The Dynamics of Poverty in Canada

Understanding poverty has suffered in the past from a lack of information about the dynamics of low income — how many people enter and leave low income each year, how long people stay poor, what circumstances accompany entry into and exit out of low income — the characteristics of the long-term poor. As a result, policy has suffered, most essentially because people for whom low income is a temporary setback need different support from those for whom poverty is a long-term condition. This study, the first general analysis of its type, explores the dynamics of poverty in Canada over the 1992–96 period using the recently developed Longitudinal Administrative Database (LAD). Among the observations this database makes possible are the relationships between changes in family status and income: becoming a single parent and leaving home as a young adult are, for example, strongly associated with entry into low income, while becoming attached is strongly associated with leaving low income for both unattached individuals and single parents (especially women). Other interesting observations are the increasingly greater likelihood of remaining poor as time in poverty increases, and the greater success in staying out of low income as time since a previous low-income spell increases. Among the most striking findings is that the population in low income consists of two quite different groups. For half of those in low income at any time during the period studied, this was a temporary experience. By contrast, the other half were in poverty on a long-term basis (more than half the time) and some 40 percent were in poverty throughout the entire period. This latter group, which represents 6 percent of the total population studied, presents special policy challenges, but if measures such as training and other forms of assistance in entering the labor market could be made to work, it also offers the greatest opportunity to reduce poverty rates on a permanent basis. The findings also reveal that personal characteristics and past low-income experience could, furthermore, help policymakers identify the population at risk of chronic low-income status and thereby effectively target policy measures. To this end, a mixture of interventions — both “carrots” and “sticks” (but in a “kinder, gentler” form than found in recent US reforms) and a strong labor market — are needed to reduce poverty in Canada, thus serving both equity and efficiency goals to which individuals across the political spectrum might agree.

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