A poverty plan in Alberta will save the government billions

02-6-12

Alberta’s provincial government is facing a choice: spend billions to maintain poverty, or address the issue head on and save billions.  The answer is not only simple, but it is supported by similar reports on the costs of poverty that have been developed in other provinces: develop a poverty strategy, save billions and create a healthier, happier society.

Across Canada calls for action on poverty are growing as provinces and territories develop and implement provincial and territorial poverty strategies.  Currently, three provinces (British Columbia, Alberta and Saskatchewan) are trailing the rest of the country as they have failed to develop, or implement a plan.  Organizations in Alberta hoping to change this have offered compelling evidence in favour of the shift.

Today, Vibrant Communities Calgary and Action to End Poverty in Alberta released “Poverty Costs: An Economic Case for a Preventative Poverty Reduction Strategy in Alberta”, which points to the billions of dollars spent on maintaining poverty versus the billions that could be saved if plans to prevent and reduce poverty were put in place.

 Approximately 400,000 Albertans are living in poverty, of which 73,000 children, with 34,000 below the age of six.  Poverty is costing the provincial government between $7.1 – $9.5 billion annually. The fourth report of its kind in Canada, “Poverty Costs” breaks down the total amount governments spend on the current system, and includes the economic losses from taxes and potential income:

  • $1.2 billion in health care costs
  • $560 million in costs attributable to crime
  • $473 million – $591 million in intergenerational costs
  • $4.8 billion – $7.2 billion in opportunity costs

Similar to welfare in other regions, Alberta’s income assistance structure puts the onus on the individual to pull themselves out of poverty.  But poverty is not the result of poor choices, as many people seem to think; rather it is a systemic issue that requires policy change,

This means that poverty persists regardless of individual behaviours, attitudes, and choices. It means that as a society we have created systems that perpetuate poverty and hence allow poverty to persist.”

For example, welfare rates in Alberta are well below the unofficial federal poverty line (Low-Income Cut-Off After Tax), which leaves little money available for the necessities of life: food, clothing, shelter.  Rising costs exacerbate the situation and many individuals are forced to make difficult choices about paying the rent or buying food.

One policy related to welfare is seen as a good practice for a poverty strategy – allowing individuals to hold assets up to $5,000 in the bank while on welfare.  In other provinces where this policy is not in place a person will scrape by below the poverty-line with no opportunity to save. How can people be expected to move forward when welfare polices deplete them of all of their resources?  This results in a perpetual need for income support programs such as welfare.

The working poor are also mentioned in the report along with growing inequality the province. While Alberta is rich in resources, it is also home to the most financially vulnerable with many households maintaining a higher debt-to-income ratio than the Canadian average (143% versus 127% nationally).  As many people struggle to stay on their feet and off of the welfare system, they find themselves sinking further into a financial hole.  This is not the recipe for a prosperous and healthy society.

The report offers an economic basis from which to develop a poverty strategy.  While the focus is on the role of the province, the report states that all levels of government need to be involved.  Poverty reduction requires a long-term approach with multiple stakeholders involved.  The economic evidence to take immediate action speaks loud and clear, and is supported by other reports in British Columbia and Ontario.  A statement at the beginning of the document sums up the overall message: “The conclusions are clear: investing in poverty prevention would be much less costly in the long run than spending to alleviate poverty in perpetuity.”