November 2000 Fraser Forum: The Dilemma of Aboriginal Welfare Dependency
The department of Indian and Northern Affairs Canada (INAC) recently released a slew of new data about registered Indians in the 1990s. There was quite a bit of good news about economic and social advance, but also some bad news about welfare dependency.
First, the good news. Registered Indians in Canada, both on and off reserve, made measurable gains in the 1990s. They still fall well below general Canadian norms, but their rate of progress is faster than the Canadian average, which seems to hold out some prospect of convergence in the future. Consider a couple of examples where the trend is clearly towards convergence:
- The average individual income of registered Indians increased 25 percent between 1990 and 1995 (even more—32 percent—for those living on reserve), compared to a general Canadian increase of 17 percent in the same time period. The average Indian income in 1995 was still only 57 percent of the Canadian mean, but that was a noticeable improvement over 1990, when it had been 53 percent.
- Life expectancy has been increasing faster for registered Indians than for other Canadians, so that by 1995 it reached 68.0 years for Indian men, and 75.7 years for Indian women. Indian women by that year were on average living longer than Canadian men in general (75.2 years) though not yet as long as Canadian women (81.4 years).
Similar trends were visible over a wide range of other social and economic indicators, such as enrolment in higher education, participation in the labour force, and percentage of housing units with running water and sewer attachments. From this perspective, registered Indians appear to be gradually catching up to the material standard of living enjoyed by most Canadians.
The bad news is that increasing aboriginal prosperity has not made a dent in the enormous problem of welfare dependency on reserves. In 1988-89, the average number of welfare beneficiaries per month was 40 percent of the on-reserve population; in 1998-99, after 10 years of solid economic progress, that indicator of welfare dependency had actually increased to 41 percent. Of course, these statistical averages conceal huge regional variations. On reserves in southern Ontario and Quebec that are close to centres of employment, the figure might be as low as 20 percent; on remote rural reserves in the West and Atlantic Canada, it can be 80 percent or even higher.
Explaining the persistence of aboriginal welfare dependency requires a closer look at aboriginal policies. One factor is surely the additional economic benefits traditionally enjoyed by registered Indians living on reserves, such as free or very low-cost housing, free education and medical care, and exemption from all federal and provincial taxes. The sum total of all these benefits means that, unless registered Indians have unusually high earning power, they are financially better off to remain on the reserve and draw welfare for spending money than to seek a job off the reserve and have to pay rent and taxes. All recipients of social assistance face this dilemma to some degree, but registered Indians living on reserve face it in an acute form.
Another factor is the federal policy of supporting aboriginal self-government, which means in practice transferring large amounts of money to band councils with fairly loose reporting requirements. Those who manage the cash flow often use it to support their friends, relatives, and political adherents on the reserve. The effect is magnified when bands also have access to resource revenues and land-claims settlements.
As a result of the increased cash flow to First Nations, their populations are now growing faster on rather than off reserve. Thus, the proportion of registered Indians living off reserve, after peaking at 42 percent in 1996, is predicted to drop to 36 percent by the year 2008. The retention of population on reserves may be good news from some points of view, but it exacerbates the problem of welfare dependency because the vast majority of reserves are far from centres of employment. Even if remote reserves succeed in creating jobs by starting their own business enterprises, the beneficial effects may be swallowed up by band members returning from the cities.
Overall, the newly released data confirm the picture that I painted in First Nations? Second Thoughts (McGill-Queens University Press, 2000). Current policies of aboriginal self-government, land-claims settlements, and generous financial transfers enrich the aboriginal political and managerial elite that control the reserve system, as shown by improving statistical averages in key indicators of well-being. But huge numbers of people remain trapped within the system, enticed to continue living far from the growth centres of modern Canada, so that welfare dependency is almost inevitable.
Tom Flanagan is professor of political science at the University of Calgary and a Senior Fellow of The Fraser Institute.
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