Newfoundland and Labrador: Recovery not a reality for all families

In 2007, Newfoundland and Labrador had the third lowest poverty and child poverty rate in the country, due largely to the efforts of its poverty reduction strategy. Unfortunately, despite this huge success, the 2008-2009 recession has increased poverty and economic insecurity for Newfoundland and Labrador families.

Newfoundland and Labrador suffered the second largest increase in unemployment in the country during the recession. Employment Insurance prevented many of these families from turning to social assistance, but Income Support caseloads still increased. The effects of the recession were visible in rising food bank use and an increase in bankruptcies, as the province also had to contend with a significant increase in the cost of living.

Now, despite the official message of economic recovery, too many families are finding that recovery is not the reality on the ground. They are still experiencing the poverty and insecurity created by the recession.

Standard measures of poverty are published with a two year lag time. But while we need to wait until 2011 to see the recession’s effect on those measures, new research by Citizens for Public Justice, with funding from World Vision Canada, already reveals the impact of the recession on key economic indicators and poverty trends.

Bearing the Brunt: How the Recession Created Poverty for Canadian Families details the growing economic insecurity in Canada and the rise in the national poverty and child poverty rates. It also reveals the significant consequences of the recession for Newfoundland and Labrador.

Although job losses were comparatively low in the Atlantic provinces, Newfoundland and Labrador still experienced the second highest increase in unemployment in the country. The province’s unemployment rate rose from 13.8% in October 2008 to 17% in October 2009, the highest unemployment rate in the country.

Newfoundland and Labrador was the only province to see a decline in EI coverage during the recession, but coverage was still extremely high at 97.3% in October 2009.

The high EI coverage spared Newfoundland and Labrador the significant growth in social assistance cases seen elsewhere in the country, but Income Support caseloads still increased 2.4% between October 2008 and December 2009. In January 2010, the caseload grew even higher, reaching 24,984 cases.

The impact of the recession could immediately be seen in bankruptcies and food bank use. Bankruptcies in the province grew 17.9% between the third quarter of 2008 and the third quarter of 2009.

Food banks witnessed increased demand, as the number of food bank users climbed 10%. 30,014 people needed to use a food bank in Newfoundland and Labrador in March 2009. 37% of food bank clients are children.

A significant proportion of low income residents are working poor, as evidenced by the fact that 9% of food bank clients have employment income. 14% of food bank users in Newfoundland and Labrador are EI recipients, the second highest proportion in the country.

One of the primary causes of increased poverty and economic insecurity in Newfoundland and Labrador is a steep rise in the cost of living in 2009. While inflation was 0.3%, food prices jumped 5.9%. The price of vegetables soared 10.9%.

Average rent for a two-bedroom apartment increased 4.8%, much higher than the national average of 2.3%. St. John’s had the fourth highest rent increase in the country at 4.9%.

This large increase in the cost of living places significant pressure on low income families to stretch their meagre incomes far enough to pay for rent, utilities and food.

While Newfoundland and Labrador are to be applauded for the commitment and success of their poverty reduction strategy, the recession has made this work harder and yet all the more necessary.

After the last recession, it took almost eight years for the unemployment rate in Canada to return to its pre-recession rate. It took 14 years for the poverty rate to decline to its pre-recession rate. So far, despite the headlines of economic recovery in 2010, Canada’s unemployment scenario has barely budged.

Without continued effort by the Newfoundland and Labrador government and a commitment of support from the federal government, many of the families impacted by the recession could suffer from its effects for years to come.