It’s Time to End Welfare: Income Support Reform that Makes Sense

Commentary, Poverty, Rick August

Some claim that governments can reduce poverty by raising welfare rates and making benefits easier to get. However, the only real poverty reduction in half a century of welfare policy has come about by raising employment rates, not welfare rates.

Work is good for people, and more people working is good for society. For many adults, if not most, who find themselves on welfare, employment is by far the most likely path out of poverty.  Among female single parents, for example, poverty and dependency rates have declined as their employment rates have increased. 

Yet, hundreds of thousands of Canadians still remain on welfare.  If the task before us is to move more low-income citizens from dependency to employment, from poverty to prosperity, welfare is part of the problem, not the solution.

Welfare competes with wages.  When welfare benefits are higher than earnings, dependency increases.  When welfare becomes an attractive alternative to work, it becomes less sustainable because fewer people are working and paying taxes to support more who are not working.  This fact means that there are very real limitations on how far governments can go to reduce poverty through passive benefits like welfare.

Canada very nearly reached the limits of welfare policy twenty years ago when about one in eight Canadians relied on welfare for their living.  The more enlightened governments of the day responded wisely, restructuring benefits to make work more attractive and beefing up employment services.  The result has been lower welfare dependency, steadily declining poverty rates, and a modestly more inclusive society. 

There are, however, still many single individuals and family heads on welfare who are capable of working but do not. Too many children still grow up in workless households, never themselves developing a work ethic. It makes little sense at any time, but particularly where there is strong labour demand. 

The key weakness of the welfare system is that it pays people not to work.  Over the long term, people will tend to do what they are paid to do.  In this sense, the welfare system itself has created a category of citizens who are chronically workless and outside the margins of the labour force. 

To change this situation, we will need to leave behind the notion that fighting poverty is just about giving money to the poor because we know that how people get their money is important too.  The best way to reduce poverty is to increase employment among low-income adults and to make sure that working is fairly rewarded.

Part of this can be achieved by more rigorous work expectations.  We need to make sure that governments do not drive entry-level jobs out of the economy because these are the jobs that welfare recipients need most.  We also need to make sure that people who do honest work have a reasonable living standard and have opportunities to move up in the work world over time.

Social policy can help or hinder this plan.  Welfare has too often been seen as an acceptable alternative to work.  Its administration is complex, cumbersome and often demoralizing to beneficiaries.  To move to a better approach, we should strip welfare to its basics – replacing most of what is now in welfare with work-friendly social supports.

If we are to invest public money in an individual, we need to make sure that our investments are socially useful.  A supplement or support to a low-income working person costs less than welfare and produces better outcomes.  Services to move adults from welfare to work would cost money, but would pay a huge and long-lasting dividend.  

The welfare system was created with good intentions as a way to offer social protection and fight poverty.  Because it exists, there is virtually no involuntary destitution in Canada, and that achievement should be noted.  As a tool against poverty, however, it has most certainly failed. 

Canada could be a country where effort and reward still count, but where every adult who participates and contributes is part of a community of citizens.  Moving closer to that goal means leaving the welfare era behind, and moving on to a more modern and dynamic social policy.