John Richards on “Tough Love” and Poverty

I was a friend of John Richards many years back, in the late 70s, when we shared a common passion for prairie left populism. He’s a bright guy, and a great writer. What bugs me is that he is still treated as a progressive by the media – based on his very brief history as an NDP Saskatchewan MLA in the early/mid 70s- even though his political evolution has been from young social democrat, to momentary, romantic ultra left (his short-lived Waffle independent MLA phase) to disillusioned CD Howe neo con for about the last 30 years. And John IS a neo con – as clearly demonstrated by his recent piece on poverty for the Howe, “Reducing Poverty: What has Worked and What Should Come Next?

http://www.cdhowe.org/pdf/commentary_255.pdf

His basic argument here is that “tough love” welfare “reform” in the sense of deep cuts to welfare rates and increased social worker policing of recipients to impose work incentives, especially in Alberta and Ontario, “worked” in that it reduced welfare recipiency and poverty rates and increased employment. He is much less enthusiastic about “soft love” earnings supplements for the working poor because they result in high marginal tax rates for those just above the poverty line. The basic message here is that the punitive cuts of Harris in Ontario and Klein in Alberta were effective in reducing poverty by driving welfare recipients into work.

I’ll offer no argument against John that work is preferable to welfare for all kinds of reasons. Indeed, I’d argue that the left has got off on the wrong foot by putting more emphasis on rights to welfare arguments (which I’ll endorse but are politically ineffective) than on the need to improve the incomes of the working poor via higher wage floors, improved EI etc. (which the public actually think are good ideas, along the general lines of a a “hand up” as opposed to a “handout.”)

What John does here is to argue that welfare “reform” somehow explains the decline in poverty and increased employment among high risk groups such as single parents and the single near elderly since the mid 1990s.

He compares poverty rates and maps trends for high risk groups, 1996 to 2005, and , surprise, surprise, poverty fell as unemployment fell and employment rose! This would come as a surprise to almost nobody.

What John emphatically does not do is compare poverty rates between cyclically equivalent years, ie 2005 compared to the late 1980s. As detailed in the just-released Campaign 2000 report card, that time comparison is much less flattering to recent policy, and shows little or no progress on the child poverty front.

John sees jobs and employment as the key solution to poverty, with considerable justification, but has nothing to say re minimum wages or access to collective bargaining which would increase the incomes of the working poor and near poor. He applauds EI “reform” in the 1990s, even though cuts have demonstrably worsened the incomes of working poor families (as most recently shown by Ross Finnie in a still to be published study for HRSDC.)

To his credit, John concedes the downside of a “sticks” or tough love approach to poverty reduction – as he shows the poverty gap ( the shortfall between the incomes of the poor and the poverty line) has grown since the mid 1990s (mainly due to cuts to welfare cheques for those who remain on welfare.)

Some methodological more than quibbles.

John looks at wages needed to reach the post tax LICO line for singles, without ever taking into account the taxes paid by the poor (which kick in at below poverty line incomes.) I’m not religious about the pre tax LICO as a poverty line, but it is the one most appropriate to address the adequacy of pre tax incomes from work.

Much more importantly, he argues that deep welfare cuts in Ontario and Alberta reduced poverty by more than the Canadian average, but demonstrates only that they reduced welfare recipency by more than the national average. Hardly the same thing. The issue deserves more serious examination, but “soft love” measures have probably been most effective.
I’m not a huge fan of earnings supplements for the working poor if these are not twinned to living wage measures (as even te OECD now counsels) but John’s point that income tested “soft love”income supplements for the working poor lead to high marginal tax rates for beneficiaries leaves me cold. If we are prepared – as we should be prepared – to create REAL incentives for people to move from welfare to work via higher wages, better access to EI for those in precarious jobs, and , yes, wage supplements, then we should be prepared to invest in supplements at such a level as to impose a low tax back rate as income rises above the poverty line.

In summary, the so-called “tough love” approach of Klein and Harris may have reduced welfare rates but it deepened poverty for those who remanied on welfare, and – in the context of an improved job market – shifted many from the ranks of the welfare poor to the working poor and near poor. That’s hardly cause for great celebration. The real challenge is to put forward a package that, yes, emphasizes rewards to work, but does so not by reinforcing the stick of welfare cuts, but by augmenting the carrots of decent wages, accessible EI, and wage and benefit supplements for the working poor.