In The Know

Poverty in Canada has been cut in half — but how?: U of C

The percentage of Canadians with incomes below the poverty line has fallen by half since 1996, writes Dr. Ron Kneebone, director of economic & social policy research in the School of Public Policy, in this report titled Poverty Reduction: Policy Initiatives or Economic Growth?

To answer the question Kneebone examines real GDP per capita trends in Canada and contrasts that to the poverty rate, or the percentage of Canadians experiencing poverty in a given year. The results are encouraging.

He finds that outside of the periods of recession from 1981-1983, 1989-1993, and 2008-2011, real per capita GDP increased and the poverty rate fell in Canada. 

“In 1976 real GDP per capita was $31,600 and the poverty rate was 13%. By 2019, real GDP per capita had increased by 77% to nearly $56,000 and the rate of poverty had fallen in half to 6.5%”

This does not mean that economic growth is the only factor in this reduction. While the close correlation of these falling rates and rising GDP per capita indicate its importance, it does not preclude the impact that certain policy initiatives, such as increased child benefits and minimum wages, have had.

“Indeed, the sharp fall in poverty since 2015 following significant increases in child benefits, a fall that occurred despite slow income growth, suggests just that. While these policies have likely helped lower poverty in Canada, the correlation reemphasizes well-known findings about the importance of economic growth in less developed countries. The data in the chart suggest that, just as in less developed countries, Canadian public policies that fail to promote economic growth may impact those at the low end of the income distribution most keenly,” he writes.

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