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Welfare Incomes is a regular report on the welfare rates in each province and territory in Canada. This report estimates welfare incomes for four types of households in 2000 and 2001: a single employable person, a single person with a disability, a single-parent family with a two-year-old child, and a two-parent family with two children aged ten and 15. The National Council of Welfare has published similar estimates since 1986.
The perverse effect of the Canada Child Tax Benefit (CCTB)
Over the last decade, successive federal governments have proudly moved to "target" their financial support to families at the lower end of the income spectrum. The CCTB is the main mechanism used by the Government of Canada to assist parents with children at home. It is composed of the Child Tax Benefit (CTB) and the National Child Benefit Supplement (NCBS). The maximum basic benefit under the CTB has been $93.08 per child per month since July 2001. The maximum for the NCBS during that period was $104.58 per month for one child.
The federal government says that it is working with the provinces, territories and First Nations to reduce child poverty. To achieve that goal, Ottawa and most of the provinces and territories have agreed that the supplementary funds paid out by the federal government may be clawed back out of the welfare benefits of families and reinvested by the provinces and territories in other children's programs. This means that the only families that saw their incomes rise in 2000 as a result of the NCBS were in Newfoundland and Labrador, New Brunswick and, to a lesser extent, Manitoba; they were joined in 2001 by Nova Scotia, Manitoba for families with children under the age of seven, and Quebec. The other provinces and territories used a variety of methods for clawing back this money: some deducted it from welfare cheques, some deducted it from the provincial family allowance. The procedure may vary, but the result is the same: the money that the province is clawing back is money that low-income families cannot afford to lose.
The clawback provision was not supposed to hurt families on welfare, but we show that the opposite has in fact occurred. The clawback has effectively frozen welfare incomes and dampened prospects for increases in the future. In those provinces and territories where the governments have clawed back the supplement to the Canada Child Tax Benefit, the federal government is, with few exceptions, providing a larger and larger share of the welfare incomes, while the share of welfare incomes that is paid by the provinces and the territories becomes smaller as the years go by. The federal government has also made it possible for the eight provinces and territories that use the clawback to evade their responsibilities to the poorest of the poor in our society.
For the three provinces that changed their approach to the CCTB in 2001 - namely, Manitoba, Nova Scotia and Quebec, we can see that the standard of living improved by an average of about one percent for the families affected between 2000 and 2001, even though the beneficial change did not take effect until mid-year.
The National Council of Welfare is very concerned by the fact that the clawbacks under the CCTB discriminate against families on welfare. Our 2001 report, Child Poverty Profile 1998, estimated that only 66 percent of poor families with children benefited from the CCTB between June 1998 and June 1999: 79 percent of two-parent poor families but only 57 percent of poor single-parent families would be allowed to keep the supplement of the CCTB. As women head most single-parent families, we believe that this constitutes discrimination on the basis of gender.
Welfare incomes very low in 2000 and 2001
We provide a national picture of estimated welfare incomes for 2000 and 2001 (Table 2). They are abysmally low. To demonstrate just how low, we compared them with the Statistics Canada's low income cut-offs (LICOs) for 2000 and 2001.
In neither 2000 nor 2001 did any province have welfare rates consistently closer to the poverty lines than elsewhere (Table 3). Rates in some provinces and territories, especially rates for single employables, are far, far below the average. Welfare incomes which reach only one fifth or one third of the poverty line are unacceptably low and should be raised at the earliest possible date.
When we compare welfare incomes with average total incomes (after government transfer payments but before tax) for equivalent households in each province, we again find that welfare incomes are well below average incomes (Table 4). Welfare provides only a portion of the level of income that most Canadians would consider normal or reasonable.
The situation of single-parent families clearly illustrates the significant gap between welfare incomes and estimated average total incomes and the poverty lines in 2001. Welfare incomes for single-parent families in 2001 were all at least $5,000 below the poverty line for two-member families living in the largest city in each province, and a minimum of $10,000 below the estimated average total income for all single-parent families in those provinces.
The abysmally low welfare incomes for these single-parent families would be slightly less tragic if governments were to stop clawing back the National Child Benefit Supplement. In most provinces and territories that clawed back the supplement at the end of 2001, the loss of earnings in single-parent families' annual budget was $1,116 (Graph).
General deterioration since the early 1990s
At no point between 1986 and 2001 did any province or territory provide welfare benefits which allowed welfare recipients to reach the poverty line. The highest rates ever achieved during the period from 1989 to 1994 were still substantially below the poverty line (Table 6). Benefits have deteriorated significantly since that period.
Most welfare recipients in Canada saw further erosion of their already precarious financial situation in 2000 and 2001. Between 1999 and 2000, the cost of living rose by 2.7 per cent (compared to only 1.7 per cent between 1998 and 1999) and by 2.6 percent between 2000 and 2001. Welfare benefits were frozen or increased slightly in most jurisdictions, so that when the cost of living is taken into account, those increases represented decreases in relation to the previous year with variations fluctuating between 0 and -2.7 percent (Table 5).
Earnings exemptions: necessary but not sufficient
We also show the allowable earnings exemptions for January 2001 in each province and territory (Table 7). The exemptions vary by family size and sometimes by employability.
Earnings exemptions are important because they provide a means for welfare recipients to improve the quality of their lives, at least marginally. These exemptions also encourage individuals to get experience in the labour market and to gain sufficient confidence to leave the welfare system.
The National Council of Welfare feels that it is fair to require some effort on the recipient's part towards self-sufficiency wherever possible. Job search and training requirements have always been a condition of eligibility for employable welfare applicants. Paying decent welfare rates and improving incentives to work by increasing earnings exemptions is sound social policy. Cutting benefits is not.
Recent developments
Moreover, a number of provinces and territories reviewed their welfare program in 2001 or announced they would do so in 2002. The National Council on Welfare will monitor closely any new measures, to ensure that the changes made genuinely reflect the needs of low-income Canadians.
Conclusion
The price of poverty is paid by all Canadians. There is abundant evidence that poverty not only causes personal human suffering, but is also illogical from a strictly economic standpoint. In February 2001, the National Council of Welfare published The Cost of Poverty, in which it presented a number of examples of this phenomenon.
The Council has seen no convincing evidence that taking money away from the poorest of poor families will motivate parents to enter the work force. What we know helps parents to provide for their children are a series of family supports such as job training, better minimum wages and labour policies that help parents to balance their responsibilities to their children with their responsibilities to their jobs. Good, integrated family policy must also include early child development programs that provide the best possible early education for children while providing the dependable, affordable child care that allows parents to participate in job training and take jobs.
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