June 2007: The Economic Costs of Poverty

Ending child poverty has economic as well as moral benefits
June 1, 2007

The main arguments raised for reducing the appallingly high rate of childhood poverty in Canada have mostly focused on its social costs--on the misery and deprivation inflicted on our youngest and most vulnerable citizens.

This is indeed the most compelling reason for ending the impoverishment now blighting the lives of one in every six children in Canada. The moral case for lifting them out of poverty is so strong that it should have impelled our political and business leaders to take the necessary remedial action long ago. Their continued indifference to this moral outrage suggests that appeals to their conscience are never likely to work.

But there’s a powerful anti-child-poverty case to be made on economic grounds, too. Politicians and CEOs may be heartless, but any proposed action that would boost the GDP should appeal to their business-first bias. At least, it should unless they lack brains as well as hearts.

It shouldn’t take all that much intelligence, surely, to realize that people mired in poverty when young are likely when grown up to engage in criminal activities, to be less skilled and productive workers, and to be ill more often and thus require more costly health care treatment.

The Center for American Progress (CAP), a progressive think-tank in Washington, recently did a study on the economic costs of child poverty in the United States. Their researchers’ estimated figures are staggering. They calculated that Americans who were poor as children—and there are now 37 million of them—are much more likely than other citizens to commit crimes, to need more health care, and to be less productive in the workforce.

One CAP researcher, Harry J. Holzer, described the results of their study to a House Ways and Means Committee hearing last January. He told the stunned Congressmen that the costs to the U.S. in crime, health care, and reduced productivity associated with childhood poverty amount to an estimated $500 billion a year. This breaks down to about $170 billion a year in increased crime, $160 billion in increased health care costs, and another $170 billion in decreased productivity.

Now, we have to be careful about applying these U.S. statistics to Canada. We can’t just make a demographic projection and assume that, because our population is one-tenth that of the U.S., the overall economic cost of child poverty in this country amounts to one-tenth the U.S. figure, or about $50 billion a year. It could be less, it could be more. On the one hand, there may be a lesser propensity for poor kids in Canada to become criminals when they grow up, but on the other hand, because of our universal public health care system, the per-capita costs of treating the sickness-prone poor in Canada is probably higher.

Even if the economic costs of child poverty in this country were as “low” as $40 billion, that’s still an awful lot of money being wasted—billions spent, in effect, to maintain a scandalously high poverty rate rather than reduce or eliminate it.

Are our politicians and CEOs really this stupid? Can’t they see that investing $40 billion a year in poverty reduction would save the same amount or more in crime, health care, and low-productivity costs? The money is being spent (mis-spent), anyway, so why not divert it into a constructive channel? It would fund an effective campaign to give every Canadian child a decent upbringing — free from poverty and hunger, free to get the best possible education, free to live in adequate comfort and security.

How many break-ins and robberies in Canada are committed from desperation by people deprived of the legitimate means of earning money? How many violent crimes are committed by people so embittered by a poverty-stricken youth that they vent their rage in anti-social behaviour? Such crimes, of course, are inexcusable, but they could also be preventable. If we provided everyone with a safe, secure, and happy childhood, we’d have a much safer and secure society.

The same rationale applies to health care and incomes. Poor people tend to have poor health because they’re denied proper nutrition, hygiene, and preventive care as children. Poor kids are also denied the physical and mental (and emotional) potential to acquire the best education, and so many of them end up with low-waged, dead-end jobs—or no jobs at all.

A recent UNICEF report ranked Canada in a dismal 19th place among 26 rich nations in its rate of child poverty. It’s shameful, it’s unpardonable—and it’s as much an economic as a moral disgrace because the financial means to end child poverty in this country is so readily available.

The specific measures to achieve this goal would include a national child care program to allow poor parents to get waged work; big improvements in welfare rates and other subsidies; more and better low-cost housing; lower tax rates on the working poor; greater access to job training; higher minimum wages; and more unionization and collective bargaining.

And if the moral imperative for taking these initiatives is not enough to persuade the skinflints in our boardrooms and legislatures, the enormous economic benefits certainly should be.

(Ed Finn is the CCPA's Senior Editor.)