as one progresses through one's career. Many of those with low incomes are in fact students, driving around in rusty old cars today so that they can learn the skills, and earn the degrees, that will let them ride in style tomorrow.

In addition, having a low income when one is a young adult, or in retirement for that matter, does not necessarily imply a lack of goods and services. This is because people are generally able to smooth out their consumption levels over time. Specifically, we tend to borrow when we're young, in order to pay for studies or to buy a property, for example, and to save more as our incomes rise, building up our assets in order to maintain our living standards in retirement.

In the end, what matters more than socioeconomic position at any given moment is that those who find themselves at the bottom of the income ladder are unlikely to remain there long, that they are not prisoners of their status, and neither are their children. This is precisely the situation of opportunity that prevails in Canada.

The point is not to underplay the difficulties associated with poverty, but rather to recognize that in this country, in the vast majority of cases, poverty is a temporary state of affairs. Alarmist declarations about the supposed permanence of poverty for a substantial portion of the Canadian population -- or about the rich getting richer while the poor get poorer -- are therefore just a lot of hot air.


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