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

Poverty has an impact on and cost to society as a whole, from greater demands on the health care and criminal justice systems, to diminished workplace and economic productivity, to harmful and unwholesome divisions in society based on economic status and “class.” In dollar terms, this loss to Canada has been estimated to range from $72 to $86 billion annually, and is estimated to cost every individual over $2000 annually.

Recent data shows that there are approximately 1 in 10 Canadians, including 1 in10 children and 1 in 4 First Nations children living in poverty.  Systemic poverty is the root cause of many health and social problems in Canada.  The World Health Organization has declared poverty as the single largest determinant of health.  This is supported by a number of accumulated studies, including reports by Canadian Dennis Raphael.  All have come to the same basic conclusion: The incidence of poverty is a severe – if not the most severe – threat to the health and quality of life individuals, communities, and societies in wealthy industrialized societies such as Canada.

Poverty is not only detrimental to the health of Canadians, but has a huge price tag on the health care system.  Evidence shows that Canada would save $7.6 billion per year on health expenditures, by merely moving people from the lowest incomes bracket to the second lowest income bracket.

Researchers’ of the report, Poverty Is Making Us Sick , calculated that an increase of $1,000 in annual income to the poorest 20% of Canadians would lead to 10,000 fewer chron­ic conditions, and 6,600 fewer disability days every two weeks.   Added to this cost is price tag for the lost productivity at work and taxes from income, as well as the cost of criminal justice system, which deals predominantly with the low-income population.

The effects of poverty are far reaching, and touch all people in society.  Evidence tells us that the effects of poverty and inequality cause worse social and health outcomes for everyone in society – not just those at the bottom.  This means that as a society, not only are we paying for poverty in actual numbers, but there is also a cost to the wellbeing of the community as a whole as well.

Indeed, Canadians – from poor to rich alike – have borne this cost for far too long.  True, it will require financial investment to reduce and eliminate poverty.  But it is evident that the return on investment will be large, in the end costing less to end poverty than to shoulder its burden year after year.  A new report looking at the cost of poverty in British Columbia estimates that while keeping the status quo costs $8-9 billion, ending poverty would only cost $3-4 billion.  Eradicating poverty is not only an ethical responsibility, but it also makes good economic sense.

As the recent Cost of Poverty in BC report states, “The real question is not ‘Can we afford to reduce poverty?’ but ‘Can we afford not to?’”

*See also the 2012 report by Action to End Poverty in Alberta and Vibrant Communities Calgary, “Poverty Costs: An Economic Case for a Preventative Poverty Reduction Strategy in Alberta.”