Thinking About Poverty Part 3: Helping the Poor — A Critical Analysis of Poverty Policy in Canada
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Thinking About Poverty Part 3: Helping the Poor — A Critical Analysis of Poverty Policy in Canada

21 November 2023


This paper is a critical analysis of formal policies and programs designed to help people who live in poverty. It is really important for readers to understand that this paper does not propose alternatives (that comes in the final essay in this series) nor does it endorse any existing policies. It is simply evaluative. The focus of this essay is on government policies and programs and specifically those that intentionally target the poor. The question we repeatedly ask here is whether government help is really helping. While redistributive programs no doubt bump some households up over the poverty line, which will reduce measured poverty, is that the solution to poverty? Or do we want the same thing for the poor that we want for ourselves? Namely, a strong, independent life and the personal satisfaction that we are contributing, participating members of our community—on both the production and consumption side of the economic equation. The OAS grant, originally means-tested and provided to low-income seniors over 70, was changed over the years to be a universal demogrant for seniors over 65 but with a clawback at a relatively high income level. Since most of the OAS grant funds go to non-poor seniors, it can no longer be considered as targeted to the poor. However, under the OAS administrative umbrella, we have the Guaranteed Income Supplement (GIS) for seniors and the Spouses Allowance (SPA) for spouses of GIS recipients. These are definitely targeted to low-income seniors based on the previous year’s income tax return. So that part of the OAS program would clearly bump a number of senior households up over the poverty line and thereby reduce measured poverty. But that is only 24 percent of the overall OAS expenditures. The bulk of OAS, the OAS grant itself, mainly goes to non-poor senior households. Regrettably, the data is not there to determine to what extent the OAS grant is predominantly a shuffling of monies between middle-income households. One concern with the GIS and SPA is the extent to which they affect the savings rate for employed persons, especially those with average or below average incomes. Within a range of incomes, there may be little incentive to save for retirement if the GIS/SPA component of OAS will make up the difference in any case. In general, while some kind of insurance is needed in case the worst happens, there is the question as to whether this is the most efficient and effective way to accomplish that. During the 1970s, government officials in Canada declared that housing is a basic “right” for all Canadians and they got involved in helping lower-income households obtain affordable housing. Since that time, we have had persistent shortages of subsidized housing and a chronic lack of affordable housing—both for owner-occupied and rental housing. Indeed, there is a case to be made that, in the area of affordable housing, government “help” may actually be making the problem worse. Social housing has become synonymous with many of the pathologies of urban life—crime, drug abuse, violence, unstable families, and despondency. As well, there are unacceptably long waiting lists for these rent-geared-to-income units. An Ontario auditor report states that the Province does a poor job of transitioning public housing recipients into employment and market housing. The way the system is structured, the auditor argues, provides little incentive for recipients to become self reliant. The biggest problem in the area of housing is on the supply side, as various government restrictions and regulations prevent new housing from being constructed where it is most needed. Social assistance (or welfare) is regarded as the quintessential example of government helping the poor. The main concern of economists is that the way the welfare system is structured, employment (at least for modest wage jobs) is not an attractive alternative. So financial dependency is identified as a critical problem. More than that, however, is the longer-term damage done to people’s sense of self-worth and of being contributing members of society. As one prominent US social scientist has noted, “The black family, which had survived centuries of slavery and discrimination, began rapidly disintegrating in the liberal welfare state that subsidized unwed pregnancy and changed welfare from an emergency rescue to a way of life.” Review after review (including Auditor reports) have stressed that “pathways to employment” be the centrepiece of a reformed system of helping the poor. Many observers remain pessimistic that systems will change because of the strong vested interests in maintaining the status quo. Many politicians, activists, and especially, well paid bureaucrats benefit from the prevailing structures. For all of their emphasis, in recent years, on the importance of participation, dignity, and inclusion for poor people, the social justice community seems to have seriously misunderstood what these terms really mean. By focussing solely on people’s role as consumers they have fundamentally shortchanged the poor. How inclusive is it when almost everyone around you is employed (is a producer) and you are not? How does enduring dependency foster self-esteem and dignity of the person? Real participation in society involves making a contribution to the economic production of a society—something that many ignore or even discourage. The poor are not well-served by policies and programs that disregard the critical role that employment plays in their long-term well-being. The prevailing welfare system in Canada is simply not helpful. The challenge is to find creative alternatives that reward work and help disadvantaged people become real participants in their communities. The real solution to poverty is, then, not merely finding ways to bump people over the line but rather to help people become self-sustaining so that they can pull themselves out of poverty. More on that in the next essay.

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Christopher A. Sarlo
Professor of Economics, Nipissing University