This report estimates the price of inaction. Regardless of the strategy used to address poverty, it asks, “What does it cost us to allow poverty to persist in Toronto?” It estimates how much more we may be spending in the health care and justice systems simply because poverty exists, and how much we lose in tax revenue, simply because poverty exists.
This preliminary analysis conservatively estimates that the overall cost of poverty in Toronto ranges from $4.4 to $5.5 billion per year. This estimate is largely comparable, with the exception of intergenerational costs, with estimates of the cost of poverty in Ontario at $32 to $38 billion and for Canada at $72 to $85 billion.1
There is no definitive measure of the full economic impact of poverty. However there is a body of work in Canada that provides estimates of the cost of poverty in the key areas of health and justice. These estimates also measure in dollars the lost economic opportunity for current and future generations who live in poverty. Until now, these estimates have been national and provincial. With this report, Toronto leads the way in estimating the cost of poverty for a Canadian city.
It would be far too simple to say that a large investment in eradicating poverty would result in saving governments and taxpayers five or six billion dollars a year. Nevertheless, this exercise provides an estimate of the scale of lost opportunity – the opportunity to spend limited funds differently, with more productive results.
Success metrics in poverty reduction tend to focus on social returns, to the exclusion of monetary ones. It is true that dollar impacts are challenging and sometimes unpopular to quantify. Yet when return on investment is unaccounted for in dollar values, decision -makers are left with only one side of the balance sheet to consider. Spending on poverty reduction is viewed as a “sunk” cost.
Social and economic returns are both critical. City halls, provincial legislatures, and Canada’s parliament are guided by both their social purpose and their budgets. How we measure outcomes shapes budgetary allocations. While fiscal return is not the primary indicator of success in poverty reduction, it is useful to have a notion of potential gains when determining what we can afford to spend.