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«Ontario’s Social Assistance Poverty Gap Kaylie Tiessen RESEARCH ANALYSIS SOLUTIONS About the Author Kaylie Tiessen is ...»

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Canadian Centre for Policy Alternatives | Ontario

May 2016

Ontario’s Social

Assistance Poverty Gap

Kaylie Tiessen

www.policyalternatives.ca RESEARCH ANALYSIS SOLUTIONS

About the Author

Kaylie Tiessen is with Unifor’s national research department. Previ-

ously, she was an economist with the CCPA-Ontario. Kaylie is a CCPA

research associate. She researches labour markets, social progress

and the value of public services.

ISBN 978-1-77125-253-9 This report is available free of charge at Acknowledgements www.policyalternatives.ca. Printed copies may The author would like to thank Jennefer Laidley and John Stapleton be ordered through the CCPA national office for for their guidance and recommendations in clarifying the parame- a $10 fee.

ters of this paper. Also to be thanked are Sheila Block, Steve Barnes and Pedro Barata for their contributions to this work.

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Click / scan the QR code below to make a tax-deductible donation With your support we can continue to produce high quality research — and to the CCPA-Ontario.

make sure it gets into the hands of citizens, journalists, policy makers and progressive organizations. Visit www.policyalternatives.ca/ontario or call 416-598-5985 for more information.

The CCPA-Ontario office is based in Toronto. We specialize in provincial and municipal issues. We deliver original, independent, peer-reviewed, non-partisan research.

The opinions and recommendations in this report, and any errors, are those of the author, and do not necessarily reflect the views of the publishers or funders of this report.

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Ontario’s Social Assistance Poverty Gap 5 Executive summary 7 Introduction 12 Measuring the depth of poverty 14 Strengthening income security in Ontario 16 Conclusion 18 Notes 4 Canadian Centre for Policy Alternatives Ontario’s Social Assistance Poverty Gap Executive Summary Just over seven years after the Government of Ontario launched a major poverty reduction strategy, it has broadened the scope to include not just families with children but, also, adults and people experiencing homelessness. This paper drills down on one key but complex policy file that is essential to the province meeting its commitments to reduce poverty and to improve income security for both children and adults: social assistance.

It measures the poverty gap for singles and families who qualify for either Ontario Works or the Ontario Disability Support Program. It concludes that the poverty gap—the distance between total benefit income and the poverty line—for people who qualify for social assistance has worsened over time, especially so for single people receiving Ontario Works. In 1989, a single person qualifying for Ontario Works faced a poverty gap of just under 40%.

By 1993, the gap had been cut in half and singles on social assistance faced a poverty gap of 20%. By 2014, the gap had widened dramatically to 59%.

People receiving benefits from Ontario’s social assistance programs are living in a greater depth of poverty now than a generation ago.

Though smaller than the gap for single individuals receiving Ontario Works, the poverty gap for all family types has followed a similar pattern.

The gap completely disappeared between 1992 and 1994 but has since widened significantly.

Here’s a snapshot of the poverty gap by family type in 2014:

The poverty gap for a single adult qualifying for Ontario Works was 59%.

It would take an additional $12,301 to close the gap.

The poverty gap for a single parent qualifying for Ontario Works was 35%. It would take an additional $10,386 to close the gap.

–  –  –

0 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2014 Note Total benefit incomes 1989-2013 accessed from Caledon Institute, 2014 from Income Security Advocacy Centre. Low-Income Measure from Statistics Canada “Low Income Lines 2011-2012,” 2013-2014 Low-Income Measures are author’s calculations.

–  –  –

6 Canadian Centre for Policy Alternatives The Ontario Child Benefit has proven to be a real workhorse: in 2009, the OCB was increased to a maximum of $1,100 annually per child in that year. By 2013, more than 530,000 families received a benefit worth a maximum of $1,210 per child. The benefit increased to $1,310 in 2014.1 And in 2015, the Ontario Child Benefit was indexed to inflation to ensure families don’t lose the value of the benefit to the rising cost of living.

In an effort to recognize the extent of the poverty gap experienced by single people receiving Ontario Works—the poorest of all who qualify for social assistance—the government invested in annual top ups of $14 a month in 2013, $25 a month in 2014 and $20 a month in 2015, with another $25 to be added in fall 2016. Unfortunately, for all other family types, rate increases have not been robust enough to even compensate for the rising cost of living, let alone move total benefit income toward any measure of adequacy.

Pulling people who qualify for social assistance out of poverty requires increased income. That income can be delivered through two avenues.





First, there is some room to manoeuvre on rates. In 2010, the social assistance rate to minimum wage ratio reached a historic low: the monthly rate for a single on OW fell to just 36% of what an employed individual working full-time for the minimum wage could expect to earn.5 Basic social assistance rates are so low that fears of a disincentive to work from small increases are unfounded. Second, incomes for those who qualify for OW and ODSP could be increased through the tax and transfer system, which could include better child benefits, more sizeable sales tax credits and other government benefits and credits.

Introduction In 2008, the provincial government released Breaking the Cycle: Ontario’s

Poverty Reduction Strategy. It committed to meet a clear target and timeline:

to reduce child poverty in Ontario by 25% within a five-year period. It made those commitments at the start of a global economic recession that made the strategy more important than ever.

Eight years later, progress has been mixed. The early years showed promise as investments in child and family poverty reduction—and particularly accelerated increases to the Ontario Child Benefit—resulted in a decrease in the child poverty rate. But a post-recession focus on austerity measures diverted the provincial government from the investments that were working.6 As a result, many of the government’s initial goals have still not been 7 Ontario’s Social Assistance Poverty Gap met. In fact, Ontario ended its five-year strategy with the same level of child poverty as when it began in 2008.

In 2014, the government recommitted itself to its original 25% child poverty reduction target, without committing to a new timeline. It also launched a second poverty reduction strategy that includes two demographics that had been seriously overlooked in the first strategic commitment: adults and people experiencing homelessness.7 The province should be commended for taking this important step.

This paper drills down on one key but complex policy file that is essential to the province meeting its commitment to reduce poverty and to improve income security for both children and adults: social assistance. It measures the 2014 poverty gap for certain family types who qualify for Ontario Works (OW) and the Ontario Disability Support Program (ODSP)—single adults, single parents with one child, couples with two children on OW, and single adults on ODSP. It also estimates the depth of poverty faced by a range of family types qualifying for social assistance.

When the province launched its first poverty reduction strategy, it chose the after-tax Low Income Measure (LIM-AT) as its core indicator. This paper uses the LIM-AT to assess how far below the poverty line those who qualify for social assistance fall. It measures the distance between the total benefit incomes of people who qualify for social assistance in Ontario and the poverty line—the poverty gap—in each year since 1989. It also estimates the depth of poverty—the total dollar value of the poverty gap—for people who qualify for social assistance in Ontario.

Measuring the poverty gap for social assistance recipients

Income is delivered to people who qualify for social assistance through two avenues: the two basic social assistance programs—Ontario Works and the Ontario Disability Support Program—as well as the tax and transfer system, which includes child benefits, sales tax credits, and other government benefits and credits. Total benefit income for those who qualify for OW and ODSP is comprised of basic social assistance, federal and provincial child tax benefits, the GST credit and the Ontario Trillium Benefit.

In 1989, when the National Council of Welfare first began to compile this data, total benefit income from these sources as a share of the LIM-AT was much higher than it is today: a single person qualifying for the equivalent of OW in 1989 could expect a total benefit income that was about 40% below the poverty line. The gap was 10% for a single person with a disability and 8 Canadian Centre for Policy Alternatives 20% for a couple with two children. By 1994, the gap for singles qualifying for the equivalent of OW had fallen to about 20% below the poverty line, as the government made investments in social assistance rates.8 During that time, the gap for other family types disappeared entirely.

In the early 1990s, the federal government introduced the GST credit in an effort to redress the regressive nature of the GST on low-income people. This new credit had the impact of increasing total benefit income for people who qualified for social assistance.9 In 1993, three federal child benefits were replaced by a single benefit targeted to low-income families. Called the Child Tax Benefit, this change resulted in increased income for the working poor, but left unchanged the total benefit income for families who qualified for social assistance.10 In 1998, the federal and provincial governments joined together on the creation of the National Child Benefit Supplement (NCBS), an additional income benefit for families with children in low income. The NCBS, however, specifically allowed the provinces to claw back that benefit from families who were receiving social assistance. It wasn’t until 2004 that Ontario families on social assistance saw the benefit of a small increased flow through amount, while most of the NCBS continued to be deducted from their OW or ODSP benefits. In 2008, with the advent of the Ontario Child Benefit, the NCBS clawback was ended. Basic needs benefits for families with children have been reduced since then to take all benefits for children out of the OW and ODSP systems.

In 1995, a new provincial government dealt a severe blow to the incomes of any Ontarian qualifying for social assistance: the rate for basic assistance (what became OW) was cut by 21.6%.11 That was the single biggest cut to social assistance incomes in the province’s history. That government then froze both OW and ODSP rates for the rest of its time in office.

In 2003, a new provincial government, led by former Premier Dalton McGuinty, was elected. It was expected that this new government would reverse at least some of the damage to social assistance, but progress has been halting, to say the least. By 2011, the total benefit income for an adult qualifying for OW benefits fell to 60% below the poverty line, making the poverty gap for those who qualify for social assistance in Ontario considerably larger than it was a generation ago.

Figure 1 illustrates just how far below the poverty line Ontarians who qualify for OW and ODSP fall. It shows a slight rise in total benefit income since 2008 for single people living with a disability on ODSP as well as for single parent families and families with two children who qualify for OW.

For families with children, that modest increase comes from the increased

–  –  –

0 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2014 Note Total benefit incomes 1989-2013 accessed from Caledon Institute, 2014 from Income Security Advocacy Centre. Low-Income Measure from Statistics Canada “Low Income Lines 2011-2012,” 2013-2014 Low-Income Measures are author’s calculations.

–  –  –

10 Canadian Centre for Policy Alternatives Changes to total benefit income, post-2003 The McGuinty government was elected in 2003 with the expectation that the erosion of income security for those who qualify for social assistance would be reversed. The erosion of rates compared to the poverty line may have slowed after that election, but only couples with two children on OW experience a smaller poverty gap today compared to 2003.

Looking back to 2008, when the first poverty reduction strategy was implemented, there has since been some improvement in the poverty gap for all family types except single people who qualify for ODSP.

These gains were not due to a restoration of social assistance rates, though they have increased slightly. For families with children, most of the improvement in the poverty gap has come through federal and provincial child benefits. Both the provincial and federal governments have invested in increased child tax benefits, which are also delivered outside of the social assistance system.

The Ontario Child Benefit has proven to be a real workhorse: in 2009, the OCB was increased to a maximum of $1,100 annually per child in that year. By 2013, more than 530,000 families received a benefit worth a maximum of $1,210 per child. The benefit increased to $1,310 in 2014.12 And in 2015, the Ontario Child Benefit was indexed to inflation to ensure families don’t lose the value of the benefit to the rising cost of living.



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