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 An Economic Case for a Preventative Poverty Reduction Strategy in Alberta.
Written by Alexa Briggs and Celia R. Lee. Published by Vibrant Communities Calgary and Action to End Poverty in Alberta. 2012.
This report was prepared to analyze the economic costs of poverty in Alberta and to encourage the adoption of a provincial poverty reduction strategy. Currently, Alberta is one of only three provinces without a poverty reduction plan. Instead, Alberta relies solely on poverty alleviation, which the authors believe is not an effective approach to ending systemic poverty in the province.
To formulate economic estimates, the report considers the opportunity, health care, crime, and inter-generational costs of poverty to both our government and society.
- Opportunity costs includes sources of revenue that are lost when people are unemployed or underemployed
- Health care costs arise from the significantly more frequent physician visits from lower income residents
- Crime costs include increased law enforcement and justice costs
- Inter-generational costs are "the costs that are incurred when children who grow up in poverty are unable to escape" (Briggs and Lee, 29, 2012) Between 20-25% of kids that grow up in low income environments become low income earners as they get older.
To measure the costs of poverty, the report uses a variety of previously established methods from other studies. For instance, the low income cut-off was used as the standard of poverty, while numerous poverty reduction reports from other provinces are used to establish the study methods. The calculated costs of poverty in Alberta are adapted from the report and provided in the table below. These do not include the cost that the government pays in social services or subsidies.
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Cost to Government
(in billions of dollars) |
Cost to Society
(in billions of dollars) | |
Health Care |
1.2 |
- | |
Crime |
0.96 |
0.46 | |
Inter-generational |
0.70 |
0.50 | |
Opportunity |
.6-1.0 |
4.2-6.2 | |
Total |
2.0-2.4 |
5.1-7.2 |
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Grand Total |
7.1 billion- 9.5 billion |
To estimate the cost of poverty, the authors assume that the characteristics (income, health care costs, crime rates, employment, etc.) of the poorest 20% will resemble those of the second quintile (20%-40% poorest) if poverty is eliminated. The authors explicitly state the assumption that "those living in poverty are able to earn more" and that "they are likely to do so if they are able" (Briggs and Lee, 31, 2012). While the authors support this position by referring to the fact that over half of Income Supports clients are expected to have started work by November 2011, this method raises important questions about market saturation for available jobs. If we are to benefit economically from the potential income of these individuals, then Alberta will need to find between 10-20% more sustainable jobs to meet this new demand. It seems that if the bulk of the poverty cost is to be targeted, then job growth will be a crucial requisite for meeting this target. Other articles have raised concerns that the poorest 20% includes a high proportion of young individuals who are currently training for high-income jobs. Therefore, poverty reduction will not impact these individuals.
Overall, the report provides good evidence that poverty costs Albertans. While it seems that savings upwards of $9 billion may be a little ambitious, the report successfully shows that this issue is large, growing, and requires our immediate attention. This report will be of interest to politicians and public servants in Alberta and in other provinces who are interested in developing a provincial poverty reduction strategy.
Reviewed by Kevin Unrau
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Thursday, 23 May 2013 
