The Cost Of Poverty to Ontario

Key Facts

Poverty disproportionately affects certain populations, and has a complex mix of institutional and individual causes.

• Poverty hits Ontarians with disabilities, Ontario’s children, Aboriginal Ontarians,single parents, and new Canadians the hardest. By all measures, the rates of poverty for Ontarians with disabilities, Ontario’s children, Aboriginal Ontarians, single parents and new Canadians are much greater than the provincial average. For example, in 2001, 35.8 per cent of new Canadians lived below the low-income cut-off (LICO), compared to the Canadian average of 15.6 per cent.
• Poverty has a complex mix of institutional and individual causes. Poverty has no single cause. It results from a mix of institutional impediments including our system of social assistance, skills and credential recognition, and cultural barriers as well as individual gaps such as lower skills, education or literacy.
• There is a relationship between poverty and poor health outcomes, lower productivity,lower educational attainment, and children’s future income. Analysis of microdata from the National Population Health Survey found that 73 per cent of Canadians with the highest incomes reported their health as excellent, while only 47 per cent of Canadians with the lowest incomes rated their health as high.

Poverty has a price tag for all Ontarians.

• Poverty has a significant cost for governments. The federal and Ontario government are losing at least $10.4 billion to $13.1 billion a year due to poverty, a loss equal to between 10.8 to 16.6 per cent of the provincial budget.
• Poverty has a cost for every household in Ontario. In real terms, poverty costs every household in the province from $2,299 to $2,895 every year.
• Poverty has a very significant total economic cost in Ontario. When both private and public (or social) costs are combined, the total cost of poverty in Ontario is equal to 5.5 to 6.6 per cent of Ontario’s Gross Domestic Product (GDP).

The cost of poverty is reflected in remedial, intergenerational, and opportunity costs.

• The remedial costs of poverty related to health care and crime are substantial. In Ontario, poverty-induced costs related to health care have an annual public costof $2.9 billion. The national added cost to health care budgets is much greater, at $7.6 billion per year. The poverty-induced costs related to crime in Ontario have a relatively small annual public cost of $0.25 to $0.6 billion, split between federal and provincial governments.
• The annual cost of child or intergenerational poverty is very high. If child poverty were eliminated, the extra income tax revenues nationally would be between $3.1 billion and $3.8 billion, while for Ontario, the additional (federal and provincial) taxes would amount to $1.3 billion to $1.6 billion. The total economic cost (private and social) of child poverty Ontario is $4.6 to 5.9 billion annually.
• Opportunity costs or lost productivity due to poverty has a great economic cost.Federal and provincial governments across Canada lose between $8.6 billion and $13 billion in income tax revenue to poverty every year; in the case of Ontario, Ottawa and Queen’s Park lose a combined $4 billion to $6.1 billion.

Reducing poverty with targeted policies and investments over the life course generates an economic return. This return is equal to a proportion of the assessed cost of poverty.

• Targeted early intervention initiatives focusing on low-income populations have a high rate of return. An analysis of the Pathways to Education project, an early intervention initiative in Regent Park, demonstrated a present value of the social benefit of the program at $50,000 per student.
• An investment in child care has a significant return for low-income populations. Many studies have shown a very high rate of return for investments in targeted childcare for low-income populations, ranging from $4 to $16 for every dollar invested.
• A reduction in poverty through increased skills and productivity amongst adults would generate a high rate of return. If 25 per cent of adults moved from the first to second income quintile, this would generate a total social benefit of at least $1 to $1.5 billion in Ontario.
• The recognition of current credentials alone as a poverty reduction intervention would result in a significant economic return. In 2001, the Conference Board of Canada estimated that eliminating the “learning recognition gap” would give Canadians a total of $4.1 billion to $5.9 billion annually. This learning recognition gap primarily affects new Canadians.

From  The Cost Of Poverty: An Analysis o f the Economic Cost of Poverty in Ontario . Ontario Food Banks. Author Nate Laurie  2008.