Improving Social Security in Canada
Reforming the Canada Assistance Plan:
A Supplementary Paper

 

Copyright Minister of Supply and Services Canada 1994
Catalogue Number MP90-2/11-1994
ISBN 0-662-61510-7
SC-094-12-94
Source ftp://ftp.hrdc-drhc.gc.ca/pub/hrdc/English/ - cape.w51
NOTE: In converting this document from WordPerfect to HTML, I`ve cleaned up the formatting glitches that occurred in the conversion, but I didn't take the time to create a set of hypertext links from the table of contents to the text. (I have, however, left the page numbers from the paper version on the text so you can find material more quickly.)
When I have time...

Gilles Séguin
Canadian Social Research Links


Preface

Social Security Reform Discussion Paper released

In Quebec City on September 18, 1994 the Prime Minister outlined four key components of the government's jobs and growth agenda: - reforming social security;
- ensuring a healthy fiscal climate;
- reviewing government programs and priorities; and
- strengthening the performance of the Canadian economy in investment, innovation and trade.
The Discussion Paper, Improving Social Security in Canada, released to the public on October 5, 1994 provides Canadians with a framework for participating in the reform of our social security system. The Paper takes a close look at why the social security system is not working for many Canadians and for the country as a whole. It sets a direction for change and offers a range of options for redesigning federal programs in the areas of working, learning and security. These programs include Unemployment Insurance, employment development services, child care and federal support for post-secondary education and social assistance.

Supplementary Papers provide analytical detail

This paper is part of a series of Supplementary Papers which are being released to provide Canadians with more detailed information about the current system and the options outlined in the Discussion Paper. This material is intended to provide a deeper understanding of the issues and to encourage more informed participation in the debate.

All contributions to the discussion are welcomed and encouraged. It is only with the participation of all Canadians that we can design an effective, fair, flexible and affordable system, which will respond to the needs of Canadians today and in the future. 


Table of Contents

Introduction 1
The History and Nature of the Canada Assistance Plan (CAP) 3
Programs that Preceded CAP 3
The Founding of CAP 3
Provincial/Territorial and Federal Responsibilities 5
Funding Conditions 6
Milestones in CAP History 7

The Need for Reform of CAP 9
Provide More Help For People To Get Jobs 9
Do More About Reducing Child Poverty 16
Promote Greater Independence For People With Disabilities 17
Improve Partnership Arrangements 19
Make CAP More Affordable and Fair 22
In Conclusion, On the Need for Reform 25

CAP Policy Reform 27
Interim Steps 27
Approaches to Longer-Term Reform 28
Transfers to Provinces and Territories 28
A New Block-Funding Approach 29
Redirecting Funding to New Priorities 33
Towards CAP Reform 36
 

Page 1

Introduction

 Improving Social Security in Canada affirms the federal government's eagerness to play its role, together with its provincial and territorial partners, the private sector and individual Canadians, in searching for the best way to achieve the goals of social security reform. The Discussion Paper illustrates reforms with respect to employment, learning and security. The proposed goals for reforming programs in the area of security are twofold: - to remove disincentives from the current system that discourage welfare recipients from getting a job, and obstacles that prevent persons with disabilities from living independently, while at the same time ensuring that support is available for individuals unable to work; and

- to set as a target the reduction of child poverty, recognizing that progress on this goal is directly linked to employment for parents.
 
This paper is on the Canada Assistance Plan (CAP) and it concerns federal involvement in supporting the most vulnerable persons in our society: those who receive social assistance (commonly known as welfare) and those who need support through social services. The programs themselves are within provincial and territorial jurisdiction. The federal government's involvement in this area takes the form of transfer payments to provincial and territorial governments.

This paper also focuses on the need for an affordable welfare and social service system. There are limits to the resources the federal government can put into CAP or its possible successors. By the same token, provinces and territories have indicated their need to manage financial pressures on their social programs. As the Discussion Paper Improving Social Security in Canada indicates, reform must see the entry of both levels of government into financially sustainable arrangements. To achieve this, difficult choices about the best use of available funds will have to be made.

This paper is divided into three main sections. The first section reviews the history of CAP in helping provinces and territories build welfare and social service systems across Canada. It outlines the nature of the current funding arrangements and the programs that CAP supports. The second section identifies the key factors that make reform of CAP necessary. The third section examines various approaches to long-term reform as well as some interim measures under which CAP could better support employability and other provincial/territorial welfare reforms and better contribute to the goal of reducing child poverty.

Page 3

1: The History and Nature of CAP

Programs that Preceded CAP

The social and economic environment of the 1950s and 1960s resulted in a unique time of social policy development in Canada. The 1950s saw the closing out of the effects of the Great Depression and the Second World War. In this decade, poverty was "rediscovered" in both the United States and Canada and, as a result, categorical assistance programs were put in place. With the 1960s came more economic growth and the desire to go further in addressing social issues, but this time in the direction of a more comprehensive network of social programs.

Before the enactment of the Canada Assistance Plan in 1966, federal financial support to the provinces and territories on behalf of Canadians in need was largely categorical in nature, with federal programs such as Old Age Assistance, Blind Persons Allowance, Disabled Persons Allowance and Unemployment Assistance providing support for specific groups. These four programs helped the provinces and territories respond to the needs of some people, but there were significant gaps in the system such as support for children who were being neglected or abused. Moreover, these transfers did not function consistently; for example, there was no single notion of a needs test to determine an applicant's eligibility for benefits. Different programs used different tests.

For instance, the Unemployment Assistance Act of 1956 had been implemented at the specific request of most provincial premiers. Of the various programs that led to CAP in 1966, Unemployment Assistance (UA) was the only one that used a needs test, a feature which would become central to CAP. However, from the late 1950s on, there were growing concerns being expressed about the deficiencies of the UA program and pressures to expand its scope. Such concerns led to action in the 1960s, not only with respect to welfare programs, but in relation to a much broader range of programs to achieve security, health, educational, employment and other objectives, and to build what would become Canada's social safety net.

The Founding of CAP

CAP was introduced in 1966 as a single plan of federal cost sharing. It consolidated the four categorical federal programs and extended federal cost sharing to a broad range of provincial/territorial welfare and social service programs such as mothers' allowances, child welfare services and homemaker services. CAP became a foundation of Canada's safety net. It was intended to help the provinces and territories develop integrated, comprehensive welfare programs to meet the various requirements of people in need, regardless of the cause of their need. It also facilitated the development of welfare services throughout Canada.

Page 4

What is the Canada Assistance Plan?

Legislation

The Canada Assistance Plan (CAP) is federal legislation that authorizes the federal government to enter into agreements with provinces and territories to share in the eligible costs which they and their municipalities incur in providing social assistance to persons in need and welfare services to persons in need or likely to become in need. (CAP traditionally shared at 50 percent, but legislation was introduced, beginning in 1990, that limited CAP contributions to the provinces not receiving Equalization to a growth rate of five percent per year.) The Act has three parts: - Part I, dealing with the provision of social assistance and welfare services;
- Part II, concerning the extension of provincial welfare programs to Status Indians on reserves, Crown lands or unorganized territories; and
- Part III, concerning work activity projects.
 Changes to the CAP legislation are made by the Parliament of Canada.

Regulations

CAP regulations provide a framework (definitions, terms and conditions, etc.) for federal cost sharing of eligible costs of assistance and welfare services. Regulations can be amended by the Minister of Human Resources Development.

Agreements

Agreements set out the responsibilities and the undertakings of both the federal and provincial/territorial governments. For example, the federal government agrees to pay contributions to the provinces and territories upon receipt of valid claims and the provinces/territories agree to provide financial assistance to persons in need through a "needs test" and to adhere to other specific funding conditions.

Agreements have been signed with all jurisdictions under Part I, and with all provinces under Part III. No agreements have been signed under Part II (the federal Department of Indian Affairs and Northern Development funds social development programs for Status Indians living on reserve). Amendments to agreements require both federal and provincial/territorial consent. A one-year advance notice by either party is required for changes to the agreements.

Guidelines

CAP guidelines are developed by the federal government, generally in consultation with the provincial/territorial governments, in order to clarify the parameters of cost sharing arising from CAP legislation and regulations.

Administration

The Cost Shared Programs Branch of Human Resources Development Canada administers CAP. The Branch reviews the funding eligibility of new programs and changes to existing programs, and it determines the acceptability for cost-sharing purposes of new agencies and institutions.

The federal government provides an advance contribution to provinces and territories based on the projected federal share of the costs of eligible programs and services. Each province/territory must submit a final fiscal year claim to arrive at a settlement for the period in question.

Page 5

Provincial/Territorial and Federal Responsibilities

Provincial/territorial governments are solely responsible for the social assistance and social service programs that they deliver. They design these programs, determine their comprehensiveness, establish their eligibility requirements, have legislative control over them, and administer the method for delivering benefits and services to people. CAP, a fiscal transfer mechanism exercised by the federal government under its spending power, contributes to the cost of eligible provincial/territorial programs.

... regarding welfare (social assistance) programs

Through provincial/territorial welfare (or social assistance) programs, persons in need can receive financial assistance to meet their basic requirements such as food, shelter, clothing and personal needs. The programs also respond to the special needs of clients such as essential travel or health-related expenditures, including dental or eye care. About two-thirds of CAP dollars go toward social assistance in a given year. Social assistance is only provided to a "person in need" as a last resort, in other words, after all other reasonable means of support (including income and assets) have been taken into account.

For provinces and territories to secure cost sharing, CAP requires them to provide social assistance through a "needs test." The needs test takes into account the budgetary requirements of the client and any dependants as well as the financial resources (income and assets) available to the household to meet those requirements. Through these tests, each province and territory establishes social assistance benefits payable to welfare recipients, based on family size, regularly-recurring special needs and other considerations. CAP does not control the benefit levels for the social assistance that provinces and territories provide to persons in need. As long as they meet basic cost-sharing requirements under CAP, provinces and territories have the scope to design their own programs and set benefit levels based on their own criteria built into their needs tests.

... and with respect to social services

Provinces and territories also provide, and CAP shares in, a range of social services. Included in this are "welfare services", meaning services that have as their objective the lessening, removal or prevention of the causes and effects of poverty, child neglect or dependence on public assistance. CAP shares in staff costs (such as salary, travel and training) of welfare services provided to eligible clientele by the province/territory or by provincially/territorially-approved non-profit agencies. The eligible clientele are persons who are determined to be in need through a needs test, or persons who are likely to become in need unless such services are provided. Likelihood of need is usually determined on the basis of an income test.

Welfare services include: day care services for children of low-income households; homemaker, home support and similar services to support individuals and families in emergency situations or as an aid to independent living in the community for elderly and disabled persons; casework, counselling, assessment and referral services (includes services for children who are in need of protection because of abuse and/or neglect); preventive rehabilitation services, including services to the chronically unemployed (e.g. life skills training, referral and job placement services); services to meet the special needs of persons at risk of being socially isolated, with particular emphasis on elderly and physically- or mentally-disabled persons; community development services designed to encourage and assist members of deprived communities to participate in improving their community's social and economic conditions; consulting, research and evaluation services with respect to welfare programs; and administrative services relating to the delivery of assistance and welfare service programs.

Page 6

In addition to the above, CAP contributes to provincial/territorial costs of other supports and services provided to persons in need. Some examples of these include: non-insured health benefits (pharmaceuticals, dental and optical care); homemakers assistance; civil legal aid; services in homes for special care and children's institutions; assistance for child welfare; and day care for children in social assistance families.

The social services area has represented about one-third of CAP spending over the years. The focus on services was an early acknowledgement of the importance of certain social investments that can provide long-term benefits for people as well as reduce the need for income support in the future. The preamble to the CAP legislation, in "encouraging the further development and extension of... welfare services programs throughout Canada", sets an important developmental goal for this area which became a key topic of federal-provincial discussion during the social security review of the 1970s.

Funding Conditions

CAP has conditions under which the federal government shares in provincial/territorial expenditures eligible under legislation and policy: - to provide financial assistance to any person in need, with eligibility for and levels of assistance to be determined by a needs test; also to provide social services to those in need or likely to become in need if the service is not provided;

- not to require a period of residence as a condition of eligibility for receipt of social assistance;

- to establish, by law, an appeal procedure respecting the provision of social assistance, and to bring this procedure to the attention of applicants; and

- to keep records for audit purposes and provide program information requested by the federal government. These conditions were historically significant for a number of reasons. First, CAP eliminated the "categories" which left some groups unserved among persons in need. Previously, people in need were often disqualified from any assistance because they did not meet the eligibility requirements of the various categorical programs. With its comprehensive approach, CAP adopted a "social safety net" philosophy which responded to need regardless of cause.

Second, by eliminating residency requirements, CAP permitted people living in Canada to move to a new area in search of work or for any other reason, without losing their ability to receive social assistance benefits should they fail to find or keep work.

Page 7

Finally, many people in Canada could now receive assistance through a "needs test." This resulted in vulnerable persons receiving assistance that was tied directly to their individual and family situations.

Milestones in CAP History

During the early 1970s, an extensive federal-provincial social security review was conducted on the future funding of social assistance and services.

Subsequent to the review, earnings exemptions guidelines were introduced in CAP as a means of exploring income supplementation approaches without fundamental or structural change to CAP. Exemptions were intended to provide greater incentives for people on welfare to increase their earnings from employment or to accept a job offer. Henceforth, CAP could share in assistance that was calculated through a provincial/territorial needs test that exempted a defined limit of the household's earnings. Today, that limit is a flat $190 per month for a family or $95 for a single person or 25 percent of the household's social assistance entitlement.

In addition, the social security review of the 1970s proposed the establishment of national service standards for the welfare services under CAP, and that new areas become eligible for cost sharing. However, the federal government withdrew the legislation drawn up in this area; moreover, there was some provincial government opposition to it as being intrusive in an area of their responsibility. Late in the review, the federal government proposed that a block fund for welfare services might be established as an alternative that would provide provinces and territories with greater flexibility than existing CAP requirements. The federal government proposed a formula for this block, based on provincial/territorial population and Gross National Product, and involving a phase-in period. However, the amounts that would be allocated to provinces and territories through the formula were, in many cases, quite different from what provinces and territories expected they would receive as a result of 50/50 cost sharing; some provinces claimed that they would lose substantial amounts of federal transfer dollars. Therefore, some provincial governments vigorously opposed the proposal, and it was set aside.

Subsequently, CAP was considered as a candidate for inclusion in the Established Programs Financing (EPF) block-funding arrangements of 1977, along with hospital insurance, medical care and post-secondary education. It was decided, however, to keep the majority of CAP programs separate from EPF. There were concerns that new and innovative social services were not yet sufficiently "established" to be included in the new block-funded EPF transfer.

In 1990, the federal Budget limited growth in CAP's contributions for the three provinces not receiving Equalization payments (Ontario, Alberta and British Columbia) to five percent per year. This "cap on CAP", subsequently extended to the end of the 1994-95 fiscal year, was to have a major impact on the size of the federal contribution relative to the level of provincial spending in Ontario and British Columbia, particularly during the period of economic downturn and high unemployment in the early 1990s.

Over the years, CAP has helped many millions of individuals and families who had no other resort or who were at risk. A 1991 evaluation by Health and Welfare Canada found that CAP has reduced the disparities in provincial/territorial social assistance benefits since its inception. The evaluation also noted that there was evidence that social services would not have developed across Canada as rapidly in the absence of CAP. The range of provincial/territorial programs to which CAP contributes is illustrated in Figure 1.1.

Page 8

Figure 1.1
 

Canada Assistance Plan
Federal Payments to Provinces and Territories, 1992-93



Social Assistance: 63 percent

Counselling and Rehabilitation: 4 percent

Welfare Service Administration: 8 percent

Subsidized Child Care: 4 percent

Homemaker Service: 2 percent

Residential Care: 7 percent

Health Care: 5 percent

Child Welfare: 5 percent

Other: 2 percent

Note: Program category percentages are estimated.Source: Human Resources Development Canada

Social Assistance is direct financial assistance for basic requirements (e.g. food, clothing and shelter), items of special need (e.g. eyeglasses, wheelchairs and items incidental to carrying on a trade) and other benefits.

Subsidized Child Care includes infant, pre-school and special needs child care as well as out of school care for school-aged children.

Welfare Service Administration includes the costs of delivering social assistance and costs of welfare service overhead. These are primarily costs for front-line staff delivering social assistance.

Counselling and Rehabilitation are for a variety of services including crisis counselling (e.g. for victims of family
violence and rape), financial counselling, and personal / marital / family counselling.

Homemaker Services are provided in the home to families and include personal care, child care, protective oversight etc..

Child Welfare Services include payments for children in foster care, casework services for at-risk children in their own home, and protective services for children.

Health Care programs cover non-insured health benefits such as dental care, speech therapists, prescription drugs.

Residential Care includes costs for both adults and children in homes for special care such as nursing homes, shelters for victims of family violence, and institutions for children with developmental handicaps.

Page 9

2: The Need for Reform of CAP

As far back as the 1970s, the need was being voiced to consider reforms to provincial and territorial social security programs and, correspondingly, to change CAP. Today, that need for reform is greater than ever.

This year, federal, provincial and territorial governments will together spend in excess of $20 billion on social assistance and social services. Yet, as will be discussed below, in the main these programs do not focus on how to help people make the transition from welfare to work, and more needs to be done to reduce child poverty and to promote greater independence for persons with disabilities.

For both levels of government, the solution cannot be to spend more money on the safety net - governments do not have the fiscal flexibility. Neither can the response be to do nothing, because there have been mounting pressures that lead inevitably toward reform, such as the growth of caseloads and program costs as well as growing public awareness that the welfare system is not the best option for people who could be productively employed. Provinces and territories have, in fact, taken some of the first steps in the direction of reform.

Therefore, reform must embrace the issue of how to better serve people in Canada within the resources that governments can afford for this purpose. Reform must involve a consideration of trade-offs between contending priorities and the discovery of more efficient ways of providing benefits or services. There must also be a consideration of how CAP might best be reformed so that its resources are used most effectively, and so that partnership arrangements are improved and the roles of government are clarified.

Some of the key reasons for reforming CAP are discussed below.

Reform CAP To Provide More Help For People To Get Jobs

Many people across Canada today are on welfare...

Some three million people in Canada (or more than 10 percent of the population) rely on social assistance. There is a considerable amount of regional variation in the number of people on welfare in Canada. As Table 2.1 indicates, the percentage of the population receiving social assistance in March 1994 was highest in the Northwest Territories (over 17 percent) and in Ontario (nearly 13 percent); it was lowest in Alberta (just over five percent) and in Saskatchewan and Manitoba (eight percent).

Page 10

Table 2.1

Provincial/Territorial Population (April, 1994) and Social Assistance (SA) Recipients (March 1994)

Newfoundland

Social Assistance Recipients: 67,400

Population: 582,900

Percent on Social Assistance: 11.6

Prince Edward Island

Social Assistance Recipients: 13,100

Population: 134,100

Percent on Social Assistance: 9.8

Nova Scotia

Social Assistance Recipients: 104,000

Population: 936,000

Percent on Social Assistance: 11.1

New Brunswick

Social Assistance Recipients: 73,500

Population: 758,300

Percent on Social Assistance: 9.7

Quebec

Social Assistance Recipients: 787,200

Population: 7,270,500

Percent on Social Assistance: 10.8
 

Ontario

Social Assistance Recipients: 1,379,300

Population: 10,895,300

Percent on Social Assistance: 12.7
 

Manitoba

Social Assistance Recipients: 89,300

Population: 1,129,000

Percent on Social Assistance: 7.9
 

Saskatchewan

Social Assistance Recipients: 81,000

Population: 1,014,800

Percent on Social Assistance: 8.0
 

Alberta

Social Assistance Recipients: 138,500

Population: 2,710,500

Percent on Social Assistance: 5.1
 

British Columbia

Social Assistance Recipients: 353,500

Population: 3,647,700

Percent on Social Assistance: 9.7
 

Northwest Territories

Social Assistance Recipients: 11,000

Population: 64,100

Percent on Social Assistance: 17.2
 

Yukon

Social Assistance Recipients: 2,400

Population: 30,000

Percent on Social Assistance: 8.0
 

Canada

Social Assistance Recipients: 3,100,200

Population: 29,173,100

Percent on Social Assistance: 10.6
 

Notes:
"Recipients" refers to all persons - head of the household plus all dependants (includes other adults and children) who are benefiting from social assistance. Other tables and charts that provide "caseload" or "case" data refer only to heads of households receiving social assistance (the recipient numbers are always higher than the case numbers).

Numbers may not add due to rounding.
Sources: Human Resources Development Canada, Statistics Canada
 

There are increasing numbers of people on welfare...

The number of people on social assistance has grown over the years. Since 1981 (as shown by Figure 2.1) the caseload has more than doubled. Sharp increases in the caseload have been experienced during the economic downturns of the early 1980s and the early 1990s. It should be noted that, in the mid- to late 1980s, there was a flattening rather than a decline in caseloads during a period of economic recovery. As we approach 1995, with improved economic conditions, caseloads are once again flattening and showing a decline in a few locations.

There is no single profile of a welfare case such as a large family with children. In fact, almost three-quarters of welfare cases comprise only one or two persons. In March 1993, over half of welfare cases were single persons without spousal relationships or dependants (many of these were persons with disabilities). Almost one-third of the cases were lone-parent families. Only about one in 10 cases were couples with children and there were very few couples without children on welfare. Reform of the welfare system faces a challenge of responding to a very heterogeneous population of people in need.

With respect to gender, the existing data show that more women receive social assistance than do men. This is largely due to the size and characteristics of the lone-parent caseload, where women outnumber men by a large proportion (for example, by more than nine to one in March 1993). However, the number of single men on social assistance exceeds the number of single women (by almost two to one in March 1993).
 

Page 11

Also, there is no single pattern for the length of time that people are on social assistance. Existing data on how long households have been on social assistance for consecutive months show a dynamic situation of individuals and families entering and exiting welfare. About 40 percent of cases were on social assistance continuously for less than six months. However, data also indicate that, over a period of 15 years or more, a significant proportion of the caseload has depended on social assistance for many years.
 

Figure 2.1

 Social Assistance Caseloads, 1981-1994

March 1981: 750,000
March 1982: 800,000
March 1983: 975,000
March 1984: 1,000,000
March 1985: 1,025,000
March 1986: 1,025,000
March 1987: 1,025,000
March 1988: 1,000,000
March 1989: 1,000,000
March 1990: 1,025,000
March 1991: 1,200,000
March 1992: 1,425,000
March 1993: 1,600,000
March 1994: 1,675,000
Source: Human Resources Development Canada.

Many welfare recipients are employable...

Many of the growing number of welfare recipients in recent years are men and women who are able and want to work. It is estimated that the proportion of household heads on welfare who are considered employable was nearly one in two in March 1993, as shown in Figure 2.2. There are also many lone parents who are not included in this category in provincial/territorial records who want to work but face barriers such as the inability to afford quality child care for their children. Also, among those who are currently considered unemployable due to disability, there are some people who, if not obliged to rely on welfare for necessary items and services related to their disability, could enter the labour market. (This issue is explored more fully in the supplementary paper on persons with disabilities.)

Lack of education and training is a barrier...

Evidence from provinces and territories that keep track of the educational background of social assistance recipients suggests that low levels of education and skills are barriers for many people who are otherwise employable but currently dependent on welfare. The federal Department of Finance report A New Framework for Economic Policy states that the "hard core unemployed are those without the right skills and lacking the flexibility, or the opportunity, to acquire new skills." As discussed in the supplementary paper on employment development services, measures such as an integrated mix of academic upgrading, training and work experience could, over time, help reduce barriers faced by social assistance recipients.

Page 12

Figure 2.2

Estimated Social Assistance Caseload by Reason for Assistance, March 1993

Lone Parents: 28 percent
Unemployed Employables: 45 percent
Disabled: 20 percent
Other: 7 percent

Notes:
Definitions of Unemployed Employables and Disabled vary among provinces and territories.
Lone parents may be classified as employable or unemployable.

Source: Human Resources Development Canada

There are also income barriers to employment...

Another barrier that inhibits social assistance recipients from entering the labour market is that, beyond a certain income threshold, they face the prospect of becoming ineligible for welfare and osing health-related and other benefits. Depending on their income, family circumstances and the extra costs of working, they may be better off financially on welfare than in the work force. Figure 2.3 compares welfare incomes with minimum wage incomes in each province (special needs and other benefits added on to the basic welfare payment would further diminish the net benefits of accepting a minimum wage job).

Figure 2.3

Comparison of Welfare Income to Minimum Wage Income,
1 Adult with 1 Child



Annual Income

Newfoundland

Minimum Wage: $9,500

Welfare Income: $13,000

Prince Edward Island

Minimum Wage: $9,500

Welfare Income: $13,000

Nova Scotia

Minimum Wage: $10,500

Welfare Income: $12,000

New Brunswick

Minimum Wage: $10,000

Welfare Wage: $10,500

Quebec

Minimum Wage: $11,500

Welfare Wage: $12,500

Ontario

Minimum Wage: $13,500

Welfare Wage: $16,500

Manitoba

Minimum Wage: $10,000

Welfare Wage: $11,500

Saskatchewan

Minimum Wage: $10,500

Welfare Wage: $12,000

Alberta

Minimum Wage: $10,000

Welfare Wage: $11,500

British Columbia

Minimum Wage: $12,000

Welfare Wage: $13,500

Notes:
Minimum wage income based on rates as of June 1994, for 2,000 hours of work.
Estimated 1993 welfare income.

Sources: Human Resources Development Canada, National Council of Welfare

Page 13

Lone parents, the vast majority of them women, face special challenges...

Lone parents, over 90 percent of them mothers, face the additional cost of child care in moving from welfare to work. Figure 2.4 compares the labour force participation of married women and lone parents who are in similar situations of having children under the age of six. Since the early 1980s, the participation of women who are lone parents has declined. The federal government has acknowledged the shortage of affordable, quality child care spaces across Canada and is committed to work with the provinces and territories to address this issue. These issues are explored further in the supplementary paper on child care and development.

Figure 2.4

Labour Force Participation of Women With Children Under the Age of Six, 1976-1993

1976

Lone Parents: 45 percent

Married: 37 percent

1977

Lone Parents: 48 percent

Married: 38 percent

1978

Lone Parents: 45 percent

Married: 40 percent

1979

Lone Parents: 50 percent

Married: 41 percent

1980

Lone Parents: 55 percent

Married: 45 percent

1981

Lone Parents: 52 percent

Married: 48 percent

1982

Lone Parents: 52 percent

Married: 49 percent

1983

Lone Parents: 50 percent

Married: 50 percent

1984

Lone Parents: 51 percent

Married: 54 percent

1985

Lone Parents: 55 percent

Married: 57 percent

1986

Lone Parents: 51 percent

Married: 59 percent

1987

Lone Parents: 52 percent

Married: 61 percent

1988

Lone Parents: 50 percent

Married: 62 percent

1989

Lone Parents: 50 percent

Married: 64 percent

1990

Lone Parents: 51 percent

Married: 64 percent

1991

Lone Parents: 50 percent

Married: 65 percent

1992

Lone Parents: 48 percent

Married: 65 percent

1993

Lone Parents: 47 percent

Married: 65 percent

1994

Lone Parents: NA

Married: NA

Source: Statistics Canada, Labour Force Survey Annual Averages, 1976-1993 (unpublished data)

Most welfare programs do not focus on employment and training...

Provincial/territorial welfare systems that are supported through CAP have always focused on helping people when all else fails. Traditionally, their mandate was not to provide people with employment and training opportunities. The core of the welfare worker's job is to determine whether or not someone is eligible for social assistance and, if so, the level of benefits to which this person is entitled. Caseworkers may provide advice on how to carry out a job search and, where appropriate, refer the recipient to a training or employability enhancement program. However, the primary focus has traditionally been on basic income support.
 

Page 14

Current earnings exemptions may not be a sufficient incentive...

Earnings exemptions allowable under CAP appear to have helped a minority of social assistance recipients who have the opportunity to earn some income without loss of their benefits. The number of people reporting earnings is relatively low, and there appears to be a need to consider measures with greater incentives. As Table 2.2 shows, less than 16 percent of welfare cases reported earned income that was exempted based on these provisions. Few single persons (less than eight percent) on welfare appear to have any earnings. Less than one quarter of lone parents report earnings. More couples with children report earnings (more than 35 percent).
 

Table 2.2

Social Assistance Cases Claiming Earnings Exemption (E.E.),
March 1992

 Family Type: Single

Cases with Earnings Exemption: 36,970

Total Cases: 502,280

Percentage with Earnings Exemption: 7.4

Family Type: Couple, no children

Cases with Earnings Exemption: 9,090

Total Cases: 45,470

Percentage with Earnings Exemption: 20.0

Family Type: Lone Parent

Cases with Earnings Exemption: 67,720

Total Cases: 291,900

Percentage with Earnings Exemption: 23.2
 
 

Family Type: Couple with children

Cases with Earnings Exemption: 35,820

Total Cases: 100,720

Percentage with Earnings Exemption: 35.6

Total

Cases with Earnings Exemption: 149,590

Total Cases: 940,370

Percentage with Earnings Exemption: 15.9

 Notes:
Figures are based on sample of 65 percent of the total social assistance caseload.
Numbers may not add due to rounding.

Source: Human Resources Development Canada

Existing Means of Enhancing Employability of Social Assistance Recipients

1. Within CAP - Part III of CAP permits cost sharing of work activity projects for people who have unusual difficulty in finding or keeping a job.

- Rarely used (only $6 million of CAP expected to be spent on this in 1994-95, less than 0.1 percent of projected CAP entitlements).

- Provinces and territories have generally regarded Part III as being narrowly focused and cumbersome. More specifically, CAP does not share in wage subsidy programs. 2. Outside of CAP - Federal-Provincial/Territorial Agreements to Enhance Employability

- Social assistance recipients benefit from training, wage subsidies and related supports.

- History - All provinces and territories, except for the Yukon, entered into agreements in 1985. A new series of five-year agreements, effective April 1, 1991 are now in place with all jurisdictions except Quebec where, under an administrative arrangement, federal programming continues to be provided.

- Funding - Combined annual funding level is currently $400 million. Funding is on a cost-matching basis, with each level of government spending an equal amount up to a limit.

- Services and programs available to social assistance recipients through the (federal) Canada Employment Centres.

- Training and employability programs offered by provincial and territorial governments. Page 15

Existing ways of providing employment opportunities for welfare recipients...

Perhaps the need to provide more opportunity for the employable caseload was foreseen in 1966 and, for that reason, CAP has a Part III dealing with work activity. However, Part III has never had significant usage because provinces/territories have regarded it as too restrictive. To begin to address this issue, the provinces/territories and the federal government have had to go outside of CAP to establish agreements on employability.

... and there are some more recent innovations...

In addition to the federal-provincial/territorial employability agreements, there have been other initiatives, such as New Brunswick Works and the Self-Sufficiency Project in British Columbia and New Brunswick, that go beyond CAP in attempting to break down the barriers to employment faced by social assistance recipients.

These programs point the way to reform. Other provinces have increased earnings exemption levels, or have innovated with income supplementation.

The Self-Sufficiency Project

What it is:

Human Resources Development Canada, in partnership with two provincial governments, is currently funding the Self-Sufficiency Project. This experimental project, operating in New Brunswick and British Columbia, is providing temporary earnings supplements to lone parents who have been in receipt of social assistance for at least a year and who leave welfare to take a job.

What it aims to do:

The Self-Sufficiency Project tests the effect of a financial incentive to help lone parents leave welfare. The ultimate objective is to "make work pay" for these people and to help them escape the poverty trap which results when the wages they can initially earn are too low to make them better off than staying on welfare.

How it works:

The Project pays a supplement equal to half the difference between actual earnings and a benchmark level. The temporary supplement is offered for a three-year period. It is assumed that participants can increase their earnings during that time - through growth in wage rates, work hours, or both - to the point that they will remain self-sufficient once the supplement ends.

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Reform CAP To Do More About Reducing Child Poverty

CAP helps children in need or likely to be in need...

CAP contributes to provincial/territorial programs that help poor families with children meet their basic and special needs. Provinces and territories also offer a range of services to help children at times of crisis or who are at risk, for example, protection services for abused or neglected children, preventive services, foster and adoption home finding and placement. In total, it is estimated that $2.8 billion of CAP's estimated expenditures for 1993-94, or just over 35 percent, help provinces and territories provide assistance and services to children.

Child poverty is a national concern...

Despite federal financial support through CAP and other programs such as the Child Tax Benefit, and despite a broad range of provincial/territorial programs, the problem of child poverty persists in Canada. Today, 1.3 million children in Canada live in low-income households, and 1.1 million of these children are in welfare families. When not including unattached individuals within the definition of "families", the most common welfare family today is a lone parent with one or two children.

Many circumstances lead to poverty...

The Economic Council of Canada concluded in its 1992 report, The New Face of Poverty, that people move in and out of poverty today due to changes in family status and in the economy.

... and children, particularly of lone parents, are much affected...

Family break-up greatly increases one's chances of being classified as "low income", particularly for the custodial parent (most often the mother). The growth in lone-parent families, particularly those led by mothers, has added to the number of children and families in poverty. Of all families with children under 18, those headed by lone parents have increased from 11 to 16 percent in the last 15 years. Being a lone parent is the second major reason, next to unemployment, for welfare dependency.

Therefore, responding to child poverty is a key reform issue...

The welfare system and other programs that benefit families and children are not doing all they could to provide the kind of support needed to help parents of these children to become more self-reliant through employment. As discussed above, self-reliance was not the main intention of the welfare system. The social security system could do more to prevent the slide of families with children down to where they have no other choice than welfare. More help is needed in breaking down the barriers to training and employment.

... and alternatives to current approaches should be considered within available resources

Rather than welfare as the answer to child poverty, there should be more consideration of approaches within available resources that focus on providing childrens' benefits outside of the welfare system to all low-income families. In doing so, another barrier that tends to trap families within welfare could be broken.

And there are other objectives, equally important, that should be pursued, such as improving child care quality and generally providing better supports for the child during the early years of development. Provinces and territories may also want to proceed further with preventive approaches, seeking to deal with problems before rather than after the fact or when on the verge of a serious problem. For example, it may be useful to consider shifting resources towards vital "social investments", such as supports for families while children are in their preschool years, either at home or through resource centres. Within the federal government, Human Resources Development Canada as well as other departments such as Health Canada and Indian and Northern Affairs Canada, have funding and other roles to play in support of achieving objectives with respect to child development.

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Reform CAP To Promote Greater Independence For People With Disabilities

Many people with disabilities have little choice but to depend on social assistance...

Twenty percent of social assistance cases are headed by a person with a disability. As well, there are other persons with disabilities who are members of families dependent on social assistance and who are not included in the above statistic because they are not the heads of households. Further, as Figure 2.5 shows, persons with disabilities are less likely to have employment earnings and are more likely to receive social assistance than are persons without disabilities.

Figure 2.5

Persons Aged 16-64 Receiving Income from Selected Sources

Worker's Compensation

Disabled: 9 percent

No Disability: 3 percent
 

Pension Income

Disabled: 18 percent

No Disability: 5 percent
 

Social Assistance

Disabled: 19 percent

No Disability: 5 percent
 

Employment Earnings

Disabled: 50 percent

No Disability: 75 percent
 

Note:
Persons can receive income from more than one source.

Source: Statistics Canada, Labour Market Activity Survey 1990

Many persons with disabilities are classified, for social assistance purposes, as being "unemployable". This generally means their social assistance benefits are higher than those payable to other recipients who are classified as "employable" and that they also receive disability-related supports and services. As noted earlier, being classified as "unemployable" and receiving disability-related supports and services from welfare can lock a person into the welfare system, even when he or she wishes to join the labour force.

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In addition to provincial/territorial programs cost shared under CAP that provide benefits or services for persons with disabilities, there are also transfers to provinces/territories under Vocational Rehabilitation of Disabled Persons (VRDP). Issues relating to VRDP are discussed in the supplementary paper on persons with disabilities.

Persons with disabilities would like to be self-reliant...

Today, people with disabilities can benefit from better health and rehabilitation services as well as from new technologies. Even those with severe disabilities are able to participate in mainstream activities if they have the supports and services they need.

But people with disabilities face additional barriers to leaving welfare...

People with disabilities face many of the same barriers to leaving the welfare safety net as do other social assistance recipients. However, they have an additional problem because they often need supports and services to function independently; some of these are health-related but not provided through insured health services. These may no longer be available to them if they undertake training or get a job, and they may not be able to afford high-cost supports and services on their own (see Figure 2.6).

Figure 2.6

Persons With Disabilities Not in the Labour Force: Main Barriers That Prevent Them from Working

Transportation: 6.7 percent

Discrimination: 6.8 percent

Family Responsibilities: 9.3 percent

Would lose additional supports: 12.0 percent

No jobs available: 13.9 percent

Inadequate training: 15.2 percent

Would lose current income: 19.8 percent

Source: Statistics Canada, Health and Activity Limitation Survey 1991
 

... and others may leave the labour market and go on welfare

By the same token, persons with disabilities in low-paying jobs who are not eligible for social assistance, may not be able to afford the supports and services they need to live independently. There may be a financial incentive for them to abandon their jobs and apply for social assistance in order to gain access to disability-related services and supports.

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Reform CAP To Improve Partnership Arrangements

Co-operation on CAP continues, but arrangements are being put to the test...

There have been ongoing federal-provincial/territorial irritants over the interpretation and perceived rigidity of CAP rules. For example, some provincial governments have sought to test income supplementation approaches. This approach, unlike welfare, can be designed to provide much stronger incentives than exist under welfare for unemployed and low-income persons to seek full-time employment and to increase their earnings. If successful, such an approach can reduce welfare dependency. Provinces and territories are free to introduce these programs (and some have done so) but these programs are not fully cost shared where there are inconsistencies with the needs test requirement of CAP.

CAP currently does not contribute to some provincial and territorial proposals involving financial support for low-income families...

Shown below are some proposed changes to welfare that provinces have brought forward for discussion with the federal government within the last two years but which were found to be non-shareable under CAP. It should be noted that, where cost sharing continues to be open-ended until the end of 1994-95, a decision to amend federal legislation or make non-legislative changes could result in an expansion of cost-shareable provincial/territorial programs and increased CAP expenditures. Clearly, both policy and fiscal issues must be considered in decisions related to flexibility under CAP.

Financial Support Proposals Not Currently Eligible

Provincial Proposal

Income Supplementation: proposal for flexible use of social assistance and other major social security benefits (such as Unemployment Insurance) in order to overhaul completely the social security system through new benefit and program structures

Why not Eligible?

Income-tested: CAP program requires a needs test to qualify for cost sharing of social assistance

Provincial Proposal

Benefits for low-income families with children: proposal for CAP to share in existing program of income supplementation targeted to these families.
 

Why not Eligible?

Income-tested: CAP program requires a needs test to qualify for cost sharing of social assistance
 

Provincial Proposal

Amend or eliminate earnings exemptions guidelines under CAP

Why not Eligible?

Requires a change to existing guidelines: however, exemption rules could be amended by non-legislative means (subject to discussions with provinces and territories)
 

There have also been many issues respecting social services...
 

There have been obstacles over time with respect to the eligibility of certain social services proposed by provinces/territories. In recent years, these obstacles have grown more into a difference of perspective between where provinces and territories would like to take their reforms and where the limits of the CAP program permit them to go.

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... particularly on matters of interpretation
 

Newly-proposed welfare services and revisions to existing services must first be approved by CAP for purposes of cost sharing. CAP guidelines identify more specific criteria. For example, they do not allow for federal cost sharing in such areas as health, education or school social services, and this tends to prevent CAP from supporting holistic, multi-disciplinary programs, such as early childhood intervention. CAP guidelines also set out some criteria for interpreting references such as "likelihood of need" that are not defined in CAP legislation. Over the years, there have been many instances when the federal government and the provinces/territories have not agreed on whether or not a proposed service should be eligible for cost sharing.

Provinces/territories would like to take some new directions in supports and services...

Below are some provincial proposals to improve social services received over the last two years by the federal government which were not considered to be cost-shareable under existing CAP legislation and rules.

Proposals Relating to Supports and Services

Not Currently Eligible

Provincial Proposal

Self-managed care: proposal to provide funds universally to disabled persons to purchase supports and services, without the use of a needs test

Why not Eligible?

Requires legislative change: CAP legislation requires a needs test to qualify for cost sharing of social assistance

Provincial Proposal

Community-based services: proposal to provide goods and services to seniors, disabled adults and children, based on the age or disability of the person involved, and not upon a needs test

Why not Eligible?

Requires legislative change: CAP legislation requires a needs test to qualify for cost sharing of social assistance
 

Provincial Proposal

Nutrition program for children

Why not Eligible?

Requires legislative change: CAP legislation requires a needs test to qualify for cost sharing of social assistance
 

Provincial Proposal

Adaptive transportation services for persons with disabilities: program would be administered without the requirement of a needs test
 

Why not Eligible?

Requires legislative change: CAP legislation requires a needs test to qualify for cost sharing of social assistance
 

Increased CAP flexibility could help provinces/territories address their priorities...

Overall, provinces and territories have expressed concerns that CAP rules have skewed their policy and program choices. In some cases, such as Quebec's APPORT program, an income supplementation program for low-income families with children, provinces and territories have foregone cost sharing while they mount income support or social service programs that are efficient and responsive to the needs of people in the province/territory. Through reform, federal, provincial and territorial governments might agree on flexible ways for resources to be allocated to the most effective, efficient programs.
 

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Strategic Initiatives Program

The Strategic Initiatives Program was launched in the February 1994 Budget when the federal government announced that it would support innovative, cost-effective approaches to meet social security needs. The government announced that it would provide $800 million for these initiatives developed together with the provinces, territories and other partners.
 

The Program is a key element of the social security reform process. It provides a unique mechanism for governments to take action in the high-priority areas of income security and services, employment, learning and education. The initiatives are designed to:
- test new options for reform;
- explore ways to help people move from welfare to work; and
- find more cost-effective approaches to labour market programs.

Initiatives announced to date by the federal government in collaboration with provinces and territories are listed below. Others will be announced in the future.

Newfoundland
Transitions- The Changes Within
- services to help students, recent graduates and unemployed persons continue their education or to find work.

New Brunswick
NB Job Corps
- provides older unemployed workers who are recipients of social assistance or Unemployment Insurance with work opportunities.

Nova Scotia
Compass
- provides training and employment opportunities for unemployed youth. working-age adults and lone parents who are at risk of long-term dependency on social assistance.
Success 2000
- facilitates the school-to-work transition for youth through a multi-stream internship training program with private sector participation.

Prince Edward Island
Ready to Learn
- provides literacy and lifeskills training and academic and skills upgrading to young persons in receipt of social assistance or Unemployment Insurance as well as to lone parents.
Choice and Opportunity
- integrates programs and services to assist persons with an intellectual disability in maximizing their participation in the labour force and the community.

Ontario
JobLink Ontario
- services and supports provided through training and employment opportunities to help social assistance recipients achieve independence.

Manitoba
Taking Charge! - Sole Parents Program
- delivery of storefront community-based services to provide lone parents on social assistance with tools and training for employment.

Alberta
Integrated Training Centres for Youth
- provides counselling, training and work experience for youth at risk of long-term dependency on public income support, to help them make a successful transition to work.

Northwest Territories
Investing in People
- provides an employment and training program, using an incentive allowance for persons who are recipients of social assistance.

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The federal government and the provinces/territories might also continue co-operating on innovations...

Progress toward achieving some objectives can best be achieved through experiments, and through sharing results across the country. The Strategic Initiatives Program of the federal government, outlined on the previous page, was introduced to help provinces and territories achieve progress in this area.

Reform CAP To Make It More Affordable and Fair

Current CAP spending...

Table 2.3 shows the estimated amounts that provinces and territories were entitled to under CAP for the fiscal year 1993-94, a year in which total entitlements are estimated to have been $7.7 billion.

The table also compares the estimated CAP contribution by province and territory for 1993-94 to spending on provincial/territorial programs, population and the number of social assistance recipients. Differences might be accounted for in part by variations in circumstances of need and in the costs of responding to need across the country. Other factors include regional differences in unemployment that affect the number of people on welfare and regional variations in rents. In addition, provincial/territorial policy, program and fiscal decisions influence the amount that provinces and territories spend on social assistance and social services and this, in turn, affects the level of federal resources transferred under CAP. Also, as will be discussed later, the entitlements for Ontario and British Columbia are considerably affected by the 1990 federal expenditure controls on CAP, the "cap on CAP."

Table 2.3

CAP Entitlement Comparisons, 1993-94

Newfoundland

CAP: $164 million

CAP as a percent of Provincial or Territorial Program Spending: 5.3

CAP per capita: $280

CAP per Social Assistance (March 1993): $2,404
 

Prince Edward Island

CAP: $36 million

CAP as a percent of Provincial or Territorial Program Spending: 5.0

CAP per capita: $268

CAP per SA Recipient (March 1993): $2,833
 

Nova Scotia

CAP: $260 million

CAP as a percent of Provincial or Territorial Program Spending: 6.4

CAP per capita: $279

CAP per SA Recipient (March 1993): $2,632
 

New Brunswick

CAP: $203 million

CAP as a percent of Provincial or Territorial Program Spending: 5.2

CAP per capita: $268

CAP per SA Recipient (March 1993): $2,593
 

Quebec

CAP: $2,665 million

CAP as a percent of Provincial or Territorial Program Spending: 6.8

CAP per capita: $368

CAP per SA Recipient (March 1993): $3,595
 

Ontario

CAP: $2,407 million

CAP as a percent of Provincial or Territorial Program Spending: 4.7

CAP per capita: $222

CAP per SA Recipient (March 1993): $1,870
 

Manitoba

CAP: $300 million

CAP as a percent of Provincial or Territorial Program Spending: 5.4

CAP per capita: $267

CAP per SA Recipient (March 1993): $3,409
 

Saskatchewan

CAP: $221 million

CAP as a percent of Provincial or Territorial Program Spending: 4.4

CAP per capita: $218

CAP per SA Recipient (March 1993): $3,235
 

Alberta

CAP: $610 million

CAP as a percent of Provincial or Territorial Program Spending: 4.1

CAP per capita: $227

CAP per SA Recipient (March 1993): $3,112
 

British Columbia

CAP: $840 million

CAP as a percent of Provincial or Territorial Program Spending: 4.5

CAP per capita: $234

CAP per SA Recipient (March 1993): $2,599
 

Northwest Territories

CAP: $25 million

CAP as a percent of Provincial or Territorial Program Spending: 2.1

CAP per capita: $398

CAP per SA Recipient (March 1993): $2,279
 

Yukon

CAP: $11 million

CAP as a percent of Provincial or Territorial Program Spending: 2.6

CAP per capita: $373

CAP per SA Recipient (March 1993): $4,520
 

Canada

CAP: $7,741 million

CAP as a percent of Provincial or Territorial Program Spending: 5.2

CAP per capita: $267

CAP per SA Recipient (March 1993): $2,602

Source: Human Resources Development Canada

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Fiscal pressures are increasing...

Improving Social Security in Canada indicates that federal, provincial and territorial governments cannot continue to sustain the growth that has occurred in social security spending. The Discussion Paper notes that combined spending on Unemployment Insurance and social assistance has grown as a proportion of the Gross Domestic Product from 2.7 percent in 1972 to 4.8 percent in 1992, an increase of over 75 percent. As Figure 2.7 shows, CAP expenditures have been growing as a proportion of overall federal government program expenditures.

Concerns over open-ended cost sharing...

The federal government finds it difficult to plan and control a major part of its social spending when CAP provides open-ended cost sharing. Provincial/territorial spending on eligible programs, and therefore CAP expenditure as well, is affected by such factors as increases in unemployment, changes to welfare rates, new policies that affect welfare eligibility, introduction of new welfare services, population growth and other demographic changes (such as an increase in lone-parent families).

Generally speaking, welfare programs are "countercyclical." In other words, when the economy and employment grow, the demand for welfare declines and vice versa. However, there is no precise correspondence between these trends. Factors such as changing family structure (e.g. an increase in the number of lone-parent families) and unemployment among older workers can have a considerable impact on these trends. For example, the economic growth of the mid-1980s following the recession in the early part of that decade did not result in a decline in welfare caseloads in Canada or in CAP-related spending. These factors highlight the need to consider approaches that are more affordable than the current CAP.

The 1994 Budget included a provision that provincial/territorial CAP entitlements in 1995-96 would be held to the 1994-95 levels and that entitlements for CAP and EPF (postsecondary education) would be no greater in 1996-97 than they were in 1993-94. Improving Social Security in Canada indicates that, given the fiscal context in 1996-97 and beyond, funding for CAP or possible successor programs will not exceed its 1993-94 estimated funding level of $7.7 billion. Consequently, estimated funding under CAP would be about $7.7 billion for 1993-94, a projected $8 billion for 1994-95 as well as for 1995-96, and no greater than $7.7 billion for 1996-97 and for subsequent fiscal years.

Figure 2.7

CAP Entitlements as Proportion of Federal Program
Expenditures, 1980-81 to 1993-94

1980-81: 4.2 percent

1981-82: 4.3 percent

1982-83: 4.4 percent

1983-84: 4.7 percent

1984-85: 4.6 percent

1985-86: 5.0 percent

1986-87: 5.0 percent

1987-88: 5.0 percent

1988-89: 5.4 percent

1989-90: 5.6 percent

1990-91: 5.7 percent

1991-92: 5.9 percent

1992-93: 6.0 percent

1993-94: 6.5 percent

Source: Human Resources Development Canada

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The provinces and territories also are under fiscal pressure...

It is not clear what monies the provincial and territorial governments, for their part, will be able to commit to social assistance and welfare services. There is no question that provincial/territorial programs will continue to be placed under fiscal pressure and this, in itself, is a clear reason for governments to consider trade-offs, seek efficiencies and determine how best to respond to priority needs.

Governments need to consider effectiveness and efficiency at the same time...

The reformed system should be more effective and, at the same time, it should be more efficient, recognizing the limits on both federal and provincial/territorial resources. There need not be a tug-of-war between the objectives of effectiveness and efficiency. Reforms that lead to a reduction in welfare dependency will, maybe not at first but eventually, lead to cost savings. No chance should be missed to reduce inefficiency and duplication. However, difficult decisions on contending priorities will have to be made.

Addressing fairness is a key goal of reform...

Another reason for considering CAP reform is the existence of disparities in federal funding that have developed since 1990. The introduction of a five percent limit on growth in CAP transfers to Alberta, British Columbia and Ontario, beginning in 1990-91, has led to objections of lost federal funding and unfair treatment. As Figure 2.8 indicates, the federal share of CAP-eligible expenditures for 1993-94 is estimated to be 29 percent in Ontario, 34 percent in British Columbia and 50 percent in Alberta (up from a low of 45 percent in 1992-93), while remaining at 50 percent in all other provinces and territories unaffected by the ceiling.

Figure 2.8

CAP Expenditures, Effective Cost-Sharing Rates, 1993-94

Newfoundland

CAP Entitlements: $164 million

Federal Share: 50 percent
 

Prince Edward Island

CAP Entitlements: $36 million

Federal Share: 50 percent
 

Nova Scotia

CAP Entitlements: $260 million

Federal Share: 50 percent
 

New Brunswick

CAP Entitlements: $203 million

Federal Share: 50 percent
 

Quebec

CAP Entitlements: $2,665 million

Federal Share: 50 percent
 

Ontario

CAP Entitlements: $2,407 million

Federal Share: 29 percent
 

Manitoba

CAP Entitlements: $300 million

Federal Share: 50 percent
 

Saskatchewan

CAP Entitlements: $221 million

Federal Share: 50 percent
 

Alberta

CAP Entitlements: $610 million

Federal Share: 50 percent
 

British Columbia

CAP Entitlements: $840 million

Federal Share: 34 percent
 

Northwest Territories

CAP Entitlements: $25 million

Federal Share: 50 percent
 

Yukon

CAP Entitlements: $11 million

Federal Share: 50 percent
 

Canada

CAP Entitlements: $7,741 million

Federal Share: 39 percent

Source: Human Resources Development Canada

Page 25

There are different ways of looking at fairness in the context of federal funding for social security programs. Improving Social Security in Canada points to a need to examine how the social security system can be redesigned to provide comparable levels of federal support for people on social assistance throughout the country. Established Programs Financing (EPF) transfers for health and post-secondary education, which provide equal per capita amounts to provinces and territories, represent another model. Canada's system of Equalization payments, which is based on the fiscal capacity of provinces, represents yet another approach to fairness. We will return to this issue of fairness in the final section of this paper which illustrates possible reforms to federal-provincial/territorial transfers as well as an alternative approach to shift significant CAP resources to new priorities.

In Conclusion, On the Need for Reform

The above has been a discussion of some key reasons for reforms to welfare programs and social services, as well as to CAP itself. Other reasons could have been discussed, such as the need to find ways of responding to the concerns of Aboriginal peoples who are significantly affected by these programs, and how to address women's issues, such as the circumstances leading to female dependency on welfare as well as concerns over child and family services.

A challenge for governments and for Canadians will be to allocate resources towards reform initiatives at a time when there is no new money for this purpose. Therefore, reform must focus on innovative and contemporary thinking, on ensuring that governments have enough flexibility to choose the track for reform that will best fit national and regional and local circumstances, on consideration of trade-offs, and on efficient achievement of key priorities.

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3: CAP Policy Reform

The previous section explored reasons for reforming provincial/territorial programs supported by CAP and, indeed, provincial and territorial governments have been considering how some of the necessary reforms in this area should be carried out, and they have taken some first steps towards reform. There was also a discussion of why CAP, as a federal-provincial/territorial transfer mechanism, needs to be changed in order to achieve the goals of social security reform.

This section illustrates some possible approaches to reform that could better serve people in Canada who are in need.

As part of the Social Security Reform process, the federal government wants to undertake discussions with the provinces, territories, and Canadians on what changes should be introduced to CAP to secure the kind of incentives, benefits and protection that will best serve Canadians in the future.

There is an important element of experimentation and evaluation that needs to take place. The Strategic Initiatives Program implemented this year is designed to provide funding for joint federal-provincial/territorial innovations that could point the way to more broad-based reforms in the future.

Interim Steps

Even with the ceiling on CAP funding, more flexible rules could give the provinces and territories room to innovate and implement changes that would improve services while saving money. Changes could be made to reduce administrative overheads in the system, for example by streamlining needs tests and financial procedures. Changes could be made to enable federal cost sharing to focus on reforms such as more preventive programs for children, welfare-to-work programs, and work activity programs.

These changes could be introduced through policy or administrative arrangements as opposed to legislative change, since it is likely that a review of existing legislation will be an outcome of the reform process itself. As a means to demonstrate the federal government's flexibility in the interim, while not prejudging or preempting social security reform, nonlegislative changes could be pursued in consultation with provincial and territorial governments.

Within the next few months, the federal government will be seeking to hold discussions with provinces and territories to examine possible non-legislative changes to CAP that could be adopted to provide this greater flexibility and also to explore ways to further reduce the administrative burden on provinces and territories associated with cost-sharing requirements.

Page 28

One such example, and some provinces have already proposed this, would be to remove or relax CAP earnings exemptions guidelines which presently establish cost-sharing limits on amounts of earned income which can be exempted from the calculation of entitlement to social assistance benefits. In so doing, the federal government could facilitate the transition from dependency to self-sufficiency for large numbers of social assistance recipients trying to get a better foothold in the labour market. Another possibility would be to relax the Work Activity Guidelines to alleviate administrative burden on the provinces and territories. Elimination of restrictive administrative requirements (i.e. prior approval for each project, annual evaluations and annual budget submissions) may enable more long-term disadvantaged social assistance recipients to have access to, and benefit from, transitions to employment training.

Even with limited resources, provinces and territories can do more by investing in areas that make the most sense in terms of helping individuals retain or re-acquire their independence, while at the same time making the best use of finite resources.

Approaches to Longer-Term Reform

The Discussion Paper sets out some broad approaches to reforming federal support for welfare. The first approach is to replace a wide variety of federal and provincial/territorial income support programs with a universal, integrated Guaranteed Annual Income (GAI). The government's own analysis suggests that the universal GAI approach is not practical as it is too costly and not the most effective way to address the priorities of reducing welfare dependency and tackling child poverty. However, the GAI approach continues to have the support of some commentators. Human Resources Development Canada will make analysis available to the Standing Committee on Human Resources Development to help it assess this issue.

Broadly speaking, other options fall within two basic categories. Under the first category, CAP could continue to be a transfer from the federal government to provinces and territories, but there could be major changes to how funding will flow under the transfer and to the conditions which are attached to it. The second category would shift significant CAP resources to new priorities, with the remainder possibly being transferred to the provinces and territories in order to assist them in providing social services and supports.

Transfers to Provinces and Territories

Why Cost Sharing May Not Be An Option for Long-Term Reform

The fiscal situation and the goals of social security reform point toward some approach other than a cost-sharing mechanism. Over the years, CAP's sharing of costs at 50 percent provided provincial/territorial treasuries with some protection against increased program costs. CAP funding responded to increases in provincial/territorial costs, regardless of whether their costs grew because of increasing numbers or needs of clients, increased social assistance rates or the introduction of new programs.

However, there are wide variances in the CAP sharing rate as a result of the 1990 expenditure controls on CAP. This raises the issue of whether the simplest, fairest approach might be to have a uniform CAP sharing rate for all provinces and territories at a rate lower than 50 percent. However, several problems would arise from such a proposal. Due to open-ended sharing, CAP expenditures would continue to be unpredictable and, in order to stay within fiscal parameters, this rate would have to be significantly lower than 50 percent (perhaps 30-35 percent). This would, however, cause a major disruption to provinces and territories which, until 1994-95, had received a CAP contribution of 50 percent and now would receive a much-reduced federal funding contribution.

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Apart from how it allocates funds, the costsharing mechanism also involves tighter accountability and controls over how contributed funds are spent than do other major transfers, such as Established Programs Financing. Nevertheless, the fact that, under cost sharing, the eligibility of each program is reviewed and that dollars flow only to eligible programs, is no assurance that the most desirable results are being achieved across the country. As has previously been discussed, CAP-supported programs are not flexible enough to significantly address the issue of child poverty and, instead of creating incentives for people to move into the labour market, these programs sometimes have the effect of trapping people within the welfare system. In other words, in order for reform objectives to be fully achieved through cost sharing, it would almost certainly be necessary to rebuild the CAP cost-sharing vehicle rather than merely introduce modest amendments to it. Rebuilding would require a new determination of what is shareable and what is not. This would pose a significant challenge for governments to resolve and could ultimately generate future federal-provincial/territorial irritants. If the range of shareable programs is too narrow, then provinces and territories would feel that CAP is holding them back in their efforts to innovate and reform their systems. If the range of shareable programs is virtually "wide open", then the main distinction between cost sharing and more flexible options such as block funding is that the former would have a more complex administrative regime which hardly seems necessary.

Therefore, given the current fiscal climate, and for reasons discussed above, cost sharing is not considered by the federal government to be an option for reform.

A New Block-Funding Approach

A block-funding approach might be considered as a means of providing provincial and territorial governments with more flexibility to redirect scarce resources towards breaking down the barriers people face to training and employment opportunities. Instead of sharing in the costs of a defined range of provincial/territorial programs, under block funding the federal government would transfer an annual amount to the provinces and territories, as it currently does, for example, through Established Programs Financing in the area of health. The scope of the block could include the current range of CAP's social assistance and social service programs as well as new provincial/territorial initiatives to support poor children, reduce social assistance dependency, and help prevent family and individual crises before they arise. The goals, accountability arrangements and funding requirements would also need to be discussed.

Some Issues Related to Block Funding

Provinces and territories would have more flexibility to decide on tradeoffs...

Given CAP expenditure controls as well as competing resource demands on provincial and territorial treasuries, the provincial and territorial governments will face a continuing challenge in resourcing their welfare and social service programs. By comparison with CAP arrangements for 1995-96 that will involve cost sharing with a ceiling for all provinces and territories, a block-funding approach could provide more flexibility for adjustments and reflecting priorities and needs as provinces and territories reform their programs. Initiatives now under way outside of CAP could be supported with federal dollars. For example, Quebec might use some of the federal funding to help finance its APPORT program. Ontario might do the same to expand current initiatives that support children and families in "at-risk" communities.

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Illustration of One Possible Structure for a Block Fund

Range of Provincial/Territorial Programs Covered:

Very flexible, including help for low-income persons to become employed; measures to reduce child poverty; services to help persons with disabilities; assistance as a last resort; social services to respond to need and to prevent need from arising; and other possible programs of social need.

Allocation of Funding:

Federal funding (not more than an estimated $7.7 billion) allocated to provinces/territories through a formula incorporating one or several "need" indicators relevant to the purpose of the block (e.g. distribution of "at-risk" populations).

Transition:

Above method to be phased in over several years. The proportion of CAP funding a province or territory received in a given base year (e.g. 1993-94, or the year prior to reform) could influence funding levels during the phase-in period.

Mechanism:

Block fund, with conditions (see below).
And provinces/territories might consider innovative ways to enhance employability opportunities for social assistance recipients.

There would be a need to discuss goals and possible funding principles...

Governments could discuss how some broad goals - such as reducing child poverty, providing better services to persons with disabilities, and ensuring the continuance of a social safety net - could be associated with the establishment of a block-funding approach.

A key issue for public and federal-provincial/territorial discussion would be whether or not a block fund should have principles attached to it. Many people and organizations in Canada will want assurances that vital welfare programs and social services will be maintained and that provinces and territories will continue to develop the network of volunteer and community-based organizations that have become such a critical part of the delivery system.

There are many forms that principles could take. The different arrangements in the area of health (EPF-Health) and post-secondary education (EPF-PSE) illustrate a variety of possible approaches. In the field of health, for example, the Canada Health Act outlines a number of criteria and conditions that provincial/territorial governments must meet to receive the full payment under the EPF legislation. In contrast, there are virtually no conditions attached to how provinces and territories spend money that is provided under the transfer for post-secondary education.

Further, the Canada Health Act describes "medically-necessary" services, most specifically in relation to hospital services. In any federal legislation for a block fund to replace CAP, it might be possible to describe certain necessary social assistance and social service programs. This, too, would be a key topic to be reviewed and discussed if this approach were to be pursued.

Moreover, Canadians, including Members of Parliament and representatives of provincial and territorial legislatures, will require a good base of information on how government monies are being spent and the results of these expenditures so that accountability to the public is maintained.

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Some Possible Goals and Conditions for a Block Fund*

General Goals

(Broad principles or values underlying the transfer agreement) - Responsiveness
Develop and maintain programs responding to varying circumstances of need, regardless of cause.

- Employability
Focus on opportunities for poor and unemployed people to upgrade their skills and participate in the job market.

- Children
Focus on reducing child poverty and preventing social problems involving the child and the family before they arise.

- Safety net
Use preventive services to help people from falling into the safety net, but continue to provide social assistance and services to people who clearly have no other resort.
Funding Principles (Examples)
 
- Accessibility
Programs cannot discriminate on such bases as ethnicity, age or gender.
- Portability
Programs cannot establish prior residency requirements.
- Fairness
Appeal procedures must be established through provincial/territorial statute.
Accountability Requirements - Information
Provinces and territories to collect information and make it available to the public and the federal government.
- Evaluation
Provinces and territories to evaluate block-funded programs on a routine basis and to make this information available to the public and to the federal government.
Note that the above are merely illustrations for discussion purposes and are not intended to represent the federal government's views on this matter or to be complete.

Taxpayers might also benefit by some tens of millions of dollars from the lower costs of administering a block fund compared to the more cumbersome accounting and administration required to sustain a cost-shared program.

The design of a block fund...

A key issue for discussion with the provinces and territories under a block fund arrangement would be the formula for determining provincial/territorial entitlements. Block fund levels could be based initially on some measure of current CAP entitlements, such as each province's or territory's CAP transfer in the year prior to when the new system would come into effect. Alternatively, the allocations might set aside previous funding trends and, taking into account the purpose of the block and socio-economic conditions, establish entirely new levels of funding, perhaps quite different from existing CAP allocations.

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A formula could be developed whereby a province's or territory's share of federal funding could increase relative to that of other provinces or territories if they experienced a major economic downturn and unemployment increased rapidly. In such a case, the indicators used within the funding formula might be sensitive to, for example, changes to the not-employed population, and the lowest quintile of income, as shown in Table 3.1. Additionally, a formula might factor in other indicators that are not shown in this table, such as the population of "at-risk" children or persons with severe disabilities. As Table 3.1 implies, some of these indicators could have a significant impact on the distribution of federal funding, and it might be useful to consider transition measures.

Table 3.1

CAP Distribution in 1993-94 and Possible Block Fund Allocators (A formula might be developed for allocating funding based on a combination of the above indicators, and potentially including other such indicators of provincial or territorial need.)

Newfoundland

Existing Distribution Percent of Total CAP Entitlements (93-94): 2.1

Percent of Social Assistance Recipients (March 93): 2.3 Possible Allocators National Population: 2.0 percent

Not Employed Population: 2.4 percent

Lowest Quintile (Provincial distribution of families and unattached individuals in the lowest quintile of total income.)(Income): 1.9 percent
 
 
Prince Edward Island

Existing Distribution Percent of Total CAP Entitlements (93-94): 0.5

Percent of Social Assistance Recipients (March 93): 0.4 Possible Allocators National Population: 0.5 percent

Not Employed Population: 0.5 percent

Lowest Quintile (Provincial distribution of families and unattached individuals in the lowest quintile of total income.)(Income): 0.5 percent
 
 
Nova Scotia

Existing Distribution Percent of Total CAP Entitlements (93-94): 3.4

Percent of Social Assistance Recipients (March 93): 3.3 Possible Allocators National Population: 3.2 percent

Not Employed Population: 3.4 percent

Lowest Quintile (Provincial distribution of families and unattached individuals in the lowest quintile of total income.)(Income): 4.0 percent
 
 
New Brunswick

Existing Distribution Percent of Total CAP Entitlements (93-94): 2.6

Percent of Social Assistance Recipients (March 93): 2.6 Possible Allocators National Population: 2.6 percent

Not Employed Population: 2.9 percent

Lowest Quintile (Provincial distribution of families and unattached individuals in the lowest quintile of total income.)(Income): 2.7 percent
 
 
Quebec

Existing Distribution Percent of Total CAP Entitlements (93-94): 34.4

Percent of Social Assistance Recipients (March 93): 24.9 Possible Allocators National Population: 25.1 percent

Not Employed Population: 25.9 percent

Lowest Quintile (Provincial distribution of families and unattached individuals in the lowest quintile of total income.)(Income): 29.8 percent
 
 
Ontario

Existing Distribution Percent of Total CAP Entitlements (93-94): 31.1

Percent of Social Assistance Recipients (March 93): 43.3 Possible Allocators National Population: 37.3 percent

Not Employed Population: 36.6 percent

Lowest Quintile (Provincial distribution of families and unattached individuals in the lowest quintile of total income.)(Income): 30.4 percent
 
 
Manitoba

Existing Distribution

Percent of Total CAP Entitlements (93-94): 3.9 Percent of Social Assistance Recipients (March 93): 3.0Possible Allocators National Population: 3.9 percent

Not Employed Population: 3.9 percent

Lowest Quintile (Provincial distribution of families and unattached individuals in the lowest quintile of total income.)(Income): 4.2 percent
 
 
Saskatchewan

Existing Distribution Percent of Total CAP Entitlements (93-94): 2.8

Percent of Social Assistance Recipients (March 93): 2.3 Possible Allocators National Population: 3.5 percent

Not Employed Population: 3.6 percent

Lowest Quintile (Provincial distribution of families and unattached individuals in the lowest quintile of total income.)(Income): 4.3 percent
 
 
Alberta

Existing Distribution Percent of Total CAP Entitlements (93-94): 7.9

Percent of Social Assistance Recipients (March 93): 6.6 Possible Allocators National Population: 9.3 percent

Not Employed Population: 8.6 percent

Lowest Quintile (Provincial distribution of families and unattached individuals in the lowest quintile of total income.)(Income): 9.5 percent
 
 
British Columbia

Existing Distribution Percent of Total CAP Entitlements (93-94): 10.9

Percent of Social Assistance Recipients (March 93): 10.9 Possible Allocators National Population: 12.3 percent

Not Employed Population: 12.2 percent

Lowest Quintile (Provincial distribution of families and unattached individuals in the lowest quintile of total income.)(Income): 12.6 percent
 
 
Northwest Territories

Existing Distribution Percent of Total CAP Entitlements (93-94): 0.3

Percent of Social Assistance Recipients (March 93): 0.4 Possible Allocators National Population: 0.2 percent

Not Employed Population: Nil

Lowest Quintile (Provincial distribution of families and unattached individuals in the lowest quintile of total income.)(Income): Nil
 
 
Yukon

Existing Distribution Percent of Total CAP Entitlements (93-94): 0.1

Percent of Social Assistance Recipients (March 93): 0.1 Possible Allocators National Population: 0.1 percent

Not Employed Population: Nil

Lowest Quintile (Provincial distribution of families and unattached individuals in the lowest quintile of total income.)(Income): Nil
 
 
Canada

Existing Distribution Percent of Total CAP Entitlements (93-94): 100.0

Percent of Social Assistance Recipients (March 93): 100.0 Possible Allocators National Population: 100.0 percent

Not Employed Population: 100.0 percent

Lowest Quintile (Provincial distribution of families and unattached individuals in the lowest quintile of total income.)(Income): 100.0 percent Note:
Numbers may not add due to rounding.
Source: Human Resources Development Canada
 

There would be advantages and disadvantages to this approach...

In summary, a block-funding approach could give provincial/territorial governments more flexibility within limited budgets to proceed with reforming their welfare and social service programs. A province or territory could be in a better position to consider trade-offs on how best to use the funding transferred to them by the federal government. Also, through use of a new funding formula that includes need indicators, it might be possible to introduce greater fairness into federal funding support for the recipients of provincial/territorial social programs. Finally, the federal and provincial/territorial governments might benefit from the stability of funding provided through a block-funded approach.

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However, it may be a challenge to obtain a consensus among governments and Canadians on whether or not there should be conditions for federal funding, and the nature of these conditions. Federal funding for CAP or its successors could not exceed 1993-94 entitlements of about $7.7 billion, and therefore a block fund could not respond to future increases in the overall level of need. Moreover, provinces and territories could not easily predict future federal contributions without knowing how the formula will allocate funding to all other provinces and territories.

Redirecting Funding to New Priorities

The second approach to reform would involve a more fundamental restructuring of the federal government's participation in the social safety net.

Some academics and policy research groups have proposed that some or all of the resources that the federal government transfers to the provincial/territorial governments under the Canada Assistance Plan be re-channelled into programs that provide more direct support to individuals. One reason they often cite for restructuring is to target scarce resources so that the priority policy goals can be achieved and disincentives in the current system can be addressed. Other reasons include improved accountability, greater efficiency, clearer roles for the federal and provincial/territorial governments, and more opportunities for the recipients to exercise individual choice.

Figure 3.1

Illustration of Possible Components of Fundamental Reform

Current Federal Programs

Child Tax Benefit

Funding in 1993-94: $5.1 billion

Post-Reform
- New Child Benefit Approach

Current Federal Programs

CAP, Social Assistance, Social Services

Funding in 1993-94: $7.7 billion

Post-Reform
- New Child Benefit
- Employable SA Recipients
- Persons with Disabilities
- Social Services
- Child Care

Current Federal Programs:

Child Care

Post-Reform
- Child Care

Post-Reform
- Creating Opportunity: $0.36 billion

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Improving Social Security in Canada illustrates an approach to restructuring current programs to pursue more actively the proposed goals of increasing employment and reducing child poverty. Priorities outlined in the Discussion Paper might usefully be considered in this context. - There could be better income support for low-income families with children.
- Working poor families with children might receive an enhanced working income supplement.
- Child care spaces might be expanded and child care might be linked to broader child development initiatives.
- Child support initiatives might be pursued, reducing the need for some lone parent families to depend upon welfare.
- Employment development services for social assistance recipients might be provided.
- There could be improved access to disability-related supports and services.
- There could be continued federal support for provincial/territorial social service programs, possibly through a block fund with conditions.
The approaches listed are intended to provide an illustrative "menu" of priority initiatives which could support the proposed goals of increasing employment and reducing child poverty. The purpose of providing the menu is to stimulate public debate and discussions with provinces and territories since priorities in these areas cannot be set by the federal government on its own. The kind of restructuring of these programs which this approach would involve could only occur if Canadians and governments agree on the nature of the reallocation it would entail. This could only be determined by Canadians and individual provincial and territorial governments after a thorough debate.

Figure 3.1 illustrates several possible priorities that might be funded using redirected CAP dollars. Various combinations would be possible, depending on which priorities are selected.

The focus of a reformed system...

A reformed system could include a new child benefit approach. There might be several designs for such a benefit and one of them might be to enhance benefits to children of low-income families by retargeting the current Child Tax Benefit and reallocating some federal CAP spending to the benefit. Alternatively, the federal Child Tax Benefit and provincial/territorial social assistance spending on behalf of children might be integrated into a new benefit for children of all low-income families. These options are discussed more fully in the supplementary paper on income security for children.

The new system could also potentially recognize other priorities, such as responding to the needs of employable social assistance recipients, persons with disabilities and other vulnerable populations through new or enhanced direct transfers to these individuals. Alternatively, provinces and territories might want federal funding to flow into a series of separate initiatives to respond to the needs of these groups, either through a funding formula or cost-matching arrangements.

One option for continued federal support of a safety net of services at the provincial/territorial level could be to redirect some CAP dollars to a social services block. Under this option, federal funding could continue to support provincial/territorial social service systems that provide services most frequently through numerous non-governmental organizations. Many of the considerations discussed in the previous section on block funding might be relevant, although the purpose of and principles for such a block might be more specific because the scope and size of the transfer would be more limited.

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Finally, Figure 3.1 indicates the potential for more resources going to the child care system across Canada. In addition to about $300 million in CAP child care expenditures, and approximately $100 million that the federal government spends on other child care services, the federal government is committed, as outlined in Creating Opportunity, to providing new resources for child care to be used in combination with enhanced provincial/territorial spending. The supplementary paper on child care provides more detail on this issue.

Some Issues Related to the Approach of Redirecting CAP Funds to New Priorities

Some of the reasons for considering this approach...

The fundamental restructuring that this approach entails could serve to concentrate funding in support of specific national priorities such as those illustrated above. The approach might also represent at least a partial answer to the issue of fairness in federal funding in that it could redirect CAP dollars toward the specific needs of vulnerable persons, regardless of where they may reside in Canada.

Children of many low-income families might receive benefits that are more adequate and that are provided outside of the welfare system rather than as a product of welfare dependency. Particularly for families whose current income narrowly exceeds the threshold for welfare eligibility, there might be reduced welfare dependency and greater financial support to maintain or increase family earnings through employment.

Flexible arrangements might also be considered to support provinces and territories in establishing improved links between social assistance and employment development services. The supplementary paper on employment development services explores issues in this area in more depth.

Provincial/territorial programs with federal funding support might provide persons with disabilities the means of acquiring disability related supports without having to be on social assistance, thus serving as an incentive for these persons to enter the labour market rather than to depend on welfare as the only way of obtaining these supports. A new, enhanced program for child care and child development could help achieve both employment and child poverty reduction goals. In addition, if some CAP funding were to be used for a social services block fund, provinces and territories might be able to shift scarce program dollars toward more preventive approaches as a result of more flexible federal funding conditions than could exist under CAP cost sharing with a ceiling.

The potential for continued support to meet a broad range of needs...

In addition to discussion on how funding might be targeted for specific priorities, such as those suggested above, there could be discussion of how funding might be used to meet the needs of a broad range of vulnerable populations in need of various supports and services. Improving Social Security in Canada states that, in considering these issues, it would be necessary to protect the funding of a wide range of vital social services, including services for seniors and health-related spending. In the context of an approach to redirect all or some of CAP funding to new priorities, funding for health, seniors or other vital services could be preserved either through transferring this funding to the province or territory, possibly through a social services block fund, or through some other, more specific initiative that helps fund the provision of these benefits.

Provinces and territories would decide how best to allocate funding through a block-funded approach in support of a social services network, if such an approach were to be pursued.

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There are key issues and trade-offs to be considered on how to fund an approach to redirect CAP dollars...

Limits on available federal and provincial/territorial funding are likely to make restructuring a challenge, and there would be difficult decisions to be made on trade-offs. The federal government, provinces and territories would have to discuss which, among numerous choices, are the key priorities to be reflected in the redirection of CAP dollars.

Proceeding with such social investments as an increased child benefit might require one or both levels of government to make difficult decisions on how to redirect other social program funding towards this purpose. The most coherent, efficient instrument might be an integrated federal-provincial/territorial child benefit. Retargeting of the existing benefit could increase the benefits for some low-income families but a more adequate benefit could be developed through redirection of some available CAP resources that might otherwise go, for example, to financial support of the employable social assistance caseload.

In some other areas, trade-offs will likely also have to be considered to increase expenditures in order to achieve long-term goals. For example, as Improving Social Security in Canada suggests, there may be long-term payoffs both for individual self-reliance and for government budgets through improving the access of social assistance recipients to employment development services. Another example might be an increased focus on prevention within the social services area. It would be essential to ensure that provinces and territories have the flexibility to allocate funding to those initiatives that will best achieve their social security goals.

In addition, the most efficient program delivery methods would have to be determined. Costs of administrative overhead should be kept as low as possible and, as in the case of the block-funded approach, these reforms could possibly provide a limited amount of savings for reinvestment in client benefits.

Towards CAP Reform

Many different groups in Canadian society benefit from the broad range of provincial and territorial government programs funded under CAP. Social assistance and services are provided to millions of people in Canada: families with children, lone-parent families, persons with disabilities, persons who live alone and the list goes on. There are many people, in different family, community and economic circumstances, who need help in different ways. This paper points to some better ways of serving these people than through the social security system of today.

The Strategic Initiatives Program will help bring about innovation in the reform of CAP and other key components of the social security system. Innovation means testing out new approaches, improving self-reliance, finding the most cost-effective solutions, and sharing the results with other provinces and territories and with Canadians.

In considering approaches to reform, it is important to recognize that financial resources in today's environment are much more scarce than they were ten or twenty years ago. Thus, approaches to reform need to be financially sustainable, both for the federal and the provincial/territorial governments.

It is hoped that this paper will contribute to public discussion of the problems associated with social assistance and social service programs in Canada, and of directions for reform.


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