Increasing the social assistance rate would provide a boost to the economy and actually save the government overall in poverty-related health costs.
By Laura Cattari
Published September 23, 2011
High inequality can diminish economic growth if it means that the country is not fully using the skills and capabilities of all its citizens or if it undermines social cohesion, leading to increased social tensions. High inequality [also] raises a moral question about fairness and social justice.
The Ontario Election campaign trail is currently littered with promises ranging from tax cuts to infrastructure and health care spending. All these promises are designed to make your life easier because as many well know, it has been a struggle. Nowhere has it been questioned by these politicians why this is so.
Basic economics teaches that without demand, supply diminishes. The largest provider of demand in our population is the average citizen.
In the September 21 issue of the National Post, Senior Economist Armine Yalnizyan states, "Canada's top 100 CEOs have seen a 13% year-over-year jump in average pay, rising to an average of $6-million. In contrast, the average earnings of employed Canadians has fallen to $38,500."
If this is so, then overall economic development, including free market job creation, has no choice but to become stagnant or recede, i.e. recession. The best preventative medicine for avoiding global recession hitting local markets is continuing to pay people fair wages and increasing their pay with inflation.
There remains 10% of our Hamilton population on social assistance who could and would provide further economic stimulus of 2.33, if we had the popular will to do so. 2.33 stimulus is equivalent to $2.33 return on a dollar investment.
That's a higher stimulus effect than the average 1.6 on public infrastructure and a pathetic 0.29 rate on permanent tax-cut measures, like those US President George W. Bush implemented.
This segment on social assistance could easily be provided with rate increases which would provide immediate impact on the Hamilton economy to the tune of an additional $25 million a month.
Dr. Atif Kubursi's report, entitled The Impact on Social Assistance in Hamilton [PDF], shows over 3,500 jobs currently generated by assistance payment stimulus. This does not include public workers.
Does our local economy really call for such drastic measures? Yes.
Immediate solutions are needed as Ontario Works case loads are rising at a rate of approximately 400 a month. Last January, Jo-Anne Priel, General Manager Community Services Department, presented to City Council a report which cited our drop in unemployment figures are directly proportional to those entering the Ontario Works.
If you consider this idea unaffordable, think again. The Registered Nurses' Association of Ontario estimates that $32 to 38 billion is lost to the public and private sectors due to poverty-related health costs when only $6.6 billion is spent on assistance.
In keeping with the idea that welfare should not be preferable to minimum wage, doubling OW alone would raise the rates to 80% of minimum wage, still motivating those on assistance to find jobs.
As an added bonus, we alleviate the cited health costs, saving the province money while stimulating the economy at a local level, generating jobs for these individuals to move into.
Given the impacts on physical and mental health on recipients, it would be fair to say that if assistance recipients were pets, the SPCA would have jailed the provincial government long ago.
We know job creation schemes are failing to keep apace of job losses. Currently there are more than 28,000 unemployed in Hamilton alone and we do not have that many jobs available.
Local spending creates local jobs. Demand platforms that address this issue. Vote this election thinking ahead.
A version of this essay was first published on the Advocacy Hamilton website.
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