Caledon: Patching the social safety net

The Caledon Institute’s Sherri Torjman articulates some repairs to Canada’s social safety net. Below are the key elements of the proposal (full paper here). My main substantive critique is that, like its predecessor discussion piece last year, Torjman envisions a strange mix of delivery, going from federal in the short-term to provincial in the medium-term, then back to federal in the long-term. This seems like it would create a lot of headaches and some perverse incentives. It would be better to have the whole program done federally, as is the case for all existing transfer programs with the exception of social assistance.

Another issue is that the long-term Basic Income is seen as equivalent to the current OAS/GIS maximum for seniors, which is to say, on the low side (a maximum of $1,112.84 as of January 2007, to be precise, or $13,354 per year). OAS/GIS is seen as one of three pillars of retirement with CPP and private pension or RRSPs as the other pillars. So as a Basic Income, intended for someone who cannot work, it is rather small, albeit notably higher than current welfare rates. Housing is not mentioned in the supplementaries, but presumably if we add access to stable, low-cost social housing that would ameliorate this situation.

Here’s the plan:

The proposed reform of Canada’s social safety net would consist of three main components and related functions: Unemployment Assistance, Employment Preparation and Basic Income.

The purpose of the Unemployment Assistance function would be to provide a form of temporary income replacement for workers who are unemployed on a short-term basis. One possible option would consist of two programs. There could be a new Temporary Income (TI) program, paying income-tested benefits to temporarily unemployed Canadians who are not eligible for Employment Insurance and are actively seeking work. Employment Insurance would remain, but in modified form. The new Temporary Income program would be a non-intrusive benefit funded through general revenues rather than premiums. It would serve unemployed Canadians who do not meet the work requirements for Employment Insurance. Temporary Income would be paid for a time-limited period, such as six months every three or four years. The regional component of the current EI program, whereby work requirements and maximum duration of benefits vary by the regional unemployment rate, could be incorporated in Temporary Income.

Employment Insurance would continue to provide social insurance financed through premiums. It would deliver only basic unemployment benefits; the regional component would go to the Temporary Income program. Employment Insurance under our scheme would be a stronger program, increasing its earnings replacement rate from the current 55 percent to 70 or 75 percent of average weekly earnings.

Employment Preparation would replace welfare (though a last-resort safety net would always be required) and would serve working-age adults likely to be unemployed for a longer time and are in financial need. Employment Preparation would ensure financial support while beneficiaries pursue an individually tailored employment plan providing access to training, upgrading and other necessary employment services. Flat-rate payments could be made on a bi-weekly basis and, ideally, would include Canada/Quebec Pension Plan contributions to allow public pension eligibility.

Employment Preparation could continue for several years but would not provide permanent income support. Basic Income would be an income-tested safety net for persons who cannot reasonably be expected to earn adequate income from employment. It is intended primarily for those with severe and prolonged disabilities. Basic Income could be designed as a federal income-tested benefit delivered through the tax system and equivalent in value to the maximum Old Age Security/Guaranteed Income Supplement currently paid to low-income seniors. Basic Income would not impose time limits.

… The three income security tiers would be supported by measures that break down the welfare wall and help make work pay. These measures include improved minimum wages and federal and provincial/territorial earnings supplements. Another essential component is an adequate child benefit equal to the cost of raising a child in a low-income family – $5,000 is the target amount. Affordable high-quality child care is also important to ensure that working parents can participate in the labour market while their children receive high-quality care. Disability supports enable participation not only in training and employment but in all domains of society, including cultural events, sports and recreation, and voluntary activities. Supplementary health and dental care, and prescription drugs would be made available to lower- and modest-income households outside of welfare so that beneficiaries need not remain on that program of support simply because they incur high costs in these areas.

Under Caledon’s proposed architecture, the federal government would assume responsibility for Temporary Income and maintain responsibility for Employment Insurance. Provincial/territorial governments would deliver Employment Assistance in order to integrate the program with their education and training systems. The federal government would provide Basic Income, which could be tax-delivered. Provinces and territories would reinvest the resulting savings in disability supports.