Making Welfare Work

The changes Manitoba’s NDP government has proposed for able-bodied welfare recipients – basically, incentives to move from public assistance to work – are a step in the right direction. In the long term, real reform will require the kind of restructuring that helped to cut American welfare rolls by well over 50% in one decade. In the short term, though, these new policies mean incremental improvements to the welfare system.

Welfare rates are hardly generous. Even at the minimum wage, a healthy adult working full-time brings home a cheque much larger than the maximum monthly welfare payment. The safety net is designed as a last resort to prevent severe hardship, not as a substitute for employment. For a childless adult or couple, every incentive in the new program is aligned in favour of leaving welfare for employment and self-sufficiency as soon as possible.

Social assistance involves more than a regular cash payment and this complicates the situation for many, especially for those with dependent children. Families on assistance can get subsidized public housing, as well as coverage for prescription drugs, dental care and eye care. These expenses are significant, and figure heavily in the decision to move into the workforce.

Very few unskilled entry-level jobs come with generous insurance benefits, much less plans that provide for partners or children. Rent for public housing is tied to income; a family on welfare is paid a full entire housing allowance, but those who make the transition to work are charged much more. Together, these factors work as a significant incentive to stay on welfare, since the extra income generated by working can be eaten up by market rental prices and medical and dental expenses.

For single parents or couples with children, the situation can be worse still. The dental, prescription and vision-care costs for a family of four are beyond the reach of a minimum-wage worker. And while the prospect of going without proper care oneself is not pleasant, parents are much more reluctant to take such chances with their children’s health.

On a day-to-day basis, other, more mundane costs of working are less important, but they do act as a barrier to greater participation in the workforce. Getting to work and maintaining a work wardrobe take another bite out of earnings and, while daycare subsidies are available, childcare is another significant expense for parents going back to work. The changes which specifically address these problems should make it a bit easier to move from welfare to work.

For all these reasons, the transition from welfare to work, especially for families, will not happen overnight. And in the long term, lasting change will require more fundamental changes than creating an allowance for bus passes. A housing voucher system would serve more people at lower cost than the current public housing infrastructure, and allow people on welfare to vote with their feet instead of being assigned to housing that doesn’t meet their needs. If supplementary insurance were not so closely tied to employment, access to dental care and prescription drugs wouldn’t be as vulnerable to changes in employment as it currently is.

Better still would be changes to income and payroll taxes. Minimum-wage earners don’t pay very high taxes, but even a few hundred dollars a year can make a big difference to low-income households. If employers paid less to the government for each employee they hire, real wages and the rate of job creation would both increase, and a higher proportion of payroll spending would end up in workers’ bank accounts instead of back in the government’s purse.

That argument inevitably leads to another, general one about the kind of a world that’s possible when governments live within their means. Ultimately, the prosperity that creates higher real wages through increased competition for workers requires a smaller public sector. Reputable economists disagree about the exact point of take-off, but few dispute the fact that Manitoba – where the total overall tax bite sits at about half – is far beyond the optimal level. Much stronger rates of sustained economic growth, the ultimate guarantee of better-paying jobs and hence more tax revenue for public services, are possible if we address that problem.

Part of the reason that’s so is the comparative inefficiency of the public sector. It’s dotted with low-performing bureaucracies whose program spending continues whether or not goals are achieved. So the Doer government deserves high praise for one key element of its welfare package, the use of non-governmental agencies like Opportunities for Employment. When the income of such groups depends on the maintenance of a strong record of success in job placements, it makes all the difference to their performance.

The NDP isn’t likely to change the bothersome fundamentals of its economic policy, but the modest measures in its welfare reform program nonetheless represent improvements in the social safety net. A positive welfare policy expects all who are able to work and support themselves to do so, and the changes facilitate that. Moving part of the delivery of important social services out of government into a mode where accountability matters is a welcome bonus.