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Does the Canada Child Benefit Actually Reduce Child Poverty?

Does the Canada Child Benefit Actually Reduce Child Poverty?

Canada Child Benefit is less effective at lifting children out of poverty due to a lack of targeting.

NORTHERN, ONTARIO  ~~~~  October 13, 2021 (LSNews)  —Despite spending an additional $5.6 billion in 2019-20, the new Canada Child Benefit only moved an estimated 90,900 children above Statistics Canada’s Low-Income Cut-Off, a key measure of low-income, finds a new essay released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank

“One of the stated goals of the Canada Child Benefit was to help lift children out of poverty, but most of the households that benefit from this new program compared to the previous ones were never living in poverty in the first place,” said Professor Christopher Sarlo, senior fellow at the Fraser Institute and author of Does the Canada Child Benefit (CCB) Actually Reduce Child Poverty?

In 2016, the federal government replaced two existing child benefit programs with the Canada Child Benefit (CCB), which provides tax-free payments to eligible families with children under the age of 18. An estimated 390,600 children would have been in households with income below Statistics Canada’s LICO line in 2019 under the old system. The new CCB reduced that number to an estimated 299,700, a reduction of 90,900. In 2019, LICO was calculated as $41,406 for a family of four living in a census city with more than 500,000 people.

The decline in child poverty rates improve when an alternative measure of poverty is used, Statistics Canada’s Market Basket Measure (MBM), which the federal government tends to favour, estimates poverty at higher levels of income compared to LICO. In 2019, for instance, the MBM for a family of four ranged up to a little over $50,000 depending on the city.

An estimated 987,306 children would have lived in households with income below the MBM in 2019 under the old system. The introduction of the CCB reduced that number to 702,942, a reduction of 284,364. “The CCB program did not target truly low-income families with children and instead deliberately prioritized the middle class,” Sarlo said. “This is yet another example of the government making grand claims without offering any empirical evidence.” 

  • The principal analysis in this essay relies on Statistics Canada’s SPSD/M simulation model.
  • Using low income cut-offs (LICO), a measure of low-income, there were an estimated 390,600 children (for 2019) in families whose income was below LICO under the old system of the Canada Child Tax Benefit (CCTB) and Universal Child Care Benefit (UCCB). The number of low-income children drops to 299,700 after the CCB was introduced, a difference of 90,900.
  • If the Market Basket Measure (MBM) is used as an indicator of poverty (it is roughly 20 to 30 percent higher than LICO), there were an estimated 987,306 children living in households whose income was below the MBM under the old system of CCTB and UCCB. The num¬ber of (below MBM) children drops to 702,942 under the new CCB, a decline of 248,364. This represents 77.5 percent of the government’s estimated decline in child poverty of 367,000.
  • It’s important to recognize the approximate values of LICO and the MBM. In 2019, for instance, LICO ranged between $27,085 and $41,406 for a family of four while the MBM ranged between $38,239 and $50,055. Neither measure attempts to capture material depriva-tion but are predominately relative measures of poverty.
  • As previous analyses have shown, the targeting of the new CCB to the middle-class rather than those in need results in more families with in¬comes close to the MBM being raised above the “poverty” line whereas fewer families deeper in need (below LICO) were pushed higher by the CCB.
  • Finally, it’s important to reiterate that the costly ($7 billion) expansion that came with the CCB was deliberately targeted towards the middle class and not to truly low-income families with children.

Author:


Christopher A. Sarlo

Professor of Economics, Nipissing University

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Northern Ontario 
Thunder Bay, Sault Ste Marie, Sudbury, Ontario 

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    The Fraser Institute is an independent, non-partisan research and educational organization based in Canada. We have offices in Calgary, Montreal, Toronto, and Vancouver. Visit our Website 

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