Lars OsbergEconomics Department
Dalhousie UniversityApril 19, 2009
Poverty and Recessions: Nova Scotia's Vulnerable in
Tough Times
The Poverty Rate in Nova Scotia & Canada rises & falls at the same time
Because unemployment rises and falls with the business cycle
In Nova Scotia, as elsewhere, unemployment drives poverty
But there has been a big change - Poverty is much deeper now in Nova Scotia
So what’s happening to unemployment?
And now that we need a safety net…OECD Economic Outlook March 2009 http://www.oecd.org/dataoecd/18/1/42443150.pdf
2006 2007 2008 2009 2010Canada - Unemployment 6.3% 6.0% 6.1% 8.8% 10.5%
What’s there ?
UI/EI Replacement Rate – 38 years of decline The average of the gross unemployment benefit replacement rates for two earnings levels, three family situations Source: OECD, Tax-Benefit Models. http://www.oecd.org/document/3/0,3343,en_2649_34637_39617987_1_1_1_1,00.html ; The Canadian Labour Force Participation Rate Revisited: Cohort and Wealth Effects Take Hold Steven James, Tim Sargent, Russell Barnett and Claude Lavoie Working Paper 2007‐01, Finance Canada, Page 11
EI Replacement Rate: Relatively low by OECD standards
OE C D S ummary Meas ure 2005Averag e G ros s Unemployment B enefit
R eplac ement
2232 41 49
35 3924 33 35 26 34
24 3312 1312
S eries 1
Net Replacement Rate over 60 months of unemployment, 2006
Average over 4 Family types 67% and 100% of AW without Social AssistanceOECD, Tax-Benefit Models w ww.oecd.org/els/social/workincentives
0
10
20
30
40
50
60
70
Only insurable earnings up to the MIE covered by the Employment Insurance REPORT OF THE CHIEF ACTUARY TO THE EMPLOYMENT INSURANCE COMMISSION ON THE EMPLOYMENT INSURANCE PREMIUM RATE AND MAXIMUM INSURABLE EARNINGS, 2009:
2007 2008 2009
Maximum EI insurable earnings $ 40,000 41,100 42,300Proportion of claims at maximum 42.9% 43.5% 44.2%
Maximum weekly benefits $ 423 435 447 Average weekly benefits $CANSIM, table 276-0016 318 331
% of insurable earnings below MIE 41.5% 40.9% 40.4%
% of insurable earnings above MIE 58.5% 59.1% 59.6%2007 actual: 2008, 2009 estimated
The Big Problem The Big Problem – EI is – EI is muchmuch harder to get, especially since harder to get, especially since 19961996
Responding to Need (a bit)EI Eligibility & Benefit Duration March 15 - April 11, 2009
EI Regular BenefitsToronto Montreal Windsor Halifax
Unemployment Rate 8.3 8.2 12.1 5.9
Number of Insured Hours Required to Qualify 595 595 455 760Minimum Weeks Payable 23 23 29 19Maximum Weeks Payable 47 47 50 41
Unemployed Persons February 2009 267,800 98,100 38,700 13,400
Social Assistance – low & falling ATIONAL COUNCIL OF WELFARE: WELFARE INCOMES 2005
Poverty is NOT inevitable
How much of market income would it take to completely eliminate the poverty gap ?Canada – 1.7%Nova Scotia – 1.7%Halifax – 2.1%
V25746680, v25746752, v25746914; Low income cut-offs after tax, 1992 base; Aggregate low income gap as a percentage of market income (Percent); All family units
For people who do not have much, it does not take much to make a big difference in their lives.
Canada’s total poverty gap – approximately equal to foregone revenue of 2% cut in HST/GST
Appendix G Page 81 Low Income in Canada: 2000-2006 Using the Market Basket Measure HRSDC. October 2008; Table 1, page 12 The Evolution of Poverty Measurement - with special reference to Canada Osberg (2007)
Poverty Line for 2 adult 2 child family (boy 13, girl 9) $2006 Market Basket Method
LICO IAT rural = 21,860100-499K = 28,200500K+ = 30,000
LIM after tax = 29,600
So where is the NDP?What Policies are proposed?Nova Scotia – Total buy-in to “Targeted Tax Cut”
Politics“Conservative tax hike on electricity makes life more
expensive for families”“NDP will invest in jobs for Nova Scotians by introducing a
10 per cent Nova Scotia manufacturing and processing tax credit”
Balanced Budgets ?
Tax-free Electric Energy Biggest benefits if you turn up thermostat, have huge
houseBad for environment, equity and efficiency
Tax credits have nil impact on job creation in a recession