What Economic Recovery?

For many Canadian families, the recession has meant increased poverty and insecurity.

For the past several months, headlines have trumpeted Canada’s unexpected economic recovery. GDP growth has been positive since the third quarter of 2009, and a return of consumer confidence has boosted spending. After months of steep job losses, the past few months have seen net job creation.

However, this economic recovery is not being felt by all Canadians. The recession created poverty and economic insecurity for many families who are still waiting for a recovery of their own. There are also several economic trends caused by the recession that should make us cautious in celebrating a return to good times.

A new report by Citizens for Public Justice (with funding from World Vision Canada) details the heavy burden of the recession on low income Canadians. Our trend analysis projects that the poverty rate rose from 9.2 per cent in 2007 to 11.7 per cent in 2009, an increase of over 900,000 people. After the last recession, it took 14 years for the poverty rate to return to its pre-recession level. This suggests that without a concerted effort to eliminate poverty, we could see the impact of the 2008-2009 recession linger on for many years.

Several key economic trends are also cause for continued concern. Over 400,000 jobs were lost during the recession, driving Canada’s unemployment rate up to 8.5 per cent in December 2009. As of March 2010, the unemployment rate was still 8.2 per cent. After the last recession, it took almost eight years for the unemployment rate to decline to its pre-recession rate. So far, employment trends give us no reason to believe that this recovery will be any faster.

While we have seen months with net job creation, we have also had months with net job loss. Even more problematic, many of the months of net job creation have seen full-time job losses offset by part-time job creation. The recession and its recovery have thus contributed to the increasing precariousness of work.

Prior to the recession, one in three jobs in Canada was considered precarious: part-time, temporary, or contract positions, with low income, few or no benefits, and no stability. As this proportion has increased, so too have the number of Canadians who have to make ends meet on part-time wages with no job guarantee beyond a few days or a few weeks.

The utter failure of employment insurance to respond to the demands of the recession has also contributed to an increase in poverty. While EI coverage increased as unemployment rose, at its peak slightly over half of all the unemployed were receiving benefits. In October 2009, this meant that 777,400 unemployed Canadians were not receiving benefits. EI coverage has since declined below 50 per cent.

Social assistance had to fill in the gaps for EI. Welfare caseloads rose across the country, climbing the highest in the provinces with the lowest EI coverage. Alberta, Ontario, and British Columbia all had increases of more than 20 per cent in their welfare caseload.

At the same time that incomes were being pressured by rising unemployment, low income Canadians had to stretch their dollars further in order to pay for rising cost of food and rent. Average food prices rose 4.9 per cent in 2009, compared to inflation of 0.3 per cent. The average rent for a two-bedroom apartment increased 2.3 per cent between the third quarter of 2008 and the third quarter of 2009.

The impact of the recession on economic insecurity was immediately visible in rising debt loads, an increase in bankruptcies, and skyrocketing food bank use. The average debt load per family grew 5.7 per cent between the third quarter of 2008 and the third quarter of 2009. Bankruptcies increased 36.4 per cent over this same period. And the number of Canadians using a food bank jumped 18 per cent in 2009, the largest year-over-year increase ever recorded.

Recovery is far from the reality on the ground for these Canadians deeply impacted by the recession. They need job creation, a stronger EI system, and livable welfare incomes.

Canada also needs a poverty elimination strategy. Without a concerted effort to reduce and eventually eliminate poverty, we will continue to see the poverty rate rise and fall along with the economic cycle. Far too many Canadians suffer from vulnerability to poverty and economic insecurity caused by recessions. It’s time to make recovery a reality for all Canadians.