Poverty comes with a high price tag

July 25, 2011

It’s no secret that British Columbia has a problem with poverty. Many of us do our part and contribute to food drives and other worthy causes. But how many British Columbians realize that poverty is costing us – all of us – a lot more than a few cans of non-perishable food and a new toy donated at Christmas?

A new study released by the Canadian Centre for Policy Alternatives has, for the first time, quantified the economic cost of poverty in BC. We estimate that poverty costs the average man, woman and child in BC as much as $2,100 each and every year.

The economic cost of poverty to society as a whole adds up to between $8.1 and $9.2 billion per year. That’s a lot of money – close to 5% of the total value of our economy. Our analysis shows that failing to address the root causes of poverty is very expensive, both in terms of current and future costs.

Study after study has linked poverty to poorer health, lower literacy, more crime, poor school performance for children, and greater stress for families. Poverty takes an enormous toll on the people who struggle with it, no question about it. But at the end of the day, it’s society at large that is paying a very high price.

British Columbians pay approximately $1.2 billion per year in higher public health care costs linked to poverty. We spend another $745 million annually on policing and criminal justice costs driven by poverty-related crime.  Higher costs of income supports and lost tax revenues that come with inadequate earnings account for over $900 million per year. 

Poverty also acts as a significant drag on our economy. BC’s prosperity is undermined when people are excluded from the workforce because they don’t have access to the supports or training they need to do better, or when they are stuck in low wage jobs in our polarized labour market. Underutilizing all the talents and human potential of poor British Columbians to contribute to society and to our economy is among the biggest costs of poverty ($6.3 to $7.2 billion per year).

This is a conservative assessment of the cost of poverty in BC, as our estimates do not capture all of the costs. Notably, we exclude the costs that child poverty imposes on future generations by perpetuating the cycle of poverty. We also do not measure many of the less tangible costs, such as the impact of high poverty levels on social cohesion and our feelings of safety in our communities. Nor do we include the direct cost of providing frontline social services to those in poverty.

The BC government’s current approach to poverty is to deal with negative consequences as they arise. This is akin to handling a leaky roof problem by repeatedly mopping the floor. It makes things look passable when the guests arrive, but it does nothing to address the root causes of the problem. And like a leaky roof, poverty’s consequences only get harder and more expensive to fix the more we put off dealing with them.

The high costs of poverty in BC gives us a purely economic reason to be concerned about our poverty levels, which are the highest in Canada.

Seven Canadian provinces and two territories have recognized this and implemented poverty reduction strategies (or are in the process of developing them). In fact, poverty reduction has emerged as an issue that transcends party politics and ideology to receive all-party agreement in most provinces.

It’s time for the BC government to rise up to the challenge and commit to a comprehensive plan to systematically tackle the root causes of poverty in BC.

We estimate that once fully implemented, such a plan for BC would cost between $3 and $4 billion per year. That’s less than half of what poverty is costing us now.

Making poverty reduction a priority is the right thing to do. And our report shows that it’s also the fiscally responsible thing to do.

The biggest challenge that lies ahead is that upfront investments are needed to bring savings down the line. The four-year election cycle hardly encourages long term thinking or investments. What’s needed is leadership, vision and a willingness to do the right thing for BC’s future.

Iglika Ivanova is an economist and public interest researcher at the CCPA-BC.