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Low-income Intensity During the 1990s: The Role of Economic Growth, Employment Earnings and Social Transfers

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  • Picot, Garnett
  • Morissette, Rene
  • Myles, John
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    Abstract

    All countries look to economic growth to reduce low-income. This paper focuses on the 1990s and assesses the role played by changes in economic growth, employment earnings and government transfers in the patterns of low-income intensity in Canada during the 1990s. We find that low-income intensity was higher in most provinces during the 1990s than during the 1980s (comparing comparable positions in the business cycle). The largest increase was in Ontario. In particular, in spite of the slow economic growth and falling unemployment between 1993 and 1997, low-income intensity continued to rise. Both increases in the low-income rate and the low-income gaps contributed to this higher level. Employment earnings continued to decline among low-income families over the 1990s, contributing to the increase in low-income intensity in central and eastern Canada in particular. This is related in part to the more severe recession of the early 1990s east of Manitoba, and the lack of recovery among poorer families. During the 1990s changes in government transfers did not offset the fall in employment earnings among lower-income families, as they did during the 1980s, resulting in rising low-income intensity. Declining transfer benefits were associated with a rising low-income gap in some provinces, particularly Alberta. The latest data available at the time of writing was 1998. The strong economic growth of 1999 and 2000 will likely have reduced low-income intensity, but it remains to be seen if it falls back to the level of the 1980s cyclical peak.

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    Bibliographic Info

    Paper provided by Statistics Canada, Analytical Studies Branch in its series Analytical Studies Branch Research Paper Series with number 2003172e.

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    Date of creation: 24 Jan 2003
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    Handle: RePEc:stc:stcp3e:2003172e

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    Keywords: Employment and unemployment; Employment insurance; social assistance and other transfers; Income; pensions; spending and wealth; Labour; Low income and inequality; Wages; salaries and other earnings;

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    1. Osberg, L. & Xu, K., 1998. "Poverty Intensity- How Well Does Canada Compare? ," Department of Economics at Dalhousie University working papers archive 98-05, Dalhousie, Department of Economics.
    2. Lin, Zhengxi, 1998. "Employment Insurance in Canada: Recent Trends and Policy Changes," Analytical Studies Branch Research Paper Series 1998125e, Statistics Canada, Analytical Studies Branch.
    3. Rebecca M. Blank & David Card, 1993. "Poverty, Income Distribution, and Growth: Are They Still Connected," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 285-340.
    4. David Card & John E. DiNardo, 2002. "Skill Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," NBER Working Papers 8769, National Bureau of Economic Research, Inc.
    5. Zyblock, Miles & Lin, Zhengxi & Zhengxi, Lin, 1997. "Trickling Down or Fizzling Out? Economic Performance, Transfers, Inequality and Low Income," Analytical Studies Branch Research Paper Series 1997110e, Statistics Canada, Analytical Studies Branch.
    6. Lars Osberg, 2000. "Poverty in Canada and the United States: measurement, trends, and implications," Canadian Journal of Economics, Canadian Economics Association, vol. 33(4), pages 847-877, November.
    7. Kapsalis, Costa, 2001. "An Assessment of EI and SA Reporting in SLID," Analytical Studies Branch Research Paper Series 2001166e, Statistics Canada, Analytical Studies Branch.
    8. Rebecca M. Blank & Maria J. Hanratty, 1993. "Responding to Need: A Comparison of Social Safety Nets in Canada and the United States," NBER Chapters, in: Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, pages 191-232 National Bureau of Economic Research, Inc.
    9. Hirsch, Barry T, 1980. "Poverty and Economic Growth: Has Trickle Down Petered Out?," Economic Inquiry, Western Economic Association International, vol. 18(1), pages 151-58, January.
    10. Osberg, L & Xu, K, 1997. "International Comparisons of Poverty Intensity : Index Decomposition and Bootstrap Inference," Department of Economics at Dalhousie University working papers archive 97-03, Dalhousie, Department of Economics.
    11. Shorrocks, Anthony F, 1995. "Revisiting the Sen Poverty Index," Econometrica, Econometric Society, vol. 63(5), pages 1225-30, September.
    12. Osberg, L & Xu, K, 1997. "International Comparisons of Poverty Intensity : Index Decomposition and Bootstrap Inference," Department of Economics at Dalhousie University working papers archive 97-03, Dalhousie, Department of Economics.
    13. Sen, Amartya K, 1976. "Poverty: An Ordinal Approach to Measurement," Econometrica, Econometric Society, vol. 44(2), pages 219-31, March.
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    Cited by:
    1. Picot, Garnett & Myles, John, 2005. "Income Inequality and Low Income in Canada: an International Perspective," Analytical Studies Branch Research Paper Series 2005240e, Statistics Canada, Analytical Studies Branch.
    2. Johnson, Anick & Morissette, Rene, 2004. "Earnings of Couples with High and Low Levels of Education, 1980-2000," Analytical Studies Branch Research Paper Series 2004230e, Statistics Canada, Analytical Studies Branch.

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