© 1997 Karen Selick
Child Poverty:  You Get What You Pay For
An edited version of this article first appeared in the July, 1997 issue of Canadian Lawyer.  If you wish to reproduce this article, click here for copyright info.


 Child Poverty:  You Get What You Pay For

Back in 1989, the House of Commons fixed the year 2000 as the deadline for eliminating child poverty in Canada.  According to recent headlines, we haven’t even made a dent in the problem since then.  Surprised?  Don’t be.  The solutions that have been proposed are virtually guaranteed to fail.

The National Child Benefit System proposed by the federal government in February is a perfect example.  Anti-poverty spokespeople pronounced it a good start, although not sufficiently generous.  In fact, the program would probably do exactly the opposite of what it’s supposed to, increasing rather than decreasing the number of poor children.

The proposal would eliminate the current Working Income Supplement of $500 per family, merging it with the so-called Child Tax Benefit (which isn’t really a tax reduction, but rather a monthly cheque sent to taxpayers and non-taxpayers alike).  The combination would produce a larger benefit that escalates with family size.  A low-income family with one child would get $1,625 per year, and each additional child would bring in $1,425 annually.

Subsidize anything, and more of it will be produced, economists tell us.  This rule holds true for milk, poultry, jobs, Canadian literature, recycling centres, methanol—you  name it.  Is there any reason to believe this law of economics will miraculously be suspended when it comes to the production of babies?

Baby bonuses were first introduced in this country in 1669 by the king of France.  They’ve been used in many other times and places.  The goal has always been to encourage people to have more babies.  Everyone has always understood this.  Why, suddenly, do politicians no longer grasp that if you pay people extra money for each child they have, it will encourage people to have more children?  Calling it an anti-poverty measure instead of a baby bonus won’t make people respond differently to the same economic incentive.

We can thank the Quebec government for giving us a dramatic demonstration of this phenomenon.  It began a program of generous baby bonuses in 1988, expressly for the purpose of reversing the province’s declining birth rate.  It worked.  Over 3 years, Quebec’s birth rate increased by 21 percent, compared with only 8 percent for neighbouring Ontario and a 1 percent decline for Newfoundland. 

The proposed federal child subsidies will be even more generous than Quebec’s.  They will be ongoing, annual payments instead of one-time payments at the child’s birth.  Furthermore, since the subsidies will be available only to low-income families and will phase out as the family’s income increases, the incentive to produce more children will be strongest among the very poorest in society.  Already we’re told (although it’s highly debatable) that 25 percent of Canada’s children live in poverty.  With higher birth rates encouraged among the poor and not affected among the middle class or wealthy, we can expect to see the proportion of poor children, as well as their absolute number, climb even higher.

Readers might object that nobody would actually be induced to have another child by a mere $1,425 per year, since the child would cost more than that to support.  In fact, many people decide to have children under financial circumstances that readers of this column would consider totally unacceptable. 
Today’s poor children did not all tumble into poverty because their parents lost their jobs.  Many of them were conceived and born to parents who must already have known they couldn’t support them in comfort.  That segment of the population who were prepared to raise their children in poverty before the new benefits were announced will be all the more willing to do so when it will mean an extra $1,425 per year in their pockets.  Others who were debating whether to have another child will decide the extra money tips the scale in favour.

If we really wanted to improve the standard of living for existing poor children rather than increasing their numbers, we would have to attach two conditions to the subsidy.  First, it should be available only for children already alive, or at least already conceived, on the day the program is announced.  This would eliminate the incentive for people to have additional children who would cost more to support than what they would bring in, thereby dragging their families deeper into poverty. 

But we’d actually have to go even further.  Some families who already have children but are considering having another might decide that even though the new child wouldn’t come with any money attached, the enhanced benefits for the existing children would be enough to finance the addition of a new one.   In other words, they might prefer to have one more child at a lower standard of living rather than the existing number at a higher standard.  Some people actually do exhibit this preference, as demonstrated by the fact that welfare mothers frequently give birth to additional children.  To prevent this, the program would have to provide that families who have new children would cease to receive benefits for the existing ones.

Would any politician ever have the guts to suggest this?  I don’t think so--which is why we’ll never solve the problem of child poverty by giving subsidies to the poor.

- END -


..... ..... 


June 18, 2000