“Poverty deficit” shows cost to end poverty in Ontario less than the cost of poverty itself
TORONTO – The cost of ending poverty in Ontario was just $14.3 billion in 2023, according to a revolutionary approach to measuring the problem developed by Wellesley Institute.
“When you consider that poverty cost the Ontario government as much as $33 billion in crime, healthcare costs and lost income in 2019, you realize that eliminating poverty makes economic sense,” says Dr. Kwame McKenzie, CEO of Wellesley Institute and co-author of a report introducing the concept of the “poverty deficit.”
In introducing the poverty deficit approach, Wellesley Institute aimed to solve an important problem: in Canada, poverty is currently measured by the percentage of households that fall below the Market Basket Measure (income) threshold for poverty, but policymakers may need more information to develop good strategy. For example, two areas may have the same percentage of people below the MBM poverty line, but one may have many people near the poverty line and the other may have many more people in deep poverty. The areas would need different approaches to deal with their poverty problem and may need different amounts of money, but you would not know that from simply looking at the percentage of people below the MBM.
Wellesley Institute’s poverty deficit approach measures the depth of poverty and calculates the amount of money which would be needed to end poverty for everyone by simple cash transfers to households. It offers the extra information that policymakers need.
“The poverty deficit is an important new way to examine poverty in Canada,” says Dr. McKenzie. “It would enable us to better assess whether poverty reduction strategies are in fact reducing the overall depth of poverty, and not just the number of people in poverty. And importantly, the calculations would highlight for decision-makers the amount of resources needed to eliminate poverty.”
Drawing on data from Statistics Canada, Wellesley Institute calculated the poverty deficit for both Ontario and Toronto.
Ontario’s $14.3 poverty deficit in 2023 was just 7.5 per cent of the Ontario government’s program spending and just 1.2 per cent of the province’s GDP that year. The poverty deficit in Toronto in 2023 was $841 million, which was less than four per cent of the City’s combined operating and capital budget that year.
The calculations further showed:
- Households which included someone with a visible minority, a newcomer to Canada, and those with at least one person under 18 were deeper in poverty.
- Households in poverty which included a person with a disability and a person over 65 were not as deep in poverty, suggesting programs such as the Ontario Disability Support Program, the Canada Disability Benefit and Old Age Security are helping these households to some extent, but not lifting them completely out of poverty.
- People in Toronto experience deeper poverty than people in Ontario as a whole.
“All levels of government have a role to play in eliminating poverty,” says Dr. McKenzie. “Understanding poverty through the lens of poverty deficits gives us a new tool to move the discussion from theory into action.”
Along with Dr. McKenzie, co-authors of “The poverty deficit: A new approach to poverty measurement and policy” were Antonia Stutter, Christine L. Sheppard and Jesse Rosenberg.
UPDATE: Since this report was developed, Statistics Canada have updated their Market Basket Measure methodology and have made poverty deficit data, at the provincial level, available online.