The Cost of Poverty

"The cost of poverty – in health care, criminal justice, social services, lost productivity, lost opportunity – is a cost we cannot afford any longer.” Tony Martin, former MP

How expensive is poverty in Canada?

It seems counterintuitive to think about the fact that poverty, which is typically thought of as economic deprivation, could be seen as expensive. In reality, poverty is one of the biggest burdens on the economic, healthcare, and criminal justice systems in Canada. It is challenging to know how much poverty costs Canadians precisely, although there are estimates available. In 2011, the federal government spent $19.9 billion on Employment Insurance benefits alone. The same year, almost $4 billion was transferred to low-income families from the federal government.

The most information available regarding the cost of poverty is province-to-province. For example, a recent report from Ontario states that poverty costs the government (in collaboration with the federal government) between $10.4 billion and $13.1 billion a year. Nova Scotia recently declared that poverty costs the province (including governmental, societal, and individual costs) $2.4 billion per year. Saskatchewan pays up to $3.8 billion per year on poverty as a whole, including $2.6 billion in absent taxes and contributions to the GDP. In British Columbia, the government spends between $8.1 and $9.2 billion on poverty.

One of the challenges is that there are so many factors to consider with relation to poverty. Although it is relatively simple to think about the cost to the economy of individuals who are unemployed or precariously employed (either working minimum wage or temporary jobs), this is only a small portion of the picture.

How does healthcare fit in?

The World Health Organization has declared poverty to be the single largest determinant of health. Poverty can and does lead to illness (due to poor nutrition, inadequate shelter, greater environmental risks and lesser access to healthcare) but the opposite is also true; illness leads to poverty by reducing household savings, overall productivity, and quality of life for individuals and families.

Many people do not realize the cost to the healthcare system that stems directly from poverty. Poverty causes serious health problems for those individuals living in poverty — for example,  living in poverty can double or triple the chances of developing diabetes and complications such as blindness and cardiovascular disease — but it also causes financial problems for the healthcare system itself. Estimates place the cost of poverty on the Canadian health care system to be $7.6 billion.

Provinces are spending up to half of their budgets on healthcare costs. For example, British Columbia has included $3 billion in its new budget to reduce healthcare costs over the next three years.

The Public Health Agency of Canada has argued that the key to ending the load on the healthcare system is to invest early — they claim that $1 invested in the first few years of a low-income person’s life can save up to $9 in the future in health and criminal justice systems.

What other factors contribute?

The healthcare system is not the only way that poverty costs those living in Canada. There is an increase in social assistance spending (estimates place the monetary value at $720 million per year at the provincial level) where poverty abounds. At the federal level, $11.2 billion was spent on the Canada Social Transfer. In 2011, almost $4 billion was transferred to low-income families from the federal government. That same year, the Canada Mortgage and Housing Corporation (a federal corporation which supports affordable housing) alone cost $3 billion in tax dollars.

Another spending avenue is the criminal justice system. There is a direct link between poverty and high rates of incarceration, which costs the government and taxpayers a significant amount of money per year — Saskatchewan is thought to spend between $50 and $120 million per year on the criminal justice system.

What needs to be done?

Poverty and inequality are complex issues that have huge and devastating impacts on individuals and Canadian society as a whole. Systemic poverty is the root cause of many health and social problems, not to mention the economic toll. Creating lasting and meaningful plans that use a human rights framework to address poverty would be costly, but not nearly as expensive as doing nothing.

A recent inquiry in British Columbia reported that per year, it would cost the province $3-4 billion to create and enact a poverty reduction strategy — a staggering amount until you consider that doing nothing to end poverty costs the province $8.1-9.2 billion every year. Enacting policies to end poverty is the best step forward legally, morally and economically.