To tackle poverty, we must first distinguish between temporary and persistent spells

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Appeared in the Financial Post, January 26, 2016

As the newly-elected federal government contemplates a national “poverty reduction strategy,” a better and more complete understanding of the state of poverty in Canada is needed.

In a recent study, we lay out some basic yet important facts to help inform the public debate. Among them is a critical insight often lost: for the vast majority of Canadians that experience poverty, it’s a temporary, not persistent, situation. This distinction is critical because the policy responses for helping those in persistent poverty are markedly different and more nuanced than those related to temporary poverty.

Temporary (or transitory) poverty can arise among young people, for instance, when they are students living on their own while attending school. But their situation changes in short order as they embark on careers and gain skills and work experience. In other cases, households may encounter a temporary negative shock to their income, perhaps due to a loss of employment, from which they are able to recover relatively quickly.

Persistent poverty, on the other hand, occurs when a person is stuck in poverty year after year and unable to escape that unfortunate circumstance. These are the people we should be primarily concerned about.

Unfortunately, when it comes to the data, activists and media headlines often focus on a snapshot in time of Canadians with low incomes, which exaggerates the extent of poverty and produces a misleading picture of our society. Meanwhile, data on the persistence of low-income is generally overlooked.

Before presenting some of that data, let’s clarify how poverty is typically measured. While Canada has no official poverty line, Statistics Canada’s low income cut-off (LICO) can provide some important insights. LICO is not, strictly speaking, a measure of poverty, as in the deprivation of basic needs such as adequate shelter and food. Rather, it’s a measure of low income relative to other members of society.

The advantage of LICO, however, is that Statistics Canada has used it for tracking the movement of people in and out of low income over several six-year periods dating back to the early 1990s. This tracking allows us to measure the extent Canadians experience persistent low income.

The most striking insight from the data is that only 1.5 per cent of Canadians remained in low-income every year from 2005 to 2010 (the latest period of available data). In other words, a very small percentage of the Canadian population lives in persistent low-income. Encouragingly, the percentage of Canadians in persistent low income has fallen by more than half, from 3.6 per cent in the first period of available data (1993 to 1998).

Thankfully, the perception that there’s a large and growing portion of Canadians trapped in low income is not borne out by the data.

The data also show that it’s common for many who experience low income in one year to escape it the following year. For example, more than a third of Canadians in low income in 2009 were no longer in low income in 2010. This reinforces the temporary nature of people’s exposure to low income.

However, for Canadians stuck in low income, Statistics Canada research has identified characteristics that put people at higher risk of living with persistent low income such as being physically or mentally disabled, belonging to a single-parent family, and having less than a high school education.

Strategies for reducing poverty should not only focus primarily on those stuck in low income, but must acknowledge the specific policies that will help this group of Canadians are likely to differ depending on the root causes of poverty. As the federal government, and other governments, develop poverty reduction plans, these are crucial things to keep in mind.

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