Tough economic times still ahead

By Lynne Slotek

As Canada’s Vital Signs 2010 reported, “the fallout from the global recession is far from over.”

Regrettably, history has taught us that – without extensive government stimulus – it will be many years before Canada returns to unemployment and poverty levels that existed before the recession. After the 1980s recession, for example, it took seven years for Canada’s unemployment rate to return to pre-recession levels, and even then poverty rates kept going up for another three years.

Recessions do not hit all Canadians equally. A report prepared last year for the Canadian Index of Wellbeing (CIW), The Economic Crisis through the Lens of Wellbeing by Jean-François Arsenault and Andrew Sharpe, showed that in each of the previous two recessions, lower and middle income families experienced much larger losses of income than higher income households.

In the 1982-83 recession, the market income of the bottom 20 per cent of households dropped by 38 per cent, while the top 20 per cent of households lost just 3 per cent. In the 1990-93 recession, the bottom 20 per cent lost 74 per cent of income compared to 5.1 per cent for the top 20 per cent.

The situation for the unemployed and Canadians living in poverty has been further complicated by the growing holes in our country’s social safety net. Cuts to EI combined with a weakening of welfare benefits have rendered the climb out of poverty more difficult than in the past.

The climb has been especially steep for historically disadvantaged groups such as recent immigrants, racialized groups, Aboriginal peoples and youth. A second report prepared for the CIW, How are Canadians Really doing? A Closer Look at Select Groups by Caryl Arundel and Associates noted that  racialized groups are three times as likely to be poor than other Canadians.

History can be an important predictor of future patterns. But sometimes we need to remind ourselves that it’s there to teach us, not to bind us. History will only repeat itself if we allow it to. We Canadians are an adaptable people and we have the capacity to explore new solutions.

What does this mean in public policy terms? It means there must be two priorities for government action. First, since recessions and their aftermath primarily hit those who lose their jobs, it is vital that governments support such individuals by designing and implementing income supplement and retraining programs that meet their needs by opening up real access to real jobs.

Secondly, governments must offset as much as possible the shortfall in private-sector spending that prevents our economy from operating at full capacity. This is no time to become complacent and assume that just because GDP may be picking up a little, the market economy will take care of everything. It was that kind of thinking that got us into trouble in the first place.

In short, we still need ongoing government stimulus and support for both Canadians hit hardest by the recession and for the economy if we are to avoid the extended periods of high unemployment and even higher poverty rates that have followed previous recessions.

Lynne Slotek is the National Project Director of the Canadian Index of Wellbeing. CIW Reports on the quality of life of Canadians are available at www.ciw.ca