A Conversation with Harry Van Mulligen

Media Appearances, Welfare, Frontier Centre

Frontier Centre: Could you describe the basic elements of welfare reform in Saskatchewan? When was it implemented and what did it contain?

Harry Van Mulligen: It began in 1997, following discussions between federal, provincial and territorial governments as to how to restructure income security in Canada. The fundamental element of our approach has been to reward the decisions of individuals to work, as opposed to remaining on social assistance.

FC: Why did the Organization for Economic Cooperation and Development applaud Saskatchewan welfare reform in its 1999 report?

HVM: I think they took that approach because we seemed to be providing positive incentives for people to work, as opposed to provinces like Ontario where there were negative incentives – if you want to remain on welfare you have to take such and such a job. The OECD took the position that we’re encouraging people to take so-called “real” job in the real economy. In the long run, that’s a better route to independence for people.

FC: Could you break down those incentives?

HVM: One was a fully mature child benefit for families. On top of the national benefit, we also have a Saskatchewan child benefit, calculated also by the federal government and sent out at the same time in one cheque. Second, an employment supplement recognized that people who move into the work force from social assistance will have additional costs. and, upon application, we also provide people with assistance there. The child benefit maxed out at about $2500 per child, the employment supplement was about $2000 per child on a annual basis. Third, we provided people with health-care coverage for their children when they were off welfare. We took away any healthcare costs incurred by moving into the job market.

FC: Has there been any monitoring of outcomes under the new system? What have they been?

HVM: The outcomes have been measured in terms of case loads and compositions of case loads. We know, for example, that there was a huge drop in the number of families on social assistance once we put the child benefit, the employment supplement and the family health benefits into play. We saw drops not only in absolute numbers but also in the composition of our caseload. There has also been some follow-up work with people who have made the transition, to evaluate how things have been going. That’s more anecdotal but it also seems to be very positive.

FC: Alberta’s monitoring of people who participated in its welfare reform program had some interesting results. Three-quarters of them, including those who are taking home less pay than their previous benefits returned, agreed that they were better off. Have you had any evidence of that in Saskatchewan?

HVM: I think it is fair to say that people who are working and getting more than they were on welfare are better positioned and are happier than they were on welfare. Again, that is based on anecdotal evidence. There have not been any large-scale surveys, but that that kind of work needs to be done.

FC: We have had plenty of time and abundance of data to make some judgments on the overall value of the welfare reform movement in North America. If you took the Canadian versions and added the American experience to them, what do you think are the best lessons we have learned?

HVM: I think to reward the decision to go to work. At the end of the day, our economy and way of life is based on all of us working and contributing. If you support that, you support the decisions of people to move into the mainstream of our society and to be included, not excluded. There are obvious limits to that when you speak of people with disabilities, but that is the fundamental difference. People get a feeling of worth and inclusion from working.

FC: You have said that welfare does not reduce poverty. Why?

HVM: However imperfect measurements of poverty might be, if you were to do an overlay of child poverty figures with welfare caseloads, you will see some correlation between increases in caseloads and increases in poverty. The amount of assistance that is provided to people on welfare is below the poverty line, so the more people you have on welfare the greater the chances that you are going to have more people who are living in poverty. The only solution is to encourage them to move out of welfare into other programs and into the job market.

FC: Some say that a prerequisite for the existence of the welfare state is a growing economy to produce the taxes that underwrite it. Does that mean that smart governments adopt strong growth policies like lower taxation and friendlier regulation?

HVM: I think that social programs work best when there is strong, vibrant economy that provides opportunities for employment and personal growth. How that’s accomplished is another question. But everyone agrees that these welfare programs were first put into place when there were much stronger economies with lower rates of unemployment than today. These programs work best when you have a strong economy.

FC: Saskatchewan has been very aggressive in reducing its income taxes, particularly the top rate. Why has it been doing that?

HVM: Given the closeness of Alberta, a reduced income tax is a means of encouraging our professionals to continue to see Saskatchewan as a good place to live and work. Even if we can’t have parity, at least we can have taxes that are more or less in line with our neighbours. Also, to encourage people to have more of their own income for whatever purposes is a positive thing.

FC: On several fiscal report cards, Saskatchewan seems to come out on top. Why should governments live within their means?

HVM: If you don’t, then you have to borrow money. If you borrow money you have to pay it back, and usually you pay that back in the form of higher taxes. As former Premier Grant Devine said, “Deficits are simply deferred taxes.” Whether they are deferred taxes or represent program cuts in expenditures that you probably wouldn’t want to have, like any family unit you don’t borrow to make ends meet.

FC: Why haven’t the provincial successes of the NDP in Saskatchewan and Manitoba ever been replicated federally? Have the party’s chances for national power ever really existed since Tommy Douglas? What advice would you give your new federal leader?

HVM: I would tell my leader to address the concerns of Canadians when it comes to their issues of employment and community. The NDP was in part founded because it, more than other parties, was sensitive to the needs of working Canadians. If you want to be relevant, you have to address the needs of the majority of people. It might not be in the same old ways, such as Stanley Knowles’ encouraging the development of modern pension programs. It might be in other ways.

FC: Rural areas across Canada, particularly on the Prairies, are under stress. How should government manage the transition to a less populated rural community?

HVM: Rural populations are declining, that is true. My own personal view is that the limited resources of governments should be utilized in the most effective manner to support attempts in rural communities to improve employment conditions, whether that is to support value-added processing or other rural-based development. But obviously the decision by governments to support individual farmers through subsidies does not seem to have been very successful. It hasn’t been successful south of the border either, where the subsidies are much greater but the same trend of rural depopulation exists.

FC: A quiet policy reform in Saskatchewan in 1992 saw Saskatchewan repeal its version of rent control. Why did you do that and what were the effects?

HVM: We did it because it didn’t seem to be working. It seemed to lock in rent increases. Under rent control, you are pretty much guaranteed your rent increase based on some inflationary figure and, of course, increase it further if you could demonstrate that you had costs over and above that to remodel or repair buildings. It didn’t seem to be having the desired impact of keeping the rents down. Also, I don’t think it had a positive impact in terms of people’s decision to invest money in those areas because they saw it as a limited dividend potential.

FC: Did the rents spike up when it was removed? Was there disruption in the marketplace?

HVM: I don’t think there was any real impact. I don’t think we have seen rental housing or other housing quite keep up with the growth in some of our cities and so we are seeing some increases in rental costs, especially for low-income people. The traditional approach of advocacy groups is to increase the amount of money you would be provided on social assistance to take these higher rents into account, but personally I think we need other ways to deal with that. Again, if you provide more assistance for those on welfare, you give them an advantage over working low-income people.

FC: The idea of ending rent control continues to confound all the political parties. None of them wants to touch it. Do you have any advice for them?

HVM:No, I don’t have any advice. That’s your issue, you deal with it. I understand even in the centre of North American enterprise, New York, they continue to have problems with certain buildings and apartments that are controlled by rent and others that aren’t.

FC: Some people say we should raise the minimum wage to help low-income people. Do you have any thoughts on that?

HVM:We have just gone through some increases in our minimum wage. I think doing that has less of an impact on families now than it once might have, because our government is in a position to support families through the employment supplement and also through the national child benefit. That being said, people need to make a decent wage if they are expected to provide for their families. Whether that is through increases in the minimum wage or through wages plus a supplement, if you don’t want to have poverty people have to be paid money.

FC: Do you see the ultimate expression of that goal in the concept of a guaranteed annual income?

HVM: I subscribe to the notion that we are doing this with the child benefit and the employment supplement. But it is done in a way that always continues to encourage people to work as a means of helping them deal with poverty issues.

FC: Is there not a moral hazard if the guaranteed annual income is set too high?

HVM:I don’t know that there is a moral hazard, but I think there is a hazard if you have programs that provide disincentives to work.

FC: A Winnipeg minister has said that the lives of inner city people, especially those on social assistance, have a higher level of involvement with government than any other sector of our society. In your speech, you talked about government not being a busy-body or micro-managing lives, and really not caring about households which double-dip in certain ways.

HVM:If we want to reduce administrative complexity, we have to look at other solutions than simply basing people’s entitlement on their month-to-month income needs. My questioning of how we pay social transfers arises out of the realization that when you receive unemployment insurance, it’s up to you how you spend that money. We are not here to tell you where you should live, how you should live, whether you pay the utilities or not, if you have a phone or don’t, whether you live with someone else or on your own – that is none of our business. Here’s the money that you are entitled to on the basis of your status, which is unemployment. When you are no longer eligible for unemployment and have to go to the local welfare department, they want to meet with you monthly to see what your circumstances are, who you are living with, what your rent is, how much you might be paying for your rent, to cut a cheque directly to the utility companies and in this sense micro-manage your life. How come one day you are able to do that yourself and the next day you can’t? It raises for me the questions to what extent we need to over involve ourselves in the lives of families.

I think there are some families with significant barriers and issues. Even now we have trustee relationships for some of those families where they do not get the money directly. Obviously, you need to work intensely with those families but, where you can, you should reduce the administrative complexity.

FC: The model in Manitoba for child services used to be based on a community volunteer model, like the Children’s Aid Society. It has now become a large provincial bureaucracy. What’s your view of centralizing these programs? Are social assistance and family aid programs better delivered on a neighbourhood basis or a provincial basis?

HVM:Delivery is always done better locally, even if the parameters in terms of support come provincially. You are then in a better position to make use of local resources and knowledge. In the area of child welfare, we know that the more that you apprehend children and remove them from their families, the greater are the chances that those children will end up being permanent wards of the government. But if you want to look for situations in which the family is supported through times of crises and retain their children, then invariably that falls back on the local community. Whether you would have foster parents or crisis nurseries who act as a “buddy” parent, anything you can do to keep those families together is important. Higher numbers of children being removed from families results in higher costs, not only for those kids and their families, but for all of society. If you want to help people, that help comes in part because you identify the resources in a local community to do that.