Research Papers

In this paper, we describe the levels of financial literacy and financial capability of adults receiving Income Assistance (IA) benefits in British Columbia. We find that, even after controlling for the usual demographic characteristics, IA recipients have significantly lower levels of knowledge (on mainstream financial topics commonly used in tests of financial literacy) and lower levels of capability in some key areas of financial management. This is not evidence that IA clients need to be instructed on budgeting; in fact we find there is no significant difference between IA clients and other adults along this dimension. Instead, we find that IA programs likely inhibit the ability of clients to gain positive experiences in making their own financial decisions. We also draw on results of a survey of voluntary sector organizations that deliver a range of services to low-income clients, including tax-filing clinics, help accessing government benefits, financial coaching or problem-solving, and consumer rights education and advocacy. We find that organizations seem to be playing an important role in helping low-income adults navigate and access public benefits, but that this work is not properly considered in the total cost of current IA programs or other income supports. We also find that the non-profit supply of financial information and advice to low-income clients is likely precarious due to uncertain funding and competing organizational priorities.

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Financial technology (fintech) can help to mitigate the problem of financial exclusion in British Columbia. Individuals who participate in the traditional banking and financial system experience a variety of social and economic benefits. Yet several factors like personal hardship, financial illiteracy, high product costs, perceived eligibility, informational gaps, a lack of credit history and legal documents, bank resistance, and customer feelings of distrust and disrespect contribute to the exclusion of many from traditional financial products and services. People who are “unbanked” and “underbanked” often turn to high-cost (even predatory) substitutes like payday lenders, rent-to-own firms, cheque-cashing services, and pawn shops. This paper illustrates how some fintech innovations—highlighting numerous companies operating in British Columbia, Canada, and internationally—can benefit people who are unbanked and underbanked as an alternative to “fringe” banking. Fintech is not, however, a panacea for those excluded, marginalized, or underserved by traditional financial firms, and there are several implementation barriers and integration risks in this market development. This paper provides seven key policy recommendations to help maximize the inclusionary benefits of fintech in British Columbia while mitigating its potential risks.

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British Columbia’s economy and finances have been strong in recent years. But an aging population and declining real-estate activity may, over the medium and long run, create pressures that current policy is not well equipped to handle. This paper estimates the long-run fiscal situation for the province and finds the status quo unsustainable. Revenue growth lags behind both the overall economy and program spending. The gap between spending and revenue will, over time, lead to unsustainable debt levels. Immediate and permanent increases in revenue or decreases in spending on the order of 3% of GDP are necessary to ensure that B.C.’s debt-to-GDP ratio does not grow without bound. This is equivalent to increasing sales taxes by 8 percentage points or decreasing program spending by nearly 17%. Roughly half the long-run gap between projected revenue and spending is due to slow revenue growth and the other half due to rising health expenditures. Though status quo policy is unsustainable, a wide variety of policy responses are available. This report explores several long-run fiscal scenarios to examine the challenges facing the province, the wide variety of policy responses, and the scope for new large-scale spending initiatives like a basic income program. Gradual changes made today will not only ensure fiscal sustainability but also allow the province to consider expanding social spending programs in a responsible manner.

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