Lars Osberg Economics Department Dalhousie University June 23, 2009 Presentation to: Council of the...
-
Upload
beryl-glenn -
Category
Documents
-
view
214 -
download
0
Transcript of Lars Osberg Economics Department Dalhousie University June 23, 2009 Presentation to: Council of the...
Lars OsbergEconomics Department
Dalhousie UniversityJune 23, 2009
Presentation to: Council of the Federation symposium St. John´s, Newfoundland, June 23
Poverty and Recessions: Canada‘s Vulnerable in
Tough Times
IMF “Advanced economies are suffering their deepest recession since World War II.”OECD Economic Outlook March 2009 http://www.oecd.org/dataoecd/18/1/42443150.pdf
2006 2007 2008 2009 2010
Canada - Unemployment 6.3% 6.0% 6.1% 8.8% 10.5%
UI/EI Replacement Rate – 38 years of decline The average of the gross unemployment benefit replacement rates for two earnings levels, three family situations Source: OECD, Tax-Benefit Models. http://www.oecd.org/document/3/0,3343,en_2649_34637_39617987_1_1_1_1,00.html ; The Canadian Labour Force Participation Rate Revisited: Cohort and Wealth Effects Take Hold Steven James, Tim Sargent, Russell Barnett and Claude Lavoie Working Paper 2007‐01, Finance Canada, Page 11
EI Replacement Rate: Relatively low by OECD standards
OE C D S ummary Meas ure 2005Averag e Gros s Unemployment B enefit
R eplac ement
2232
41 4935 39
24 33 3526 34
2433
12 1312
S eries 1
The Big Problem The Big Problem – EI is – EI is muchmuch harder to get, especially since harder to get, especially since 19961996
Poverty in perspective
How much of market income would it take to completely eliminate the poverty gap ?Canada – 1.7%Nova Scotia – 1.7%
V25746680, v25746752, v25746914; Low income cut-offs after tax, 1992 base; Aggregate low income gap as a percentage of market income (Percent); All family units
For people who do not have much, it does not take much to make a big difference in their lives.
Canada’s total poverty gap - approximately equal to foregone revenue of 2% cut in HST/GST
“Low Income/Poverty Line” - How should we measure it?
Methodologies in use in Canada 1970 – 2008 Note: Because real median incomes flat 1980 - 2006, all effectively updated for inflation only
LICO - % income spent on necessitiesLIM – 50% medianMarket Basket Method
oHRDC or Fraser InstituteSubjective (Leyden)
“Barely adequate for day-to-day living”“Make ends meet”
Appendix G Page 81 Low Income in Canada: 2000-2006 Using the Market Basket Measure HRSDC. October 2008; Table 1, page 12 The Evolution of Poverty Measurement - with special reference to Canada Osberg (2007)
Poverty Line for 2 adult 2 child family (boy 13, girl 9)
$2006
Market Basket Method
LICO IAT rural = 21,860 100-499K = 28,200
500K+ = 30,000
LIM after tax = 29,600
Income Poverty Line in Canada
Broad consensus on approximate level for urban areas for some family types
BUT “Market Basket” Methodology shows importance of Child Care ExpensesTransportation Cost in rural areas – bus service
NOT available
Is Annual Income Inadequacy a good guide for Poverty Policy?
Sen: Commodities are needed for capabilities, which enable valued functioningsPoverty = deprivation of capabilities
Relative income can determine absolute capabilitye.g. When everyone else has a car, how to get
groceries? Capabilities <= $ income + “social wage” + contextProblem: “capabilities” = opportunity set, ≠ observed choicesMeasurement example: % Canadians without car OR bus stop
within 1 KMMultidimensional Poverty indices
Measure achieved functioningsCan look within households
What is critical value of specific item deprivation?How to aggregate over single / multiple deprivations?Correlation of attributes is crucial
Little information added if highly correlated with income, but “too low” correlation implies separable issues involved Measurement error biases towards chance correlation
Social Exclusion – ‘prevented from participation in normal activities of society’
Example of transportation Income poverty – do you have enough cash to buy bus fare ?Capabilities approach
– might ask: is there a bus route? – but capability is fundamentally an individual attribute
Social Exclusion – accessibility planning seen as an issue of community design Bus to where? How often? Is it wheelchair accessible? Where are
services located? Determines feasibility of employment + access to social life &
public services – many feedback effects of isolationMulti-dimensional, mixed indicators, threshold &
feedback effects, long term deprivation crucial Social Exclusion – a relationship of society & the
excludedMeasurement Implication – both personal attributes & social
context of individuals are crucial to social exclusion & poverty
“Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services”
UN Universal Declaration of Human Rights (1948) Article
25 Human rights
Specified by Constitutions & International CovenantsClear legal origin, specificity & procedural legitimacy in
democratic institutionsIndivisible & interdependent
E.g. Right to privacy is empty without right to housingImposes obligations on state parties Typically seen as either/or condition
Head-count measure of deprivation ?
Main PointsLong term trend increase in Average Poverty Gap in CanadaPoverty Rate moves with Unemployment Rate – rapid rise 2009+Canada’s social safety net cut substantially in mid 1990s – not
fixed
Implications – More Poor People and Deeper Poverty in 2009-11As recession grinds on, faster, deeper income losses likely – but less
social support is now in place for income replacement than in 1990s Work Incentives & Retraining – increasingly irrelevant as jobs
disappearLonger Term Trends
Social Exclusion, Capabilities & Human Rights discourse will widen policy dimensions to include context and “social wage”
Little change in real median household income in Canada between 1977-2007CANSIM Table 202-0411 –Statistics Canada no. 75-202-X Income in Canada 2007
Was slow growth in living standards inevitable? NOT ! – Canada has worst record
Average Annual Growth of Median Real Income(Equivalised Household Income After Tax)
0.68%
1.50%
0.38%
1.91%
3.62%
2.88%
4.21%
1.15%
3.28%
1.39%
0.15%
0.45%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
USA 79-04
UK 79-99
SWITZERLAND 82-02
SWEDEN 81-00
SPAIN 80-00
NORWAY 79-00
LUXEMBOURG 85-00
GERMANY 81-00
NETHERLANDS 83-99
FRANCE 81-00
CANADA 81-00
AUSTRALIA 81-03
Average Income has risen because top quintile much better off Statistics Canada 75-202-X Income in Canada 2007
Time and Poverty SpellsAnnual accounting period – too long & too short
No cash & no credit? – very cold in much less than a week
Immediate Needs - historic focus of social policy – now downgraded Human Rights perspective implies short term deprivation matters Stress may trigger events with long term consequences
Long term poverty & inter-generational impacts ? Long term poor – clearly the most deprived – “culture of deprivation” a
real concern Now the focus of “Human Capital” emphasis & “Social Exclusion” discourse
Individuals flow through sequence of householdsPoverty spell entry, exit and recurrence implied by real time
changes in both incomes and household composition Panel data + {assumption: equivalence scale + no transactions costs} can
generate individual life histories of equivalent income poverty spells Costs of volatility & insecurity in health, well-being & human capital not
now recognized
23-04-19Lars Osberg and Kuan Xu, Dalhousie University, Canada30
Not much change & fairly narrow range – in 2006 $ [Fraser Institute an outlier – “extreme deprivation” concept]
4 person household Low Income/ Poverty Line - urban area of 100-499,000
rural ratio single ratio
Statistics Canada LICO - 1969 base 29,600 1.29 2.2
Statistics Canada LICO - 1978 base 34,400 1.29 2
Statistics Canada LICO - 1992 base (63%) 34,100 1.29 2
Statistics Canada LICO - IAT 1992 base 28,200 1.29 2
CCSD half average income 31,700 1 2.33
Senate Committee (basic needs+30%)*avg growth 35,500 1 2.33
CCSD updated to 2004** 35,200 1 2.33
Senate Committee updated to 2004** 39,400 1 2.33
Statistics Canada subjective -"barely adequate for daily living" 22,700 1 1.4
Statistics Canada subjective -"make ends meet" 35,976 1 1.3
Statistics Canada LIM 50% median market income 29,100 1 2
LIM 50% median before Tax 34,000 1 2
LIM 50% median after tax 29,600 1 2
Sarlo / Fraser Institute market basket 20,320
HRDC market basket* 27,400 0.97 2
Axioms, Aggregation & Dominance – measurement since Sen (1976)
Distribution Sensitive Poverty Indices
SST = FGT1 (1+G(g)) SST = (r) (g) (1+G(gi)).
Average Poverty Gap ratio often ≠ poverty rate
Inequality of poverty gaps is empirically unimportant
Axiomatic basis of Indices Transfer sensitivity axiom
important BUT others ??Focus – relative poverty lines
cannot qualify Impartiality – group identities
of poor irrelevant Continuity – no “threshold
effects” – by assumption Equivalence scales
LIS scale now common Stochastic Dominance of
Deprivation ProfilesRestricted dominance is
relevant criterion Poverty among the Elderly ?
FGTn
z y
z ng
i
qi
ii
q
1 1
11
11
ggg