Rethinking income security

The Caledon Institute weighs in on income security for working age adults. The abstract is below but this does not give any of the details. The authors do a great job of describing why the current patchwork mix of EI and welfare does not work well.

Towards a New Architecture for Canada’s Adult Benefits

Ken Battle, Michael Mendelson and Sherri Torjman, June 2006

Since its creation in 1992, the Caledon Institute of Social Policy has worked to modernize Canada’s social security system.  We have made the case for major changes not just to individual social programs but to the basic structures and functions – the ‘architecture’, to use the current vogue term – of social policy.

 

This paper advances our work on the modernization agenda in a large area of Canadian social policy that has for the most part defied successful reform – income security programs and supportive services for working-age adults, which Caledon has dubbed ‘adult benefits.’  The first part of the paper explains why current programs – especially welfare and Employment Insurance, the two core adult benefits – fail to meet the needs of working-age Canadians.  Fundamental and comprehensive reform is required, through integrated changes to both federal and provincial/territorial programs and a realignment of governments’ roles and responsibilities.  The second part offers our thinking on how to build a new architecture for adult benefits.

Their solution is to start with the labour market, by shoring up the minimum wage and bring in working income supplements (modelled after the US Earned Income Tax Credit, and proposed by the previous Liberal government for implementation in 2008). They would keep child benefits seperate under the Canada Child Tax Benefit program, then focus on working age adults.

The new framework would look like this: the federal EI program would be broadened and would be more like CPP is for seniors, and a new income-tested Temporary Income program would be brought in modelled on the OAS and GIS for seniors; second, for the medium-term unemployed, an Employment Preparation run by the provinces would be brought in to replace current social assistance programs (how this is really all that different from the status quo is not that obvious); third, for those who cannot work for whatever reason a Basic Income would be available, and also federal.

What puzzles me is why they would not make all income support federal in nature. Why have short-term and long-term assistance federal and medium-term assistance provincial? They raise some jurisdictional issues but these have been resolved before. All income support with the exception of social assistance is already federal in nature, and the problem with provincial programs is that they face a prisonners’ dilemma – no province wants to raise support levels for fear that they will be overloaded by mobile Canadians from other provinces. The feds can rectify the prisonners’ dilemma, and could create a more comprehensive Basic Income or Guaranteed Annual Income by meshing the different elements together.

I know what you are thinking: what is this going to cost? Alas, no numbers are provided. According to Social Development Canada’s Social Security Statistics, Canada and the Provinces, all provinces combined paid about $10.3 billion in social assistance in 2002/03, with a peak of $14.3 billion in 1993/94 (nominal dollars). Presumably, a better system would be less mean-spirited and more generous, so the cost would go up. But think about it this way: any new money that goes into income support for the poorest will get spent in the local economy so the macroeconomics are good for small business.

Good on Caledon for getting this conversation started.