Sep 28, 2009

Will job creation solve our poverty problems?


You may recall that during the leaders’ debate prior to last May’s election, Gordon Campbell argued that creating jobs is the best poverty reduction strategy out there. Since his re-election, the government’s attention has been focused on the economy, while social policy has taken a back seat. But is this the best approach?

A recent report released by the OECD devotes an entire chapter to the question “Is Work the Best Antidote to Poverty?” OECD Employment Outlook: Tackling the Jobs Crisis looks at the impact of the global recession on labour markets and presents some very interesting observations on the problem of working poverty in industrialized countries. In the end, the researchers find that we need more than just job creation to deal with poverty:

Employment reduces considerably the poverty risk, but does not solve all problems. On average in the OECD area, 7% of individuals living in households with at least one worker are poor.

According to the same report, in Canada this number was 9%. Moreover, the data show that working poor account for close to 70% of all poor people in Canada, which is roughly the same as the OECD average.

Yes, in all countries people who do not work experience higher poverty rates than those who do (no surprises here), but it’s sobering to realize just how common working poverty is. This leads the researchers to conclude that

the working poor constitute an important target population for anti-poverty policy in most OECD countries.

What kind of anti-poverty policies may be necessary? Poverty is a complex social problem and country-specific factors need to be taken into account, but the report notes that:

Social transfers play a key role, precisely because they can be targeted towards the most vulnerable households: on average in the OECD area, they reduce by almost half the rate of in-work poverty.

On this front Canada’s not doing very well. Previous OECD reports (such as last fall’s Growing Unequal? Income Distribution and Poverty in OECD Countries) have noted that social transfers in Canada have become less generous between the mid-1990s and the mid-2000s, so it should not surprise us that our poverty rates (including working poverty) have grown.

Another very interesting point made in the report is the call for increased training opportunities for those who have lost their jobs.

At the same time, OECD research suggests that it would be advisable to shift somewhat the focus and resources behind activation from the “work-first” approach which tended to dominate prior to the crisis to a “train-first” approach for those at high risk of long-term unemployment.

All in all, this report adds to the evidence that even a strong economy will not eliminate poverty on its own without a comprehensive, government-led poverty reduction plan.

Perhaps someone should send Gordon Campbell a copy.

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