New Income Security Architecture

John Stapleton

May 30, 2011

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When we talkabout …

And Welfare, we mean: And Income SecurityPrograms, we mean:

Receipt of benefits Dependency Entitlement

Failure Continued Receipt Non-receipt

Success Getting Off Staying On

Program Spending Waste; a drain Entitlement and Citizenship

Cost Unaffordable, unsustainableunnecessary

Affordable – what makes Canadawhat it is

Self-sufficiency Off welfare Includes income security benefits

Reform Open doors of opportunity or apush through the door 16Supports mandatoryrequirements

Redesign to reach more – extendbenefits – support choice

The Importance of a Different Lens

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Behaviour “Welfare cheat” lens Achieving self-sufficiency lens

Acquiring a spouse “She’s got a boyfriend” Forming a viable economic andfamily unit to escape poverty

Help from family “Getting illicit money” Reinforces role of families helpingtheir own members – helping build abase to escape poverty

Having a bankaccount – beingseen in a bank

“Hiding money from thesystem”

Returning to normalcy – buildingassets – demonstrating moneymanagement skills – building a baseto escape poverty

Getting a job “Working and not reporting it -working under the table”

The first major building block inbecoming self-sufficient andreturning to normalcy and self-sufficiency

Spending on non-necessities

“How can they afford that ifthey are supposed to be poor?”

Returning to normalcy – takingresponsibility for a household budget– making choices for better or worse– Weighing risk and responsibilityconsistent with adult behaviour

The Importance of a Different Lens

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Harper’s 4 New Programs: Not going away……………

These programs all have a bias away from entitlement and towards participation.

1. Working Income Tax Benefit2. Registered Disability

Savings Plan 3. Tax Free Savings Account4. UCCB

What should the new program look like?

• Children would be provided for through a separate income stream.

• Remaining social assistance benefits would be provided for adults only.

• Recipients' housing needs would be provided through a special housing benefit that would be provided outside of the social assistance system

What should the new program look like?

• The benefit unit definition would adopt the current income tax definition so that new rules would not be separately required.

• There would be no asset test and no needs test.

• Only income would be tested again using tax definitions.

• Recipients with earnings would graduate directly to the Working Income Tax Benefit (WITB) program.

• Opportunity planners would administer employment supports and employment testing with the principle of transition to the labour force paramount.

What should the new program look like?

• For persons with disabilities, the ultimate goal is to provide a benefit that resembles Old Age Security (OAS) and the Guaranteed Income Supplement (GIS)

• Disability rates were the same as those paid to seniors from 1973 to 1975 in Ontario through the GAINS program.

What should the new program look like?

• For persons who do not have disabilities, the system would have elements that require participation.

• A minimum $10,000 is recommended would not be a guaranteed annual income but would represents a fundamental restructuring of basic income security for persons in need

How do we build a new program?

• There are several possible changes that lead from the current complex social assistance system to the simplified income system noted above.

• Interim changes to the social assistance system can be accomplished smoothly leading to a new income transfer system for low income working age adults.

• Change to the current liquid asset limitation rules to exempt registered savings instruments with higher overall limits

• Implementation of a new housing benefit that would replace the shelter component of social assistance

• Completion of the child benefit system such that the four elements of child benefits remove all children from the benefit structure

• Changes to rules that prevent self-reliance.

How do we build a new program?

Children Seniors

Comparable Programs for Working Age Adults

base benefit CCTB CPP/OAS EI

income tested benefits

NCBS, UCCB, OCB GIS

EI/Welfare, GST refudable credit, other refundable credits WITB

registered tax savings instruments RESP RPP, RRSP TFSA, RDSP

matching contributions

CLB, CESG, Millenium Scolarships

tax credits and/or exemptions

An EI account could pay for training based on contributions over time, RDSP matching credits

An Accounts based Model for Income Security Benefits

For Programs to work, the new model has to have the needed DNA:

• create support through a federal tax and EI account, where contributions would result in a minimum level of refundable credits;

• create low-income benefits to help alleviate working poverty(eg:WITB)

• use instruments to allow low-income adults to contribute money that is redeemable before retirement;

• create programs to match contributions

What will stop us ?

• From 1973-75, we had a Guaranteed Annual Income System for the aged and persons with disabilities.

• The de-indexation of benefits for persons with disabilities implemented in 1975 opened a gap between the incomes of seniors and adults with disabilities over the last 34 years.

• The recession of the mid 1970's was responsible for de-indexation but once done, the rates were never re-indexed.

What will stop us ?

• Although rates were increased more than the rate of inflation prior to and during the recession in 1990-92, social assistance increases in 1993 slowed and rates began to fall helped along by the 21.6% cuts in 1995.

What will stop us ?

• The 'super trend' of generally rising rates has been followed by a second super trend of ever reducing rates.

• From 1935 to 1993, rates generally rose in comparison to inflation and have fallen ever since

What will stop us ?

• The largest caseload increases occurred following the two recessions.

• The government can choose to restructure the system for the future or it can choose to tinker with a social assistance system that was last overhauled in the 1980's and 'shrink-wrapped' in the 1990's.

• We can’t afford a social assistance system that traps people for long periods

• Caseloads remain at a low point of population and that caseloads grow during times of high unemployment.