Down and Out in North America: Recent Trends in Poverty Rates in the U.S. and Canada

Abstract

This paper documents the striking difference in U. S. and Canadian poverty trends from 1970 to 1986. While U.S. poverty has shown no consistent trend since 1970, Canadian poverty decreased by 60%. This paper examines why U. S. and Canadian poverty trends differed during two periods: 1970-1979 and 1979-1986. During the 1970s, we find that the principle reason for declining Canadian poverty rates is higher economic growth. During the 1980s, we find that differences in government transfers are the main cause of relative poverty change in the two countries. Virtually all of the 3.5 difference in U.S. and Canadian poverty changes from 1979 to 1986 can be attributed to differences in the proportion of families moved out of poverty by transfers. This may reflect both the expansion in social assistance levels in Canada, and the retrenchment in assistance levels in the U. S.