More flexible regulation and lower taxes could have avoided 140,000 episodes of poverty in Quebec, says the MEI
Montreal, Thursday, May 23, 2024 – A lighter regulatory and tax burden would have reduced the number and the length of episodes of poverty in Quebec, shows a new study published by the Montreal Economic Institute this morning.
“The economic literature is very clear: the weight of regulation and taxes has a negative impact on economic growth, and ultimately on social mobility,” explains Vincent Geloso, senior economist at the MEI. “If Quebec had a level of economic freedom similar to Alberta’s, 140,000 fewer Quebecers would have experienced an episode of poverty.”
The researcher explains that the economic literature establishes clear links between faster economic growth and greater income growth for all groups in economically freer societies.
Using longitudinal data from Statistics Canada, the study finds that with a fiscal and regulatory environment similar to Alberta’s, around 140,000 fewer Quebecers would have lived through an episode of poverty between 2013 and 2020.
The study also shows that the rate of episodes of persistent poverty, namely eight years or more, would have been nearly 50 per cent lower, representing 107,000 fewer Quebecers experiencing an episode of persistent poverty.
The author explains that occupational licensing, by restricting access to certain professions, is particularly regressive and contributes to a higher prevalence of episodes of poverty.
“When it comes to occupational licensing, one can think for instance of the seven months of training required to be a hairdresser in the Outaouais region, or the eight months of training to become a house painter,” explains Mr. Geloso. “These are regulations that restrict opportunities for workers, and ultimately their employment options and therefore their potential incomes.”
He also points out that eliminating legal barriers to entry for new players in certain industries, like supply management for instance, as well as municipal regulations restricting residential construction, would help reduce the prevalence of these episodes of poverty.
The MEI study is available here.
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