The Trap of Poverty

As I think about my social housing neighbours, I realize that most have lived in Regent Park for 10, 20, or even 30+ years. No one, it seems, ever moves out. Years ago, some came as single moms struggling to raise their children. Others arrived due to physical or mental health disabilities. Yet others were immigrants who, facing various barriers, failed to find a foothold in their new country. But regardless of why they came, they now appear to be caught in a poverty trap – a trap that accentuates the divide in a mixed-income neighbourhood.

One barrier that prevents the poor from getting ahead arises from our broken social safety net. This system, set up in the 1950s and 60s, now pays shamefully inadequate rates. For a single person in 2022, the Ontario Disability Support Program (ODSP) provides $1169/month to cover both rent and basic needs, while welfare, the Ontario Works Program (OW), provides even less at $733/month. To make matters worse, there are claw-backs: if a recipient earns more than $200/month, 50% of their remaining income is deducted from their stipend. As a result, recipients cannot save for further training, nor can they risk finding a better job. Meanwhile, a bureaucracy that scrutinizes their earnings on a monthly basis eats up scarce tax dollars.

But it is not just a broken welfare system that blocks the poor. Entrenched systemic problems create further obstacles. Minimum-wage service jobs, for example, may keep our lattés and Uber rides cheap but not pay enough to provide a family with rent and food. Similarly, child care staff and personal support workers for the elderly perform invaluable jobs for a less-than-liveable wage.

The barrier of low hourly wages is further complicated by yet another hurdle – soaring housing costs. Although countless expensive condominiums continue to rise, our city is losing its supply of mid-priced rental units. As a result, even if social housing residents manage to save for a better apartment, there is nowhere for them to move. Nor can they hazard moving since the list for social housing is now 80,000-100,000 names long and involves an estimated 10-year wait.

These issues are symptomatic of our society’s growing inequality – a situation that the pandemic exacerbated. Meanwhile, the recovery is described as K-shaped, with the income of high earners rising sharply, while relative to inflation, pay for low earners is declining, creating a widening gap. And as has been widely argued, a weakened middle class is detrimental both to the economy and to democracy.

So, what can be done? What changes can empower the poor to break free from poverty?

First of all, our welfare system needs to be overhauled. Payment rates need to be drastically raised to cover current rent and food costs, and then they need to keep pace with inflation. Along with this, the overly-complicated income reporting system must be streamlined. In this regard, some form of basic income or tax credits might be helpful. However, people need more than just money. They need jobs because work not only provides income but also gives structure, meaning, and dignity to their lives.

Other systemic changes are also required. Low-wage workers need a liveable minimum wage, sick pay and job security. Because our society cannot function without its service sector, we need to value such jobs, particularly those involving care for children, the sick, and the elderly. Not only are such caring jobs inherently meaningful, but they provide immense benefit to our society.

We also need creative ways to solve our housing crisis. Yes, it is a supply problem – but various levers could prevent housing from becoming a place to invest rather than a place to live: higher capital gains taxes on non-primary residences, more affordable units required in new buildings, and controls on rent increases.  Also, since cities are left providing most of the services to the poor, perhaps they should augment their property tax totals by instituting a progressive rate for higher-value homes. 

Our labour and housing markets are just two sectors that require reform if we, as a society, are to tackle the overall issue of rising inequality. It will take far more than just taxing the rich. It will require rethinking all the regulations governing our market economy's structure: taxation, patents, contracts, bankruptcies, monopolies, trade, corporations, etc. (Reich, 2015). There is no silver bullet. But in an ever-changing economy, we need ongoing changes to ensure that capitalism works for everyone.

Despite all this, I still find reasons to be hopeful. After reading several economists' recent books, I am encouraged that their theories are now based less on abstract modelling and more on historical analysis (Piketty, 2014) and pilot projects (Banerjee & Duflo, 2019). This grounding enables them to recognize the importance of values beyond mere monetary value (Carney, 2021). Another reason for hope is how the pandemic has spotlighted the disproportionate suffering of the marginalized – an awareness that could lead to more significant pressure for change. 

Meanwhile, I believe that many people in our city are not indifferent to the needs of the marginalized. And with creativity, they can find countless ways to get to know, support, and advocate for their neighbours as they struggle to escape the trap of poverty. After all, as the old adage says, “When everyone does better, everyone does better.”