Reducing poverty is good, but building real financial well-being is even better

14 March 2018
Author: Elizabeth Mulholland
On February 21 2018, the Honourable Jean-Yves Duclos shared what Canadians have told him about poverty.  
 
He heard that poverty isn’t just about not enough money. Poverty goes hand in hand with hunger, inadequate housing, poor physical and mental health, discrimination, and social exclusion. These experiences are most prevalent and acute for Indigenous Peoples, newcomers, people of colour, people with disabilities, LBGTQ Canadians and victims of family violence.
 
We agree. Through program partnerships with community organizations in the national ABLE Financial Empowerment Network, we have worked with tens of thousands of low-income Canadians, learning about the complexity of their lives, their diverse experiences, and the systemic and personal challenges they face. 
 
One key challenge is accessing important income benefits that governments already offer people living in poverty. These benefits can potentially double a low-income family’s income – but only if they can get them. Most are delivered through the tax system, but some benefits are accessed through separate application processes (e.g. EI and social assistance). 
 
Hundreds of millions in federal benefits alone go unclaimed each year by Canada’s lowest income households because they don’t know they are eligible or struggle to tax file and navigate complex application processes. This prevents people from receiving benefits like the Canada Child Benefit (up to $6,400 per child annually) or the Guaranteed Income Supplement (GIS) for seniors (up to $876 per month). 
 
The Canada Revenue Agency (CRA) has been working hard to make it easier for Canadians to access the over 157 benefits and credits delivered through our tax system – e.g. their recent decision to automate GIS renewal. But some people will always need hands-on help to overcome barriers standing between them and the benefits they are owed.
 
Affluent Canadians have a multitude of professionals dedicated to helping them get their tax credits, but who helps Canadians with low incomes?  
 
If they are lucky, some may find free community programs that are making a real difference. In just three years, 14 of our community partners providing tax filing and one-on-one financial help have enabled over 61,000 low-income individuals to tax file, submit 5,400 benefits applications, and increase their incomes by $126 million. Despite measurably reducing poverty, however, these organizations have no sustained funding for this work.
 
We, therefore, encourage Minister Duclos to ensure the federal poverty reduction strategy expands these services, because connecting Canadians to benefits that already exist should be job one. 
 
This can be done cost-effectively by building them into existing programs targeted to low and modest-income Canadians and by investing in and leveraging excellent resources like: tax filing software; accredited, nonprofit, credit counselling agencies; community agencies offering tax and benefit assistance; CRA’s Community Volunteer Income Tax Program; and volunteer tax clinics offered by chartered professional accountants. 
 
Minister Duclos’ report also highlighted that many Canadians are living paycheque to paycheque, hovering on the brink of poverty, feeling the stress that comes with knowing that one shock – an unexpected expense, illness or job loss – could send them spiralling over the edge. 
 
Again, we agree. For these Canadians, research shows that keeping a cash buffer is critical to avoiding financial hardship and greatly reduces the risk that a family will, within six months: miss a payment for rent, mortgage or a recurring bill; be unable to afford enough food; or be forced to skip needed medical care. Further evidence indicates that savings act as ‘trampolines’ – increasing people’s capacity to pursue proven pathways to greater prosperity, such as education, training, entrepreneurship, and home ownership. 
 
Savings can’t replace effective employment and income support programs, but they can make households more resilient and enable them to take greater advantage of opportunities to build their human and financial capital.
 
We, therefore, encourage the Minister to look beyond income alone when it comes to measuring and reducing poverty, and to focus as well on helping households to increase short and long-term savings that are equally critical to building their financial resilience and chances of future prosperity.
 
Reducing income poverty is good, but helping families to build true financial well-being through adequate income and savings is even better and a goal that every Canadian can get behind. So let’s not miss this opportunity.

THE AUTHOR

Elizabeth Mulholland has been engaged in social policy making for over 30 years, including as a senior policy advisor to Prime Minister Jean Chretien. She is now the CEO of Prosper Canada.

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