October 2000 Fraser Forum: Social Assistance & Poverty
One of the more important social policy questions in contemporary society is: Can you survive on social assistance? Do welfare recipients receive enough income to cover the basic necessities?
According to the National Council of Welfare, the answer to this question is an emphatic no! Indeed, it is their view that welfare provides "abysmally low" levels of income and they mince no words about its impact:
No written account can even come close to portraying the damage to physical health and the scars to psychological well-being that can come from living at standards below those deemed absolutely minimal for basic subsistence.
This statement, from a Council report entitled Welfare in Canada: The Tangled Safety Net, was written in the late 1980s. Since then, the real value of social assistance has fallen. It would follow, then, that the situation for welfare recipients must be even more tragic now. But it isn’t. And it never was.
The problem with the Council’s condemnation of social assistance is that it is based on a standard of living far more generous than anything envisioned by the originators of welfare. The National Council of Welfare uses Statistics Canada’s Low-Income Cut-Offs (LICO) as a "poverty line" despite clear warnings by Statscan that the LICO’s are not poverty lines and were never intended as such. According to the Council, a family of four in all of Canada’s major cities is impoverished if its total income is below $33,000 in 2000. To portray these kinds of income levels as "absolutely minimal for basic subsistence" is an act of shameless deceit.
It might be useful for us to return to the document that gave welfare in Canada its existence. In other words, what (we might logically ask) was the original intention of the legislation? The Canada Assistance Plan Act is very clear on this. Its purpose was "to provide income to meet the cost of basic requirements of a single person or family when all other resources have been exhausted." It was never intended to provide a middle class standard of living, or even a standard that includes a variety of common social amenities. The purpose of welfare is to cover the basic necessities of life for people who have no other income.
It is, of course, a matter of lively debate whether social assistance should cover more than just the basics. Those in the social welfare community believe that it should and are in favour of big increases in welfare rates. And, let’s be clear, no one that I know wants people to be living at a "basic necessities" level. No one believes that that is satisfactory. However, simply taking more money from Canadian earners, and giving an amount to welfare recipients that exceeds the income of hundreds of thousands of those same earners is not a solution. You do not have to be an economist to see the real problems with that sort of redistribution. Those of us who put a high value on individual freedom and recognize the importance of an incentive to work would much prefer a solution that involves gainful employment of all who are able to work.
If it is the purpose of welfare to cover just the "basic requirements," then in order to judge the adequacy of welfare, it would seem that what we need is some estimate of the cost of basic necessities, and then a comparison of that with social assistance rates. And, happily, we do have precisely these estimates.
Since 1992, The Fraser Institute has published "basic needs" poverty lines that I have developed. These poverty lines were primarily intended to enable us to track the incidence of real deprivation in our society; to determine, essentially, how many of our fellow citizens were unable to cover all of the basic necessities of life. These poverty lines are also useful in helping us assess the adequacy of social assistance. The latest assessment (the details of which will be provided in a forthcoming publication by the Institute entitled Measuring Poverty in Canada: Report 2000), for the year 1997, is that social assistance generally fulfils its mandate. Specifically, the incomes of welfare recipients who are classified as unemployable (mainly disabled persons and single parents) are, in virtually all cases, above the ‘basic needs’ poverty line. The incomes of those persons who are classified as employable, but with dependents, is, in most cases, at or near the basic needs poverty line. Finally, the income of those who are employable and without dependents (single persons) is generally not sufficient to cover the basic necessities. The clear expectation for the latter group is that welfare will be a very temporary situation and that rates should not be such as to discourage employment.
If the goal of social assistance is to be a temporary, last resort program that provides enough income to prevent hunger, inadequate shelter, and other forms of real deprivation, then the only way to assess its adequacy is to compare the income of its recipients to a basic needs poverty line. This has been done several times over the past decade and the consistent conclusion is that welfare in Canada is generally sufficient to cover basic needs.
Chris Sarlo teaches economics at Nipissing University in North Bay, ON. He is the author of Poverty in Canada, published by The Fraser Institute.
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