Jan 22, 2010

Now for some disaster relief on the homefront


I’ve been very pleasantly surprised at the public response to the tragic earthquake in Haiti. I’ve seen donations being collected through school bake sales, at the liquor store, and on Hockey Night in Canada, among the usual channels for such stuff. It’s nice to know that, collectively, we care, in spite of the neglect of Haiti by our elected governments for some time.

But having said that, my home province of BC and Canada as a whole have become a lot meaner in recent years. Sure, the good life is still attainable if you have a good job and bought real estate before prices took off, whether due to that good job or through an early inheritance from the folks (itself a growing source in inequality as the boomers hit retirement). But as the song (and a CCPA report) goes, it’s a bad time to be poor.

As we show our Olympic pride at having a crew of multi-million-dollar-a-year hockey players come to Vancouver to play for the home team, let it be known that BC has the lowest minimum wage in Canada at $8, and that has not changed since 2001. In case you were wondering, for a minimum wage earner to pull in what Sidney Crosby earns in just one year, they would have to work 40 hours a week for 541 years (and I’m not even counting Crosby’s signing bonus and endorsement contracts).

You know the rest of the story: social assistance rates that are preposterously low and a system that is punitive; a lack of supports for child care; the end of new social housing construction; an over-crowded public transit system; cutbacks at schools and libraries; and so on.

In my work on climate action, it seems inevitable that the price of food, transportation and energy are going up if we are to be successful at reducing emissions. How we go about designing climate actions matters a lot, and this is the focus of my recent work. But most of the affluent people who go to policy meetings are not thinking about how higher prices affect low income people. Across all of these areas, the problem low income people face is, well, their low income, even though they have done the least to contribute to the climate crisis.

So in the absence of “first-best” solutions like raising the earning power of low income workers and setting a floor (basic or guaranteed) income for all, we are left with “second-best” solutions that try to fix regressive impacts on an issue by issue basis. A credit here, a subsidy there and an ugly patchwork everywhere. Which is already a huge problem: after about $20-25,000 per year low-income credits and subsidies phase out for the low-but-not-lowest-income workers, meaning they face marginal tax rates of 60-70% on new income earned. With the carbon tax and now the HST, the same dynamic has been exacerbated with low-income credits that phase out early and quickly.

Still, I think that a more coherent credit system could be the basis for a guaranteed income, but it would have to be designed more like the credits we give to the middle-class, like Old Age Security and the Canada Child Tax Benefit, which have a long tail phase out so that a very high proportion of families get something. A lot of economists agree on this type of redistribution. But they generally think only about redistributing after the fact. I also want to see the labour market do more of the heavy lifting, as it gives workers and taxpayers the sense that they have earned that income, and this makes for better social inclusion and better political sustainability. Doing that means expanding the scope and quality of public services, raising minimum wages and, perhaps more importantly, vastly expanding the unionization of the low-wage service sector.

So Canada, let’s take that generous spirit we discovered when Haiti got trampled by an earthquake and put it to work at home. A campaign of charitable giving is of course helpful and there are lots of great organizations doing the work that governments ought to be doing. But let’s also focus on electing governments that are going to make eradicating poverty a top priority, something no political party (including the NDP) has endorsed.

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