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Federal Inequality Report & Welfare 2012 Update


Two reports were released this week that deserve attention. The Caledon Institute released their national snapshot of welfare incomes, and the federal Finance Committee released the results of their study on income inequality.  Short overviews of both are below:

Welfare in Canada 2012

Diving into the void left by the closure of the National Council of Welfare last year, the Caledon Institute has picked up the torch on welfare statistics and ensured that data on provincial/terrtirorial social assistance programs is published annually.  This week Caledon released Welfare in Canada 2012 running the totals on welfare incomes across the country in the four categories:  a single person considered employable, a single person with a disability, a single parent with one child age 2 and a couple with two children ages 10 and 15.

Meant to be a program of last resort, welfare has become a program that forces individuals to deplete nearly all of their assets and personal wealth in order to access a system that keeps them below the poverty line.  All welfare incomes in all categories keep people below the poverty line (low-income cut-offs in this case) – to varying degrees depending on the province. Only single-parent families in Newfoundland and Labrador offered rates that brought people above the Low-Income Cut-Off (LICO) for that category.

Single persons with a disability was the only category that had lower overall welfare rates in 2011-2012.  The report also points out that Newfoundland and Labrador saw increases in welfare rates for single persons since 2006, while PEI saw decreases in this category and single persons with a disability.  Then there is BC where the rate for a single employable person ($7,952 in 2010 – 60% below the LICO) has stayed pretty much at the same level since 1986 ($8,033).  Troubling to say the least.

The report also compares welfare incomes to average after-tax household incomes for the same categories demonstrating a greater disparity in purchasing power and the ability to meet basic needs.  Offering a factual overview of welfare, the report reminds us that social assistance is woefully inadequate and the need for reform and higher rates of support are desperate.  A harsh truth, but one that governments cannot, and should not, hide from.

Finance Committee Report on Inequality

Member of Parliament Scott Brison, the Liberal critic for finance and national revenue, put forward a motion in June 2012 (M-315) for the Finance Committee to study the social and economic impact of inequality, and in April of this year the Committee dedicated three days to examining the issue.   The result is a final report released on December 11, “Income Inequality in Canada:  An Overview”.

The study was meant to address four goals:

  • Review federal/provincial/territorial personal income tax & support systems
  • Examine best practices to reduce income inequality and improve GDP per capita
  • Identify gaps in the  federal tax system that contribute to income inequality and any barriers keeping people on social assistance
  • Provide recommendations on how to improve income inequality  and prosperity for all

While the background content of the report directly points to a regressive tax system benefiting the wealthier segments of society, the final Committee recommendations seem to have avoided the issue altogether.  In fact, they seem like direct talking points from the federal government including references to creating strong economic conditions for job growth, removing barriers to employment (as thought that is main reason people are poor or inequality is rising – not low wages, or an ineffective tax system), keeping taxes low, and support for existing programs in place (like the Working Income Tax Benefit and Aboriginal Education Act).

These recommendations are beyond disappointing considering the purpose of the study, the information gathered, and reality that many people are facing.  Consider the point on page 21 of the report that points directly to the tax system:

“..further enhancements to the tax and transfer system are required to provide those who are most economically disadvantaged with more adequate and stable income, and to provide support during periods of financial difficulty.”

This is one of many points in the report supporting changes to social programs and the tax system. The research gathered indicates the government recommendations go nowhere near a solution.   In fact, all they really do is maintain the status quo.

Also consider that people in Canada want action on inequality.  In September, 2012 a survey of 26 countries concluded that most Canadians feel their politicians are defending the rich to the detriment of the poor, and expect their governments to take an active role in reducing income disparities.  The survey also pointed to the fact that many people living in Canada support higher taxes on wealthy individuals in order to reduce poverty and inequality.

A separate poll conducted last spring noted that 64 per cent of Canadians are willing to pay slightly higher taxes in order to protect social programs, and an overwhelming majority felt that rising income inequality is a serious problem requiring attention.

Yet none of the Committee recommendations reflect this type of action. In fact, the Committee recommendations are rather weak overall.  This is likely why the Liberal Party and NDP were compelled to release their own recommendations further on in the report that actually highlight solutions such as looking at the minimum wage, supporting affordable child care, creating a national housing strategy and national poverty strategy.

Clearly, the report was developed not with best interests of the country in mind, but best interests of the few.