Family poverty in Canada

Executive Summary

The family is the primary economic unit in Canada and an appropriate basis for studying poverty in this country. Family poverty has largely been a good news story over the past decade, with substantial declines in single-parent and elderly family rates of low income. Two-parent family poverty is low in comparison to single-parent family rates and marriage appears to exert a powerful influence in reducing poverty. However, two-parent families have not experienced a similar decline in rates of low income over the past decade as have other groups, perhaps due to policy inattention.

The issue of family poverty in 2007 in Canada thus presents two main policy objectives: to maintain the current decline in poverty rates among single-parent families, and to achieve greater reductions in the rate of poverty for two-parent families.

Creating appropriate incentive structures is the key to successful anti-poverty programs. This paper advocates incentives that will make work pay, encourage asset building, strengthen family structures and recognize the importance of marriage in reducing poverty.

Continued reductions in single-parent poverty may be attained by either reducing the rate of single parenthood or increasing the work effort of single parents. Reducing the prevalence of single parenthood is an objective of the Healthy Marriage Initiative in the U.S. This combines a public service message campaign with on-the-ground counseling services for low income unmarried couples. The program’s US$500 million budget signals a unique government commitment to supporting marriage. It holds the promise of boosting marriage satisfaction rates and creating positive feedback on the benefits of marriage for the rest of society. Canada should pay close attention to outcomes from the Healthy Marriage Initiative when they become available.

The Working Income Tax Benefit (WITB), based on the highly successful Earned Income Tax Credit (EITC) in the U.S., is designed to ‘make work pay’ for low income Canadians by compensating them for high marginal tax rates, or what is called the “welfare wall.” The WITB will be rolled out for the 2007 tax year and should assist low income Canadians entering the work force. The initial size of the WITB, however, is disappointing.

Two-parent families in low income deserve recognition of the extra costs they face due to the presence of two adults in the family. Benefits directed at low income families, such as the National Child Benefit, are based solely on the number of children without regard to the number of parents in the family, which creates a disadvantage for two-parent families. It must be remembered that child poverty and family poverty are synonymous terms. Children in poverty exist within families in poverty.

The U.S.’s EITC includes additional payments for married couples in recognition of the positive impacts of marriage within and outside the family, as well as the extra costs faced by two-parent families. Creating a marriage bonus within Canadian social programs, such as the WITB or the National Child Benefit, would acknowledge the important contribution two-parent families make to society, as well as compensate them for the additional costs they face. Moving to a family-based tax system that includes joint filing and income splitting would constitute further recognition by government of the importance of the family.

Asset promotion is an anti-poverty concept with potential long-term benefits for single- and two-parent families. Assets can serve as cushions against income loss, a means to earn additional income and may provide important lessons in financial management. However, welfare rules that prevent recipients from accumulating assets can block these benefits. Programs such as Learn$ave encourage low-income families to save through incentive contributions.

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