There’s a big hole in Ottawa’s poverty reduction strategy, writes Sean Speer: The opportunity to work.
By Sean Speer, Sept. 6, 2017
Now that we’ve enjoyed the Labour Day holiday, it’s an opportune time to pay tribute to work and its economic and non-economic benefits. Paid work is not only essential to providing for oneself and one’s family. It has much broader implications, including for one’s health and sense of dignity, purpose, and self. Work is one of those crucial activities and institutions that underpins the good life.
This isn’t mere sophistry. A considerable body of evidence finds a strong association between work and a long list of positive economic and social outcomes.
Yet one area that’s under-explored in Canada is the relationship between work and poverty. It’s notable, for instance, that work and unemployment don’t feature prominently in the federal government’s recent discussion paper on poverty.
The evidence is clear: work and the paycheque that comes with it are key to fighting poverty.
That’s peculiar, since the importance of work as a key anti-poverty tool is broadly accepted across the political spectrum in the United States. Even a report by the left-leaning Center for American Progress (where Prime Minister Trudeau has previously spoken) observes that “the best pathway out of poverty is a well-paying job.”
American groups of all political stripes have seen the data that clearly show that employment is a key defence against poverty. The U.S. poverty rate for full-time workers is three per cent, but it’s 34 per cent for those who don’t work. Put differently: someone is 10 times more likely to be poor if he or she doesn’t work full-time.
Canadian data can be harder to come by. The 2011 book Poverty in Canada shed a bit of light. It reported that “more full-time work for the head of the family was associated with a 79.5% greater chance of exiting poverty,” while accumulating more months of work upped the likelihood by 75.4 per cent. This provides a useful sense of the extent to which work can help people escape poverty.
But data provided by Statistics Canada on the employment and income status of Canadians between ages 25 and 65 provides further evidence of the relationship between work and poverty. The results aren’t quite as striking as in the U.S. but there’s no question that paid work plays a key role in determining whether someone falls below the low-income cut off.
The poverty rate is seven per cent for working Canadians, 20.3 per cent for those unemployed, and 23.1 per cent for those not in the labour force. The findings are similar for disabled Canadians. The poverty rate for disabled workers is eight per cent compared to 27.1 per cent for those unemployed and 26 per cent for those out of the labour force.
The evidence is clear: work and the paycheque that comes with it are key to fighting poverty.
And work doesn’t just provide financial stability. It offers us structure, more personal responsibility and self-ownership, a source of status and identity, means of participating in a collective purpose, and the satisfaction of “earned success.” These intangible benefits are also major factors behind work’s positive effects on poverty.
Public policy should minimize the extent to which it discourages hiring and employment.
What does this mean for policy-makers?
One takeaway is that Ottawa’s poverty-reduction strategy must put more emphasis on encouraging work. Any new policies or programming ought to be principally focused on reducing barriers to employment, particularly for groups underrepresented in the labour force such as Indigenous Canadians and disabled persons. Examples might include: more flexible labour-market rules, an expansion of the Working Income Tax Benefit, wage subsidies and work-sharing for people with disabilities, and an ambitious set of policies to support entrepreneurship, such as lowering capital-gains taxes.
The second takeaway is that public policy should minimize the extent to which it discourages hiring and employment. Policy-makers often think about trade-induced or technology-induced dislocation, but they rarely consider the risks of policy-induced job losses or opportunity costs. Higher costs in the form of rising minimum wages, a greater regulatory burden, and other policies risk undermining employment opportunities, particularly so for the “working poor.” Similarly, income-support programming with high clawback rates (what economists call marginal effective tax rates) can be an obstacle to recipients pursuing a job or expanded hours. Governments ought to therefore apply a “job lens” to different policy choices to better understand the possible employment effects.
Labour Day reminds us to recognize the importance of paid work as an economic and non-economic institution including with regards to poverty reduction. Now is the time to redouble our commitment and efforts to a work-centric policy agenda.
Sean Speer is Munk senior fellow at the Macdonald-Laurier Institute.
