MLI senior fellow Philip Cross writes in the Financial Post that to the surprise of many, the poverty rate barely budged in the recent recession. This is quite striking, since poverty rates have tracked unemployment in previous recessions. “Coming out of the worst recession in a generation, few question that low-income people were served well by the social safety net. This remarkable feat has gone entirely without comment or appreciation, while some pundits still rail about how mean our society supposedly has become,” writes Cross.
The social safety net worked
Philip Cross, Special to Financial Post | 17/09/13 |
The passing of the fifth anniversary of when the financial crisis morphed into an economic crisis serves as a reminder of how long much of the Western world has experienced slow growth, with no return to normalcy on the horizon.
As usually happens during extended periods of lethargic growth, the public debate increasingly has shifted from how to stimulate growth to how to distribute its meagre offerings. The mentality of redistributionists seems to be if we can’t make the pie bigger for everyone, let’s carve out a bigger slice for favoured groups in our society
In this debate about distribution and inequality, it is fundamentally important that the exclusive focus has been on the middle and upper classes, and not the poorest members of society. This is remarkable, because people at the bottom of the income ladder usually suffer the most when the economy stumbles.
The nearby graph shows that there was a close relationship between the unemployment rate and the poverty rate (broadly defined as income below Statistics Canada’s Low Income Cut Off). During the recessions of the early 1980s and 1990s, the unemployment rate jumped nearly four percentage points. As a result, the poverty rate rose over two points in 1982, and nearly four points in the early 1990s. A corollary of former President Ronald Reagan’s assertion that “the best possible social program is a job” is that losing a job aggravates poverty.
However, during the recession in 2009, the poverty rate in Canada barely budged. There is no precedent for poverty not increasing during a recession. Some advocacy groups clearly were surprised by this development. Citizens for Public Justice launched a project in 2009 called “Bearing the Brunt” to capture how the recession would disproportionately impact the poor, a textbook example of embracing a narrative before the fact. The report failed to note that the poverty rate did not soar as they had expected—poverty was the economic ‘dog that didn’t bark’ during the economic night of recession. … To read the rest of Cross’s column click here.