Poverty in Canada and the USA: Measurement, Trends and Implications

This paper begins by asking how poverty in affluent countries should be measured, before examining recent evidence on poverty intensity and its social significance. Section 1 advocates use of the Sen-Shorrocks-Thon index of poverty intensity and introduces the " Poverty Box " as a summary graphical representation. Recently, poverty intensity has increased in Canada while falling in the US. Although on a national basis Canadian poverty intensity remained below that in the US, by 1997 many US states were indistinguishable from Canadian provinces. Fixed effects regressions across states and provinces using Generalized Least Squares and bootstrap standard errors indicate that changes in the unemployment rate, unemployment insurance and social assistance are significant determinants of changes in poverty intensity. Since changes in trade exposure were not statistically significant, the general moral is that trade liberalization does not preclude the macro economic and social policy choices which can improve poverty outcomes. The paper concludes with a discussion of the social significance of income poverty, and its relationship to social exclusion and fundamental human rights. 3 Although Canada and the United States are two of the richest countries in the world, many Canadians and Americans perceive themselves, and are perceived by others, to be poor-which raises the issue of how best to measure poverty. Within Canada, there are widespread worries that the self image of Canada as a place with relatively little poverty (somewhat " kinder and gentler " than the US), may be a bit outdated. International comparisons indicate that poverty in North America is relatively 1 high, compared to many (but not all) European countries. Furthermore, poverty in Canada has been rising, while in the US it has been falling in recent years-which raises the issues of why that has been happening and what it will mean, in the longer term, for Canada and the US as a whole. The paper therefore addresses measurement issues, recent developments in North American and European poverty and the social significance of income poverty. Section 1 stresses the importance of an appropriate index for poverty measurement. Section 2 presents recent data on poverty in Europe and North America and notes that between 1994 and 1997 Canadian provinces became quite similar to many US states in poverty intensity. Section 3 examines some hypotheses which might explain these trends while Section 4 addresses their social significance. Underlying the paper as a whole is the question: " Why …