October 2001

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Room to Experiment: Seizing Alberta’s Advantage for Welfare Reform

by Sylvia LeRoy & Barry Cooper

In the spring of 2001, Alberta Human Resources and Employment (AHRE) Minister Clint Dunford announced that his ministry would be embarking on a comprehensive review of programs directed at the province’s low-income citizens. In a province where an expanding economy and shifting policy priorities have given the government room to experiment with comprehensive reforms both to program administration and delivery, such an initiative is long overdue.

In recent years, Alberta has led the country in welfare reform. During the early 1980s, base welfare benefit levels in Alberta were 53 percent higher than those of the three largest provinces (Boessenkool, 1997). During the following decade, inflation reduced the value of these benefits and brought them nearer to the Canadian average; even so, by 1993 the number of Albertans on welfare had peaked at around 7.3 percent of the population.

Welfare reform was an integral part of the deficit reduction strategy of the first Klein government. In March of 1993, Minister of Social Services Mike Cardinal inaugurated an ambitious program to reduce the number of Albertans on welfare. A crucial element was to reconsider the purpose and the effects of welfare. Instead of accepting the conventional understanding of the intentions of existing programs as being assistance for those who could not help themselves (as well as “help” for those who could), Cardinal saw the chief consequence to be the enabling, aiding, and abetting of individual dependency on government. The objective of welfare reform, therefore, was to instill greater personal responsibility by overhauling the administrative culture of the social services ministry, by changing the qualification criteria and thereby reducing the number of beneficiaries (many of whom were young, able-bodied, and employable), and by reducing benefits to levels below a minimum-wage income. Benefits for single, employable individuals were immediately cut by 19 percent.

Within three years, Alberta had cut its welfare caseload by almost 60 percent. Significantly, these reductions were achieved not simply by pushing unqualified individuals off the rolls, but also by reducing the number of new welfare recipients. Last year, only 2.2 percent of Albertans were on welfare, a drop of more than 70 percent since 1993. With the national average hovering at 6.8 percent of the population, this was by far the lowest welfare load in the country.

By Canadian standards this was certainly an unprecedented achievement. But considering that among Canadian provinces only Alberta has a welfare caseload comparable to average American states, Canadian standards offer little guidance for welfare reform (see Schafer, Emes, and Clemens, 2001).

Why have Canadian provinces been so slow to introduce the broad, structural reforms needed to break people from welfare dependency? One reason is purely political: conventional wisdom dictates that the public will only continue to support a government that adopts a “balanced” mix of spending and taxing. However, since 1993, the Alberta government has proven that this is not the case.

Nonetheless, since Alberta Treasurer Jim Dinning’s last budget in 1997 (Cooper and Kanji, 2000), the government has backed away from its early support for welfare reform.

The watered-down approach to welfare reform is evident in the very terms of discussion being used to frame Alberta’s current low-income programs review. For example, any new welfare reforms are likely to be significantly influenced by the province’s commitment to the Market Basket Measure (MBM) of poverty, an index resulting from a joint federal- provincial project headed by Human Resources Development Can-ada (HRDC) using data from Statistics Canada.

The new measure is definitely an improvement over the Low Income Cutoff (LICO) numbers provided by Statistics Canada that have long been used by poverty activists, other social interest groups, and the media to measure the national poverty line. But the LICO line, which a household is below if it spends 20 percent more of its income than would an average family on food, clothing, and shelter, is an indicator of relative wealth (frequently equated with “social inclusion”), not poverty. Consequently, as the average family grows richer, the LICO is raised—and so too are popular expectations for inflated low-income support payments.

Presented as a "pragmatic compromise" between basic needs and social inclusion definitions of poverty, the MBM adopts a subjective evaluation of "creditable necessity" that includes allowances for such expenses as recreation and entertainment (Sarlo, 2001). Like the LICO measure, therefore, the MBM index is also open to distorting upward pressures. As Andrew Jackson, director of research for the Canadian Council on Social Development promises, "there will be a big debate on how generous the basket of goods should be. Furthermore, once this "creditable" basket of goods becomes established and widely accepted, there will be tremendous pressure for governments to keep welfare payments around the new benchmark.

The one concrete reform announced by Minister Dunford at the beginning of September 2001 involves tying welfare rates to regional costs of living. This proposal reflects the reality that shelter is proportionately the largest expense for low-income families, and that rent varies significantly from urban areas of high economic growth, such as Calgary, to smaller towns and rural areas. At the same time, rates will be adjusted in response to changes in regional costs of living. Historically, such changes have tended to go only in one direction—up. ued to spend more on social programs

There is every indication that the public would stand firmly behind more serious reforms. In 2000, only 36 percent of Albertans felt that the government should be spending more on welfare and social services, down considerably from the 48 percent that wanted increased spending on these programs just a year earlier (Kanji and Cooper, 2001). Moreover, a foregone opportunity to embrace fiscally and socially responsible reforms contravenes the clear and long-standing commitment of Albertans to cutting taxes and paying down the debt.

Unlike so many other provincial governments, Alberta is in a position to try out new models of social service delivery. With Bill 11, Alberta took the first small steps towards expanding the private delivery of some surgical procedures, inviting competition into an area of (near) government monoply. Also, Alberta’s low ratio of welfare and religious charities to welfare cases indicates that charities may be able to assume more responsibility for the province’s social services (Clemens, 2000).

The American states provide numerous other examples of creative initiatives designed to get people off welfare, and back into the workforce (see Schafer, Emes, and Clemens 2001). A valuable opportunity would be lost if the government dropped attempts at reform to reduce dependency and, instead, continued to spend more on social programs either by boosting benefits or by expanding programs for low-income Albertans.

Thomas Lukaszuk, the Tory MLA who is chairing the Low Income Program review, is not expected to report to the minister until mid-October, 2001. A spokesman from AHRE has promised that all suggestions for reform may be brought to the table. Premier Ralph Klein and AHRE Minister Dunford will then have an opportunity to resume the welfare reforms begun in 1993.

References

Boessenkool, Kenneth J. (1997). Back To Work: Learning From the Alberta Welfare Experiment. Toronto: C.D. Howe Institute.

Clemens, Jason (2000). Is Charity-Based Welfare Provision Possible? Fraser Forum (October): 4-6.

Cooper, Barry and Mebs Kanji (2000). Governing in Post-Deficit Times: Alberta in the Klein Years. Monograph Series on Public Policy and Public Administration. Paper no. 10. University of Toronto, Centre for Public Management.

Kanji, Mebs and Barry Cooper (2001). Shifting Priorities: From Deficit-Spending to Paying Down the Debt and Lowering Taxes. Public Policy Sources number 46. Vancouver, BC: The Fraser Institute.

Tom Olson (2001). “Alberta to Link Welfare to Regional Living Costs," Natonal Post, September 3.

Schafer, Chris, Joel Emes, and Jason Clemens (2001). Surveying US and Canadian Welfare Reform. Critical Issues Bulletin. Vancouver, BC: The Fraser Institute.

Sarlo, Chris (2001). Measuring Poverty in Canada. Critical Issues Bulletin. Vancouver, BC: The Fraser Institute.

Sylvia LeRoy is a research analyst in The Fraser Institute’s Calgary office. She is co-author, with Barry Cooper, of the Public Policy Source Off Limits: How Radical Environmentalists are Shutting Down Canada’s National Parks.
 
Barry Cooper is Professor of Political Science at the University of Calgary and Director of The Fraser Institute’s Calgary office.

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