TABLE OF CONTENTS

Français

PREFACE

THE SETTING FOR WELFARE REFORM

NEWFOUNDLAND

PRINCE EDWARD ISLAND

NOVA SCOTIA

NEW BRUNSWICK

QUEBEC

ONTARIO

MANITOBA

SASKATCHEWAN

ALBERTA

BRITISH COLUMBIA

NORTHWEST TERRITORIES AND YUKON TERRITORY

THE BROAD ISSUES OF WELFARE REFORM

RECOMMENDATIONS

FOOTNOTES

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PREFACE

The welfare system described in the pages ahead has become leaner and meaner in most parts of Canada. Many of the cuts of the 1990s were the result of new policies adopted by provincial and territorial governments on their own initiative. The federal government also bears responsibility, however, because of its cuts in financial support for provincial and territorial welfare programs. Another Look at Welfare Reform begins with a look at fiscal restraints originating in Ottawa and then turns to changes in welfare policy by province and territory. The individual provincial chapters are followed by an analysis of two of the factors with the most impact on the welfare system - jobs and money - and a concluding chapter that contains a series of recommendations for improving welfare in Canada.

As in our previous work on welfare, the National Council of Welfare circulated a draft text of this report to provincial and territorial officials and asked them to verify the factual material. The Council greatly appreciates the time they took to review the text. We made numerous corrections as a result of their comments, and the final version is much improved as a result.

The analysis of the factual material, the conclusions drawn and the recommendations made in this report all are the sole responsibility of the National Council of Welfare. We realize that some governments support our views and others do not. Either way, we believe that the report will add to the public's understanding of welfare programs and will stimulate debate on ways to assist the millions of people on welfare who are among the poorest of the poor in Canada.

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THE SETTING FOR WELFARE REFORM

The recession that began in 1990 made a bad situation even worse. Unemployment started to climb, and so did the unemployment insurance and welfare rolls. Increases in the cost of UI and welfare added to government spending on one side of the ledger, and all the people out of work meant smaller tax revenues on the other side. The result was higher budget deficits.

Successive federal governments responded to the challenges of the 1990s by backing away from a leading role in social policy. In a series of moves undertaken with virtually no consultation or even prior warning, Ottawa cut its own spending for social programs to the bone and left provincial and territorial governments to cope with the problems dumped in their laps.

By the time the federal government started taking a second look at its role in social programs in 1996 and 1997, the new initiatives it supported paled beside the damage that had already been done.

Canadians wind up on welfare for any number of reasons, but one of the main reasons is unemployment. Welfare statistics dating back to the beginning of the Canada Assistance Plan in 1966 show a strong link between the number of people on welfare and the number of people who are unemployed.

The increases starting in 1982 were the result of the recession of 1981 and 1982, the worst economic downturn since the Great Depression of the 1930s. The number of people looking for work declined slowly for the rest of the decade and started rising again with the recession of 1990 and 1991. The unemployment figures for all of 1997 will not be available until early 1998. The same general pattern appears in the line marked with diamonds representing the estimated number of people on welfare as of March 31 each year. The number of people on welfare is invariably higher than the number of people who are unemployed. There are two main reasons for this. The unemployment statistics cover individuals who are out of work, but they do not take account of spouses or children of unemployed Canadians. The welfare statistics count all members of all families on welfare as well as the "unattached" individuals who are on welfare. The welfare statistics also include a sizable number of people - especially people with severe disabilities - who would not normally be part of the paid labour force in the first place.

In 1990, the average number of people who were unemployed was 1,163,900. Unemployment reached a peak of 1,648,800 in 1993 and was down to 1,469,200 in 1996. The number of people on welfare rose from 1,930,100 in 1990 to 3,100,200 in 1994 and was down to 2,937,100 by 1996 The number on welfare as of March 31, 1997, was 2,774,900.

Like the statistics on unemployment and welfare, the statistics on poverty rise and fall with the state of the economy. The 1996 poverty statistics will not be available until the end of 1997.

This report on welfare reform in the 1990s includes detailed information about welfare programs in each province and territory, including trends in welfare caseloads and the adequacy of the benefits provided.

Welfare is often described as Canada's social safety net of last resort, because it was designed to assist people who have exhausted all other means of support. Welfare is supposedly designed to cover the cost of the necessities of life. As we will see repeatedly in this report, however, the size of a person's welfare cheque often has less to do with the cost of living and more to do with the willingness of governments to foot the bill.

Welfare in Canada is funded primarily by the federal, provincial and territorial governments. Cuts in federal support have had a devastating effect on the adequacy of welfare programs throughout Canada. Most provinces and territories were quick to pass on the federal cuts or impose additional cuts of their own.

The federal government started walking away from welfare and social services in 1990 with a cap on cost-sharing under the Canada Assistance Plan in the three wealthiest provinces: Ontario, Alberta and British Columbia. The Progressive Conservative government in Ottawa decided that payments under the plan to the three provinces would not increase by more than five percent a year. The "cap on CAP" was originally set to last for two years, but it was later extended until the end of the 1994-95 fiscal year.

Welfare caseloads continued to grow in Ontario and British Columbia in the wake of the recession of 1990 and 1991, and the provinces had to pay all the costs of welfare and social services above the five percent ceiling. In the end, the cap on CAP cost British Columbia $1.3 billion and Ontario a whopping $8.4 billion. Losses in Alberta were minimal because of the province's decision to reduce the size of its welfare rolls under reforms that began in 1993.

The National Council of Welfare strongly criticized the cap on CAP in a 1990 report entitled The Canada Assistance Plan: No Time for Cuts. We argued that the federal government should not be cutting its support for welfare at a time of increasing need and that poor people should not be asked to share the burden of cuts in government spending.

Not long after the 1993 federal election, the new Liberal government annnounced an overall freeze on welfare payments to the provinces and territories and imposed a new round of cuts in unemployment insurance.

Federal social policy hit rock bottom in the 1995 budget speech with huge cuts in spending and a new "block funding" mechanism known as the Canada Health and Social Transfer to replace the Canada Assistance Plan and funding arrangements for medicare and post-secondary education that were known as Established Programs Financing.

The new funding arrangements started with the 1996-97 fiscal year on April 1, 1996, and ushered in sizable cuts in combined federal support for medicare, post-secondary education, welfare and social services In the 1994-95 fiscal year, the federal government paid $29.4 billion to the provinces and territories for the four programs, partly in cash and partly in taxing powers that Ottawa had originally given up in 1977. By 1997-98, total federal support would fall by 14 percent to $25.2 billion.

Welfare was particularly hard hit by the change in federal policy The Canada Assistance Plan required provinces and territories to provide welfare to all people determined to be "in need." It required provinces and territories to have a procedure for appeals for people who felt mistreated by the welfare system And it prevented provinces and territories from imposing residence requirements on people applying for welfare.

Under the Canada Health and Social Transfer, only the ban on residence requirements remained. The elimination of the needs test as a national standard cleared the way for provinces and territories to impose work-for-welfare programs and to disqualify certain groups from applying for welfare. Appeals continued to be allowed even without a national requirement, but most appeals systems became meaner because of new limits on the types of decisions that could be appealed or because the process itself became more rigid and legalistic.

The National Council of Welfare called the Canada Health and Social Transfer "the worst social policy initiative undertaken by the federal government in more than a generation" in a report entitled The 1995 Budget and Block Funding. Other social policy groups raised similar complaints. The federal government refused to listen.

The first concession to the criticism came in the 1996 federal budget speech with the announcement that cash payments to the provinces and territories under the Canada Health and Social Transfer would not fall below $11 billion a year. A second concession came at the start of the 1997 federal election campaign, when the Liberals said the cash floor for the CHST would be raised to $12.5 billion. The announcement was billed as a reinvestment in health care. Welfare was barely mentioned during the campaign that followed.

Table 1 on the previous page shows federal transfers for medicare, post-secondary education, welfare and social services by province and territory from the 1994-95 fiscal year through fiscal 1998-99. The figures are cash payments and taxing powers combined and are based on a minimum total cash payment of $12.5 billion.¹

The first two columns reflect the previous restraints on federal payments under the Canada Assistance Plan and on federal support for medicare and post-secondary education. The next three columns show the additional cuts under the new Canada Health and Social Transfer. The overall drop in federal support from the 1994-95 fiscal year to 1997-98 was 14.2 percent, from $29.4 billion to $25.2 billion. Federal support now is predicted to rise by three percent to nearly $26 billion in 1998-99. Without the cash floor of $12.5 billion, federal support would have fallen to $25.1 billion.

Cuts in federal funding under the Canada Health and Social Transfer were not the only battle scars on the social policy landscape of the 1990s. Ottawa also cut its support for unemployment insurance, subsidized housing and Aboriginal people and failed to deliver on a promise to expand subsidized day care.

Both the Progressive Conservatives and Liberals made cuts to unemployment insurance in the 1990s. The name of the program was eventually changed to employment insurance - a purely cosmetic change that no doubt provided jobs for the people who print stationery and the painters who do the signs at federal offices - but the program itself became a shadow of its former self.

Figures from Human Resources Development Canada show that 88 percent of unemployed workers received UI benefits in 1990. The percentage fell more or less steadily in the years that followed and was down to 43 percent of unemployed workers by the middle of 1997. The reforms in employment insurance made it more difficult for unemployed workers to get benefits in the first instance, reduced the level of benefits for many recipients, and cut the length of the benefit periods.

Meanwhile, the employment insurance fund, a fund that is made up of contributions by workers and employers which are not immediately needed to pay benefits, is expected to grow to more than $12 billion during the 1997-98 fiscal year. The federal Finance Department said the fund is a contingency against a future downturn in the economy. Critics said the fund was kept large simply because it reduces the size of the federal deficit.

Reduced federal support for employment insurance means more dependency on provincial and territorial welfare programs. Until recently, Ottawa insisted that only ten percent of people who exhausted UI benefits ended up on welfare, but the federal claim was widely disputed by others Quebec, for example, estimated that the federal UI reforms had pushed some 30,000 new cases onto welfare in the province from 1990 to 1994 and that 46.4 percent of welfare recipients over 30 in 1994-95 were unemployed people who were getting little or no support from the federal government.²

In the 1993 federal election campaign, the Liberals had promised more financial support for day care once the economy recovered from the last recession. The specific promise was a total of 150,000 new subsidized day care spaces over a period of three years beginning in the 1995-96 fiscal year at a cost of $720 million.

By the end of 1995, the offer was still on the table, but a new catch was added: provinces would have to come up with half the money for the new program. In June 1996, the revised offer was withdrawn by the Minister of Human Resources Development. The Minister made the provinces a much reduced offer of $250 million over three years to help parents find child care so they could remain at work.

The reason given in Ottawa for the Liberal government's change of heart was lack of provincial interest Several provincial governments were quick to take issue with that explanation.

Progressive Conservative and Liberal governments also reduced federal support for housing programs in recent years Under the slogan "Getting Government Right," the federal government announced in the 1996 budget speech that Canada Mortgage and Housing Corporation would phase out its remaining role in "social" or subsidized housing except for housing on Indian reserves. By early 1997, provinces were signing agreements with Ottawa to manage social housing programs started in previous years. Provincial governments will have more flexibility to revamp their housing budgets with a minimum of national standards.

Finally, the federal government's commitments in the area of welfare for Aboriginal people also were compromised in the 1990s. Under the Constitution, Ottawa is responsible for assistance to status Indians living on reserves. In 1992, the federal government gave notice that it would no longer cover the full cost of welfare for the first year that a family moved away from the reserve. Thousands of new cases were added to provincial welfare rolls as a result.

The welfare rates paid by Ottawa for Indians who are still living on reserves also fell as a consequence of provincial and territorial cuts that were made in the wake of the overall squeeze in federal funding. Welfare for status Indians living on a reserve works according to the provincial or territorial welfare system's rules and benefit levels. Most governments cut their basic or special assistance rates and made it harder for people to qualify for welfare, and all of those changes applied equally to people on reserves.

The one advance in federal social policy during the 1990s came in the area of child benefits. Ottawa responded positively to a proposal by provincial and territorial governments to improve benefits for poor families with children By the time of the 1997 federal budget speech, the proposal amounted to a modest increase in federal child benefits, with the details still being negotiated with provinces and territories.

The basic idea was to create a new Canada Child Tax Benefit for low-income and middle-income families with children. The benefit would replace the current federal Child Tax Benefit, including the working income supplement for low-wage families contained in the federal benefit.

Many low-income families with children who get most of their income from salaries or wages would get very modest increases in benefits under the Canada Child Tax Benefit. However, low-income families on welfare would see any increases clawed back by provincial and territorial governments, and the money clawed back would be "reinvested" in programs for low-wage families with children.

The National Council of Welfare questioned the clawback strategy in a 1997 report entitled Child Benefits: A Small Step Forward. The Council and most other social policy groups urged the federal government to make a more substantial commitment to fighting child and family poverty. The promise of $850 million as a "downpayment" on a new child benefit was dwarfed by the billions of dollars taken out of social programs by successive federal governments in recent years. The Speech from the Throne that opened the 1997 session of Parliament promised an additional $850 million a year sometime during the course of the government's current mandate.

All in all, the cuts in welfare outlined in the chapters that follow should come as no surprise. Given the state of the economy at the start of the decade, the cuts in spending by all levels of government, the loss of national standards for welfare, and a general withdrawal of the federal government from many areas of social policy, the people who depend on welfare to make ends meet were facing even tougher times.

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NEWFOUNDLAND

The realities of the 1990s were especially harsh. The province struggled through the recession of 1990-91. Cuts in unemployment insurance hit the province disproportionately hard, because so many Newfoundlanders relied on UI on a regular basis. But the harshest reality of all was the closure of the cod fishery on July 2, 1992.

Overfishing and poor management of international fish quotas had resulted in dangerously low numbers of northern cod on the Grand Bank along Newfoundland's northeastern coast. Stocks of other groundfish or bottom-feeders were also depleted. More than 30,000 people were directly displaced in Newfoundland because of the groundfish moratorium.

Billions of dollars have been paid out by the federal government since 1992 under the Northern Cod Adjustment and Recovery Plan, the Atlantic Groundfish Adjustment Program and the Atlantic Groundfish Strategy. The number of fishermen and processing plant workers qualifying for benefits under these programs was much higher than expected. More than 40,000 people from the Atlantic provinces and Quebec were eligible, compared with the original estimate of 26,500.

The moratorium was initially for two years, to see how fish stocks would improve By 1997, fish stocks were just starting to improve, and limited groundfishing was allowed.

In 1996, the unemployment rate in Newfoundland was double the national average and the highest of any province. From March 1990 to March 1996, the number of people on welfare jumped from 47,900 to 72,000. Nearly 20 percent of the population of Newfoundland depended on welfare at some point in 1996.

In the first half of the 1990s, welfare reforms in Newfoundland were less harsh than in some other provinces. However, they did follow a common pattern: rate freezes, cuts in special assistance and increased efforts to control abuse.

Basic welfare rates were last increased in April 1992, and welfare incomes have been losing ground to inflation since that time. The National Council of Welfare report Welfare Incomes 1995 shows that the purchasing power of welfare households in Newfoundland has dropped slowly but steadily since 1992.

In 1991, there were actually a few improvements in special assistance coverage: a new province-wide winter fuel supplement, a $55 monthly supplement for single parents, and modest increases in special allowances for medical diets, funeral expenses and housekeeping services.

In 1992, the government froze its home support budget for disabled people on welfare. Special transportation allowances were cut in three consecutive budgets starting in 1993. The 1994 budget froze grants to social agencies at a time when social and economic difficulties were driving up demand for social services. In the 1995 budget, allowances for furniture were cut and the province stopped paying arrears in welfare recipients' electricity bills. The 1996 bud- get cut furniture and household equipment budgets by 50 percent, and it made room and board the rule for all single employable people on welfare Since then, the government pays them separate shelter allowances only in exceptional cases.

The Department of Social Services hired 13 investigators in October 1993 to control abuse and recover money in cases of fraud. Savings to March 1994 were $2.5 million or slightly more than one percent of the province's annual welfare budget of about $200 million. The opposition social services critic in the House of Assembly said the investigators were actually turning up mistakes made by overworked and overstressed staff.³

The province hired five more fraud investigators as a result of its 1994 budget and another ten after the 1996 budget. In May 1996, the Department of Social Services announced that its investigators had looked into almost 1,400 cases in the previous year. They found 113 cases serious enough to investigate further.⁴

Newfoundland's current hopes for welfare reform are contained in its Strategic Social Plan Consultation Paper published in June 1996. When the government released the paper, it also announced the creation of the Social Policy Advisory Committee, an independent group to conduct a public consultation on social reforms in Newfoundland.

The Strategic Social Plan Consultation Paper looked at a wide range of human services from health care and education to justice and social services On the issue of welfare reform, the paper drew heavily on the work of the Newfoundland Royal Commission on Employment and Unemployment. The Commission's 1986 report, Building on Our Strengths, had called for extensive reforms to income security and unemployment insurance. In December 1993, the same group, now called the Economic Recovery Commission, recommended largely replacing both programs with a new Income Supplementation Program made up of two elements:

• A Basic Income Supplement of $3,000 a year for an adult and $1,500 for a child in all households with no income. Youths 18 to 24 years of age would receive $1,500 a year if living at home or $2,000 a year if living on their own.

• A Work Supplement equal to 20 percent of individual earnings between $500 and $10,500 for low-income people from 20 to 65 years of age. The maximum Work Supplement would be $2,000 a year The maximum would drop by 40 percent for family income in excess of $15,000 a year.

Once the new system was in place, unemployment insurance would revert to being an insurance program. It would be more difficult to qualify, and benefit periods would be shorter than under the existing system. Welfare would provide social services or top up the Basic Income Supplement for households with special needs.

The Income Supplementation Program would involve a significant redesign of federal assistance to unemployed workers. Provincial officials started discussions with their federal counterparts early in 1994 to see if federal funding was possible Ottawa put up $400,000 for a joint study by officials of the two governments.

Despite all the studying and negotiating, the plan did not lead to any concrete federal action. Federal cuts in transfer payments to the provinces and reduced levels of support for unemployed workers put the brakes on welfare reform even before it even got started.

The Social Policy Advisory Committee released its final report in April 1997. It recommended more government spending in areas such as job creation, day care and child nutrition. At the news conference announcing the report's release, the Premier said his government would review the recommendations and produce a final blueprint for welfare reform in Newfoundland by the end of 1997.⁵ There was no price tag on the proposed reforms, but it appears unlikely that the province will be able to afford expensive new initiatives. In March 1997, a month before the final report was released, the provincial budget called for spending cuts of $355 million over the next three years.

The provincial government and the Social Policy Advisory Committee cling to their vision of progressive welfare reform. But there is still no indication that Ottawa is prepared to offer Newfoundland the financial support it needs to make that vision a reality.

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PRINCE EDWARD ISLAND

The improvements at the beginning of the decade arose from a report on the welfare system entitled Dignity, Security and Opportunity that was released early in 1989. Within two months, the province raised benefit levels, introduced new special allowances, and improved supplements for school-related expenses and for disabled people living at home. The reforms continued with further rate increases in the summer of 1991 and 1992.

A general slowdown in the economy and the closing of Canadian Forces Base Summerside in 1992 increased dependency on unemployment insurance and welfare during the early 1990s. The number of people on welfare jumped from 8,600 in March 1990 to 13,100 in March 1994.

Welfare rates were frozen in 1993 and cut twice in the following years The result was a significant drop in purchasing power for all categories of welfare recipients. From 1992 through 1995, the losses in provincial benefits amounted to $2,568 a year for a single employable person, $542 for a disabled person, $815 for a single parent with one child, and $1,125 for a couple with two children. Further cuts in shelter allowances in 1996 have added to the hardships of people on welfare.

Shortly after its re-election in January 1993, the provincial government started restructuring health and social services. In March 1993, it released a three-year plan to get its finances in order. Part of the plan involved the transfer of the welfare program to the Health and Community Services Agency, which was created in October 1993. Along with new regional boards and a provincial council, the agency started running the day-to-day welfare operations.

On May 18, 1994, the province announced three changes in policy aimed at decreasing spending on welfare by $2.5 million during the 1994-95 fiscal year.

• The maximum monthly shelter allowance for single people was reduced in June 1994 for new welfare recipients, from $480 to $305 in Charlottetown and from $410 to $260 in rural areas, except for people with special housing needs. For single people already on welfare, the cuts took effect in September.

• Special assistance for transportation for medical, employment-related and day careneeds was tightened. The provincial Auditor-General's report for 1994 said the province was too generous, because welfare recipients often got the maximum $25 monthly allowance for medical transportation whether they needed the money for medical reasons or not.

• As of July 1994, income from the federal GST credit was no longer exempt in the calculation of welfare entitlements. That meant a dollar-for-dollar reduction in welfare benefits for all households on welfare. For a family with two children, it translated into a drop of $608 in their income for the year.

In April 1996, the province standardized its maximum shelter allowances for welfare recipients by cutting shelter allowances in Charlottetown. The new maximum shelter allowances were $260 for a single person, $520 for a single parent with one child and $660 for two adults and two children. The old shelter allowance levels for the same households were $305, $610 and $770, respectively.

The Conservatives won the provincial election of November 18, 1996. The party had promised a review of the way the welfare system treated income from the federal GST credit as part of its election platform. In the 1997 budget speech, the government announced that the GST credit would once again be considered exempt income and would not trigger reductions in welfare incomes after June 1, 1997.

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NOVA SCOTIA

Long after other provinces had unified their welfare programs under the Canada Assistance Plan in the late 1960s and early 1970s, Nova Scotia, Ontario and Manitoba kept their two-tier systems. In Nova Scotia, there is a provincial welfare program called Family Benefits for long-term recipients, such as people with disabilities and single-parent families, and municipal welfare for other people in need, mainly able-bodied unemployed people and their families. Until recently, each of Nova Scotia's 66 municipalities ran its own welfare program.

Family Benefits are paid entirely by the province, and the same eligibility rules apply everywhere in Nova Scotia. For able-bodied applicants on municipal welfare, benefits are more or less generous and the treatment of recipients more or less fair, depending on each municipality's views about welfare and its spending priorities. Traditionally, the province paid 75 percent of municipal welfare costs in most communities and up to 93 percent in smaller communities. Municipal property taxes had to cover the rest.

The Canada Assistance Plan reimbursed the province for half of the total cost of welfare, including both provincial Family Benefits and municipal welfare. In April 1996, the Canada Assistance Plan was replaced by the Canada Health and Social Transfer.

During the 1980s, a number of provincial and municipal task forces and commissions had revealed serious problems in the two-tier system. The same shortcomings kept resurfacing: the inadequacy of welfare rates and the absence of province-wide minimum standards for assistance. Despite the repeated calls for action, however, nothing was done to move to a one-tier welfare system. The major stumbling block was money. Municipalities feared that the province would saddle them with other costs in exchange for relieving them of municipal welfare.

It was only in July 1995 that the province made the first move to eliminate the two-tier system when it announced that it was taking over welfare in Cape Breton. When the province integrated social assistance throughout the region, over 3,500 new households were added to the provincial caseload at an additional cost of $16.5 million to the province. The province did not impose any new obligations on Cape Breton municipalities to offset the $16.5 million because the region was in dire economic straits. In the months that followed, the province was criticized by a number of municipalities for not extending the same offer to other disadvantaged areas.

Also in July 1995, the province changed the funding formula for calculating its share of municipal welfare costs. Under the new plan, provincial spending on municipal welfare was capped at the previous year's level Halifax reported a $1.2 million shortfall in its budget for the 1995-96 year because of the spending cap, and Dartmouth lost $1.4 million.

Annapolis County municipalities reacted to the freeze by reducing welfare benefits by 20 percent, cutting off special assistance for prescription drugs and wheelchairs, and deducting the value of the federal government's Child Tax Benefit from welfare cheques dollar for dollar. The deduction was unprecedented and led to huge declines in the welfare entitlements of families with children.

One-tier welfare came to the Halifax area early in 1996 Nova Scotia reached an agreement with Halifax Regional Council concerning the provincial takeover of welfare in February. Two months later, the province increased food allowances in the region by $25 to $40 a month for families with children, the first real increase in welfare benefits in four years. At the same time, it reduced maximum shelter allowances for single people from $350 to $225 monthly, but only for recipients who went on welfare in April or later.

The shelter allowance cuts meant more homelessness and more despair, according to a coalition of community groups. About a dozen groups working directly with poor people criticized the cuts in the shelter allowance. They suggested that people in Halifax had better get used to seeing more people sleeping in doorways and lining up at social agencies for help.⁶

Provincial officials discussed the takeover of welfare with the rest of the municipalities for a number of months On April 11, 1997, the Minister of Community Services announced that the provincial government and the Union of Nova Scotia. Municipalities had reached a financial agreement to unify the two-tier welfare system. The unification of the two systems would not cost municipalities any more than the $42.8 million they were currently paying each year in welfare costs. The new single-tier system would be the first step in the consolidation of federal, provincial and municipal support programs by 1998-99.

Provincial welfare rates under the Family Benefits program were raised twice in 1991, then frozen until 1994. The 1994 rates remained unchanged through 1995 and 1996In Halifax, basic rates remained frozen from 1992 until the spring of 1996, when the province took over the welfare system.

From March 1990 to March 1994, unemployment pushed the number of people on the welfare rolls from 78,400 to 104,000. The caseload was still 104,000 in March 1995, although many households moved on and off welfare during the year. The number of people on welfare dropped marginally to 103,100 by March 1996, and it dropped significantly to 93,700 by March 1997.

The budget brought down on April 29, 1994, included a publication entitled Government by Design. The guide was a plan to arrive at a balanced budget by 1997 and included a number of cutbacks in the Department of Community Services: staff reductions, cuts in prescription drug subsidies, a province-wide eligibility review, and shelter allowance reductions for disabled welfare recipients living with their families.

On October 4, 1996, the province announced a series of measures aimed at meeting the increasing demands on its services while staying within budget. The measures included beefing up the recovery of welfare overpayments and tightening up initial and continuing eligibility reviews. Thirteen new workers were hired to improve early detection of overpayments and fraud The cost to parents of subsidized child care went up 50 cents a day. About 300 disabled welfare recipients who were also receiving Canada Pension Plan survivors' benefits saw their welfare cheques decrease by $164 a month on average.

The Nova Scotia Advisory Council on the Status of Women told the Commons Finance Committee in November 1996 that federal and provincial efforts to reduce government deficits were having adverse effects on the province's poor. University tuition fees were rising dramatically, reducing access to education for single-parent mothers Student aid to mothers on welfare was down . Shelter allowances for single employable women and men on welfare in the Halifax area were only $225 a month, an amount clearly insufficient to meet basic needs. Funding for social agencies, including transition houses and women's centres, had been cut.⁷

The November 1996 issue of Women's Writes, the newsletter of the Nova Scotia Advisory Council on the Status of Women, raised concerns about plans for promoting self-sufficiency for single-parent mothers. The Council was worried the changes would lead to less flexibility in the welfare application process, lower benefits, automatic reclassification for single mothers as employable unless they could prove otherwise, fewer and less adequate services like child care and training, and little or no funding for transition houses and women's centres.

On April 17, 1997, the province tabled its first balanced budget in 20 years. Two weeks later, a social advocate with the Halifax Metro Food Bank Society gave the Nova Scotia government a failing grade in the area of social responsibility. The tide may have turned for some, she said, but not for others who were still struggling to stay afloat.⁸

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NEW BRUNSWICK

Prior to the major reforms of 1995, there were a number of smaller changes in welfare policy.

The Assistance for the Reduction of Rental Costs program stopped accepting new applications in 1992. The program had provided up to $150 a month for a single elderly or disabled person and up to $169 for a couple with disproportionately high shelter costs. In its heyday in March 1987, the program assisted almost 1,800 households at a cost of $1.3 million a year. By 1995-96, there were only 38 seniors and 234 people with disabilities left in the program, at a cost to the province of less than $300,000.

In April 1993, New Brunswick signed an agreement with the federal government to have welfare benefits that were paid to people during waiting periods for unemployment insurance deducted directly from their subsequent UI cheques.

In the summer of 1993, basic welfare rates were decreased for blind and disabled welfare recipients living in the homes of their parents where the parents were not on welfare and family income was more than $30,000 a year.

Since April 1994, social assistance applicants and recipients 60 to 65 years of age are required to apply for Canada Pension Plan early retirement benefits. For many, this means a lower income, and a lower standard of living, for the rest of their lives.

In the summer of 1994, the province created the Income Supplement Benefit program, a shelter subsidy for low-income families with children paying more than 30 percent of their welfare cheques for shelter. For eligible families, this meant a maximum annual payment of $900 for 1995, although many of these families had been receiving a heating supplement of up to $420 which the Income Supplement Benefit replaced.

During 1992, the federal and New Brunswick governments announced two pilot projects aimed at getting people off welfare and into jobs: New Brunswick Works and the Self-Sufficiency Project.

N.B. Works provides a continuum of work experience and training lasting up to four years for welfare recipients with children, most of them single parents. The 1995-96 annual report said about 1,000 of the 2,900 people who entered the program no longer rely on welfare and another 790 people are still in the program. The overall cost to the federal and provincial governments over the full six years of the pilot project is estimated to be $134 million or an average of $46,000 for each participant.

Social advocates have criticized N.B. Works for the high cost of the program and for choosing the most employable welfare recipients to participate - people who were most likely to find work in the absence of the program. Critics also questioned how many N.B. Works graduates would find decent jobs as long as unemployment remains high.⁹

The province maintains that participants were chosen not because they were the most likely to succeed, but because they were the most likely to have been long-term welfare recipients in the absence of an intervention.

The Self-Sufficiency Project offered earnings supplements to single parents on welfare in New Brunswick and also in British Columbia. The three-year project involved some 3,000 welfare households in New Brunswick: 1,500 in a control group receiving no benefits and 1,500 in a wage supplementation program. The program paid half the difference between a participant's actual salary and a "target" income of $30,000 in New Brunswick. The target income in British Columbia was higher because of the higher cost of living For people earning between the minimum wage and $8 an hour, the program has the effect of roughly doubling their earnings.

An assessment done in the fifth quarter after enrolment showed that more people in the program group were working full-time and fewer people were receiving welfare than people in the control group. The average income from all sources for people in the program group was $1,238 a month, compared to average income of $1,007 a month for people in the control group.

The key question still to be answered, however, is what will happen to participants once the earnings supplements end after three years.¹⁰

Another job initiative was the N.B. Job Corps, announced in March 1994 and designed to provide displaced older workers with job opportunities in development projects. Unemployed workers 50 to 65 years of age are guaranteed work placements of 26 weeks a year for three years at a salary of $12,000 a year. The program is to run from 1994-95 to 1998-99 and will cost $80 million, shared equally by the federal and provincial governments.

New Brunswick started taking another look at the welfare system in 1991, and the formal process of welfare reform began at the end of 1993 with the release of a discussion paper entitled Creating New Options.

The paper was characterized by critics of the government as a return to the Elizabethan Poor Laws. An article in the Canadian Review of Social Policy put it this way: "Through its policies of retrenchment and cutbacks, along with the lowest rates of welfare in the country, this government has pushed its responsibility down onto local communities to look after its poor by using such degrading charitable devices as soup kitchens, food banks, emergency shelters and clothing depots."¹¹

Following public and private consultations, the province released another paper entitled From Options to Actions: A New Social Assistance Policy Blueprint in the fall of 1994. The paper set forth a number of principles as the foundation of welfare policy in New Brunswick:

• better harmonization of income support and human resource development;

• recognition that attainment of self-sufficiency can be a long and complex process and that people making the transition to work should be supported by government;

• recognition of the primary role of families and community in supporting each other in meeting financial and social needs;

• simplification of income support rules and greater flexibility;

• affordability; and

• income support that amounted to less than the "financial and non-financial rewards" from work.

From Options to Actions proposed a broad range of welfare reforms affecting the disabled, families with children, and youth. Most of the changes are contained in the Family Income Security Act, which replaced the previous welfare law, the Social Welfare Act, on May 1, 1995. Other changes were implemented in the summer and fall of 1995 through regulations, operational policy amendments and other legislative changes.

The new welfare regime supports the efforts of recipients making the transition to work or involved in training or education. A case management approach assists recipients toward their own career goals and aspirations. Depending on the individual case plan, a recipient may be offered a wide range of services, from basic assistance to extended health benefits, wage exemptions and social services.

As of September 1995, welfare applicants under 21 and living independently have to attend school or participate in some other form of upgrading or development. Single recipients who make an effort to upgrade their skills see an increase in monthly benefits from $260 to $300, while those who refuse suffer a gigantic drop from $260 to $50 a month. Single parents under 18 who participate receive $700 a month, and those who do not participate get $300.

Young people 16 through 18 would not normally qualify for welfare on their own unless welfare workers determined that the parental home was not a suitable place to live. When young people live on their own, the province tries to recoup some of the cost under the Family Support Orders Service.

The province had proposed in From Options to Action to seek family support for a single parent under 19 on welfare from the non-custodial parent and both sets of grandparents of the child. However, the proposal with respect to grandparents was not implemented.

Extended earnings exemptions and special exemptions for newly self-employed recipients came into effect in September 1995. The extended wage exemption allows recipients with dependents a flat-rate exemption of their first $200 a month in earnings. They also get to keep 35 percent of any income they earn beyond $200 a month during the first six months of work and up to 30 percent of any additional earnings during the second six months. The exemption for a single person is $150 a month plus 30 percent of additional earnings for the first six months and 25 percent for the second six months. Finally, welfare recipients who set up their own businesses enjoy a 100 percent exemption on the income they generate for three months to help them get established.

Also included in the welfare reform package are supplemental health benefits similar to those offered by many employers. When a welfare recipient finds a job that does not offer a health plan, the province provides coverage for up to one year on a cost-shared basis with the recipient The Extended Health Benefits program started in September 1995.

In May 1995, the government expanded the day care assistance program to cover welfare recipients in smaller communities.

A package of welfare reforms was introduced in May 1995 for people with disabilitiesA $75,000 trust fund may be established by the family of a disabled person to assist with disability-related costs and to help the person to remain in his or her home and community. A trust fund can also be used to provide income for people with disabilities who outlive their parents Disabled welfare recipients can share accommodations without having their benefits reduced. Following a review of the Vocational Rehabilitation of Disabled Persons program in 1995, the program was revamped in 1996, with the goal of designing a more effective service and improving methods of delivery.

Disabled recipients also saw asset exemption levels tripled from $1,000 to $3,000 in May 1995. The change meant that disabled people on welfare could keep more money in a contingency fund for emergency or unexpected expenses, like uninsured health costs. The asset exemption level was doubled at the same time for non-disabled recipients to $1,000 for a single person and $2,000 for a family.

On the administrative side of the welfare system, the province hired the Canadian subsidiary of U.S.-based Andersen Consulting late in 1994 to help overhaul the way welfare is administered and to upgrade the welfare program's computer technology. The province estimated that it would save some $80 million over five years less the $16 million for Andersen's fees and the $3 million or $4 million for the new technology.

In July 1995, the province announced that welfare caseloads had decreased to their lowest levels since September 1990. The Minister pointed to a drop in the number of single employable recipients, who were required to pick up their welfare cheques in person the previous two months.¹²

The income security appeal process was overhauled in November 1995. The most significant changes were a new provision allowing former welfare recipients to become Appeal Board members and the elimination of the possibility of appeal on matters relating to special assistance. The limitation on appeals is unlikely to be challenged now that the Canada Assistance Plan is no longer in force.

Late in 1996, New Brunswick appeared to soften its approach to welfare reformThe budget speech of December 10, 1996, forecast budget surpluses and declining unemployment for years to come. Among the measures in the budget speech were a provincial Child Tax Benefit and Working Income Supplement. The Child Tax Benefit will pay an estimated 50,000 low-income families up to $250 a year for each child Benefits are reduced when net family income tops $20,000 a year. The Working Income Supplement will pay up to $250 a year to low-income families with children and earned income of between $3,750 and $25,921 a year. The two programs are expected to cost the province $25 million a year when they are in full force The first cheques under the programs went out in October 1997.

The budget also announced a two percent increase in welfare rates for unemployable single people and childless couples as of April 1997. The increase affects 18,000 welfare households. The budget also increased the monthly earnings exemption for about 3,000 people in the Interim Assistance Program by $50 a month. The cost of both the rate increase and the selective exemption increase was estimated at $2 million a year.

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QUEBEC

The welfare reforms of 1989 and 1990 were embodied in new legislation entitled An Act Respecting Income Security. The act replaced the old Social Aid Act with two new programs: the Financial Support Program for people with severe disabilities and the Work and Employment Incentives Program for everyone else. The legislation also created the Parental Wage Assistance Program for low-income families with children to replace the Work Income Supplement Program.

The Financial Support Program is for single adults or adults living in families who have physical or mental conditions that severely limit their ability to work. A disabling condition has to be long-term or permanent and must be verified by a doctor. Benefit levels for the Financial Support Program were set higher than they would have been under the old Social Aid Program. The previous system of indexing benefits every year to increases in the cost of living was to continue.

The Work and Employment Incentives Program assists people who are considered able to work. The definition of employable in Quebec is considerably broader than in most other provinces. The employable category includes single parents regardless of the age or number of children, people aged 55 through 64, and people suffering from short-term physical or mental problems. About a third of the employable caseload is exempt from job search or training requirements.

The levels of assistance in the Work and Employment Incentives Program were designed to vary according to the willingness and the ability of recipients to take part in employability enhancement programs: vocational training, job search assistance, academic upgrading, work in community agencies or subsidized employment. Recipients were classified into one of four categories: not participating, available, not available and participating.

The category with the lowest rates is not participating. It applies to recipients who choose not to take part in employability enhancement programs or withdraw from a program.

The next lowest benefit was the available category, applied to employable people who expressed a formal interest in an employment program but for whom no appropriate measure was available. The category was dropped in April 1996.

Recipients in the second highest group, the unavailable category, are those considered temporarily unable to work. This category includes people with physical or mental conditions that keep them out of the job market for at least one month, women between the 20th week of pregnancy and the fifth week after giving birth, parents with children below school age, people who care for dependents with physical or mental disabilities, and people over 55 years of age.

The highest benefits under the Work and Employment Incentives Program go to people in the participating category: those who are participating in an employability enhancement program.

The Work and Employment Incentives Program introduced two controversial new concepts to welfare in Quebec The first was a rate reduction for separate households, both single people and families, sharing accommodation. Under the old rules, rates were cut by $85 a month when a welfare recipient shared accommodation with a relative, whether or not the relative was on welfare. After reform, the cuts generally applied to an employable person sharing a house or apartment with someone else on welfare. Welfare recipients sharing accommodation with severely disabled people who require constant care were exempt from the cuts. The maximum monthly reduction as of 1997 was $104.

Nearly 107,000 of the 350,000 employable households on welfare as of June 1997 had their cheques cut because of the shared accommodation rule.

The second controversial change was the introduction of a parental contribution, a first in Canada. The province invoked section 633 of the Quebec Civil Code, which states that adults 18 years of age and over who have not yet declared their independence are considered dependent on their parents, and the parents are required to contribute support and maintenance. Where an applicant has not attained independence, that person's welfare cheque is cut for up to three years by an amount the government feels the parents should be contributing.. The amount is set by regulation, and it varies according to the parents' income and the size of the family. There is no upper age limit on the rule.

As of October 1996, about 6,300 people received lower welfare cheques because of the parental contribution rule.

In addition to the Financial Support Program and the Work and Employment Incentives Program, the reforms of 1989 and 1990 launched the Parental Wage Assistance Program for low-income families with children, retroactive to the 1988 tax year. The Parental Wage Assistance Program offered an earnings supplement, a shelter subsidy for families with high shelter costs, and partial reimbursement of day care costs.

While the dust was still settling on these changes, the economy went into a recession. The average number of unemployed people in Quebec rose from 359,000 in 1990 to 467,000 in 1993. The welfare numbers also shot up, from 555,900 welfare recipients in March 1990 to 741,400 in March 1993. The welfare numbers kept rising even after the job market improved in 1994.

Early in 1993, the Quebec government hired more "verifying agents." The government had the public's support when it clamped down on fraud and abuse in the system, according to public opinion polls Some 80 percent of those polled were in favour of surprise home visits.

A study by researchers at Laval University took issue with claims that the verifying agents were saving the province large sums of money. The government said it would save about $86 million in the 1993-94 fiscal year because of the home visits. Based on their review of available statistics, the authors of the study suggested that the real amount recovered by the welfare agents because of abuse was considerably lower They suggested the government was pandering to the popularity of home visits with the public.¹³

Home visits were only part of the crackdown on welfare abuse. Other measures to discourage would-be abusers included mandatory cheque pick-ups for some targeted categories of recipients, more extensive case reviews and exchange of information on a larger scale with other agencies and other provinces. All of these controls were either started or expanded in 1993.

In the fall of 1993, welfare rates dropped by $10 to $30 for new households classified as not participating and available. Existing recipients had a one-year delay before their cheques were cut. Special allowances for air ambulance service and moving costs for single parents enroled in post-secondary education went up. Welfare rates went up for families in shelters for victims of family violence Coverage for non-insured health services was offered to single parents for up to six months after leaving welfare. Asset exemption levels went up by $147 for each child in the household Other types of assets, like special payments received by victims of thalidomide, were declared totally exempt. The government started offering special incen- tives to welfare recipients who wanted to start their own businesses.

Also during 1993, the government decided that employable people just starting on welfare would not have priority to participate in employability measures for the first six months on assistance. The decision meant that new recipients might not be able to qualify for the higher benefits paid under the available and participating categories for six months. The new rule appeared contrary to the government's strategy of getting people off welfare and into jobs.

Meanwhile, Quebec was tightening up its remedial education program for people on welfare. The total number of available places dropped to 22,000 by 1994 from a high of 37,000 a few years earlier. The government said initial failure rates of around 60 percent had forced it to increase the standards for participation, so it started making new welfare recipients wait 24 months before they could participate. The previous waiting period was nine months Social groups said that the government was focusing its efforts only on the most employable recipients at the expense of others.¹⁴

The government froze welfare rates for most employable households on welfare in 1994It also froze benefit levels of the Parental Wage Assistance Program and allowances under the Family Assistance Allowances Act. The Family Assistance Allowances Act consolidates many financial assistance programs for families with children They include provincial family allowances, and allowances for newborns, young children and handicapped children. Recipients of the Financial Support Program were exempted from the freeze. There was also a modest rate increase at the same time for single parents who were either participating in an employability measure, waiting to participate, or at home with young children. In the spring of 1994, special allowances for nursing mothers went up and a new allowance for infant formula came into effect.

Most of the money saved through the cuts in the fall of 1993 served to cover the cost of the increases in March 1994. Of the 456,000 welfare households in Quebec at the time, the government estimated that 48 percent would see their benefits decrease, 32 percent would see them increase and the rest would see no change in their cheques.

In the spring of 1994, Quebec started requiring that welfare applicants and recipients between 60 and 65 apply for any early retirement benefits they could receive under the Quebec or Canada Pension Plans.

A provincial election was held in the summer of 1994, and the Parti Quebecois replaced the Liberals as the Government of Quebec. Within short order, the new Minister ended the cheque pick-up policy for employable people Of the 200,000 people who had to pick up their cheques in person the previous year, she said, only three percent were found to have "serious intent to defraud the government. However, the cheque pick-up policy was reinstated in 1996 for some 145,000 employable people. The exercise saved the government $20 million when 4,000 people - three percent of the people subject to the requirement - did not pick up their cheques. The government news release did not mention whether any of the 4,000 were part of the normal turnover of people not collecting their cheques because they found jobs.

The new Minister also said the government was reviewing the welfare penalties for shared accommodation. The penalties had been the subject of an unsuccessful court challenge by welfare rights groups and a damning report by the provincial Ombudsman, both in 1994.As of 1997, the penalty for shared accommodation was still in effect.

The province's May 1995 budget extended the freeze on government spending, including welfare, into 1996. Late in November 1995, the government announced a 2.3 percent increase in welfare benefits for permanently unemployable households on welfare starting in January 1996. The budget did not impose further welfare cuts and eligibility restrictions, despite rising caseloads and the federal announcement of reduced transfer payments for social programs under the new Canada Health and Social Transfer Social advocacy groups felt that the government had suspended - or at least softened - welfare reforms to attract the welfare vote in the upco- ming fall referendum on sovereignty for Quebec. The Parti Quebecois promise to protect the poor and maintain social programs was popular with unions, public sector employees and community groups.¹⁴

The Minister of Income Security announced an increase in the provincial minimum wage on June 4, 1995. That was when the March for Bread and Roses ended its province-wide rally for social justice on the grounds of the National Assembly. The march was organized by a coalition of 85 groups, representing women, unions, churches and community organizations.

About 15,000 people attended the rally to support demands for a higher provincial minimum wage, pay equity and more compassionate welfare reforms. The minimum wage in the province officially went up from $6 an hour to $6.45 as of October 1, 1995.

In August 1995, the federal government announced a commitment under the Strategic Initiatives Program to contribute over $80 million over three years to Quebec for the Parental Wage Assistance Program and a Quebec high school certification program for single parents on welfare.

The initial take-up rate on the Parental Wage Assistance Program was disappointingly low. In its first year, 1988, the program helped about 18,000 families at a cost of about $17.5 million. Almost 33,000 families received assistance in 1994 at a cost of about $51 million. Preliminary figures showed that close to $59 million was paid out to almost 37,000 households in 1995.

April 1996 marked a major effort by the provincial government to tighten up the welfare system. There were cuts in rates for many recipients. The penalty for not looking for a job or quitting one without a valid reason went up from $100 to $150 a month. The province started applying more pressure on immigrant sponsors who were not meeting their support obligations. And there were changes in liquid asset exemptions that almost guaranteed that people would have to spend their last dollar before becoming eligible for welfare.

Welfare recipients in Quebec had seen their incomes rise between 1990 and 1993Between January 1993 and April 1996, there were increases for a few recipients, but losses for most of them Table 2 on the next page shows the changes in detail for typical categories of recipients.

The people in the Financial Support Program, all of them long-term unemployable people, saw their monthly rates rise slightly. Most rates in the Work and Employment Incentives Program were lower. About 35,000 households in the participating category had their rates cut by $30 a month in April 1996. The available category was wound up completely, and about 26,000 recipients were transferred to the lower-paying not participating category.