Executive Summary of Income for Living?

Can working people make ends meet? Is the welfare system too generous? What difference does it make if government gives low-income people tax breaks? Is it worthwhile for a person on welfare to take a minimum-wage job?

The National Council of Welfare's latest report looks at the incomes of people on welfare and the incomes of people with jobs. The study compares gross incomes and take-home incomes of full-time workers with minimum-wage jobs, jobs that paid ten dollars an hour and jobs with average wages. Income for Living? looks at the impact of federal and provincial tax and benefit programs on these low-income and average-income people in Montreal, Toronto, Calgary and Vancouver.

This report uses both the Low Income Cut-offs or LICOs from Statistics Canada and the new Market Basket Measure (MBM) from Human Resources Development Canada as the gauges of poverty in Canada. The LICO is the measure that most organizations in Canada call the poverty line. The MBM estimates the cost of a specific basket of goods and services for 2000 that would be required for a minimum standard of living.

Income for Living? shows the incomes for four family types: a single person; a single person with a disability; a single parent with one child two years old; and a couple with two children ages 10 and 15. The study uses data for 2000 since this is the only year for which MBM data is available.

The National Council of Welfare tracks welfare incomes across Canada every year, so the Council was not surprised to see that the welfare rates were well below both the MBM and LICO poverty lines. What was more surprising was that minimum-wage workers outside Quebec almost never reached either the MBM or LICO. Only when workers had "low-wage" or ten-dollar-an-hour work did they make it over the poverty lines. Even at ten dollars an hour, most low-wage workers were still "near poor;" that is at 125 percent of the poverty line. People were comfortably over both poverty lines only when they had full-time work at average wages.

There were marked differences between provinces in how they provided incentives and supports to work. Most provinces provided minor tax breaks to people with disabilities and to parents of young children who took on full-time work, but these ranged in value. Only Quebec provided a system of affordable child care - probably the most necessary of all supports for parents moving into the job market. Quebec was also the most generous with tax breaks and family benefits for parents with lower-paid work.

Income for Living? is the first project in which the Council has used the new poverty measure released by the Government of Canada in May 2003. The MBM gives a list of the specific items that people need to live on, using standard tools like Health Canada's Healthy Food Basket. The new measure is only available for 2000, so there was no way to track changes over the years.

The MBM gave a good snapshot of the situation of people with low incomes in 2000. When the incomes of people on welfare and even of people with full-time jobs are below the new poverty line, policy makers and ordinary Canadians have to ask themselves some pointed questions. Just what items from the MBM basket of goods do we think poor Canadians should do without? Would it be fresh vegetables? The bus pass that lets a person look for work or go to school? Decent housing? Good quality child care?

The National Council of Welfare's new report also looks at the affordability of average-priced apartments and child care for people on welfare and in lower-paid work. The majority of people on welfare and in minimum-wage or and low-wage work simply could not afford average-priced apartments.

The combined cost of average-priced centre-based child care and average-priced apartments exceeded the take-home incomes of minimum-wage single parents. The exception was in Quebec where five-dollar-a-day care was available. This is a serious gap in public policies that are intended to encourage parents into the job market. Without decent, affordable child care, low-income single parents are hard pressed to attend school or find work.

The Council believes that it is only fair that full-time workers should be able to support themselves and their families above the poverty line, whether it is measured by the MBM or LICO. Getting families to this level requires several mechanisms.

The National Council of Welfare calls on governments to start by setting welfare rates at a livable level. People on welfare need the incomes to stay healthy and get back into the work force if they can. Raising minimum wage to the level that would support at least one adult at a level above poverty seems like an obvious next step. Providing the tax relief, income supports or "top-ups" to low-wage earners is another. Ensuring that there is an adequate supply of safe and affordable housing and providing safe and affordable child care to allow parents to work are also essential.

The report takes a technical look at some of the basic incentives and disincentives to work for Canadians on welfare and in lower-paid work.

The National Council of Welfare is a citizens' advisory body to the federal Minister of Social Development.

• Welfare rates are far, far below either of the poverty lines, LICO or the MBM.
• Across the four cities, welfare for single employable people was less than half the LICO poverty line and just over half the MBM poverty line. Incomes ranged from a low of 33 percent of the LICO in Alberta to a high of 45 percent in Ontario. Using the MBM, the range was a low of 42 percent in Alberta to a high of 56 percent of the poverty line in Quebec.
• Families on welfare fared better, but they also lived on incomes that were shockingly low. The best that welfare provided for the couple with two children were incomes that ranged from a low of 56 percent in Montreal to a high of 63 percent in Calgary using LICO. Using the MBM, the range was a low of 65 percent in Vancouver and a high of 76 percent in Calgary.

• Even people with full-time work were at terrible risk of poverty. In almost every case, a person with a full-time, full-year job at minimum wage could not live above the LICO poverty line.
• Things looked better through the lens of the MBM poverty line. In Quebec, all minimum-wage workers were over the MBM poverty line. The single parent with one child had an income of 132 percent of the MBM. This modestly better situation is a result of Quebec's investment in benefits and taxes for single-parent families of young children.
• There were a few exceptions elsewhere. In Ontario, the single disabled person and the couple with children had incomes that matched the MBM poverty line, but were still below the LICO. In Alberta, the single disabled person's income almost met the MBM and the income of the couple with two children was 110 percent of the MBM. In British Columbia, even when adults worked full time all year, the single disabled person and the couple with two children could only touch the MBM poverty line.

• The Council used the OECD's definition of low-wage work, which is two-thirds of the hourly median wage; about ten dollars an hour in 2000.
• Workers with jobs that paid ten dollars an hour were safely over both of the poverty lines but low-wage workers still enjoyed few frills. These families were financially fragile. Any change in their situations, from a brief illness to the family car breaking down, could throw the family into a crisis.
• Using the LICO poverty line, every low-wage family in this study lived in "near poverty," that is, on incomes that were under 125 percent of the poverty line. Take-home earnings ranged from just 108 percent of the LICO in Quebec for a single employable person to 122 percent of the LICO for the couple with two children in Ontario and in British Columbia.
• The situation looked better through the lens of the MBM poverty line. The take-home incomes of low-wage families ranged from a high of 153 percent for the single disabled person in Quebec to a low of 104 percent for the single parent with one child in British Colombia.

• Income for Living? uses average wages based on Statistics Canada's Survey of Labour and Income (SLID).
• Families with average wages were consistently able to support their families well over both the LICO and the MBM poverty lines. When all the adults in the family had full-time work, families could cover all the necessities and put a little aside.

• The cost of rent for average apartments in all four cities was simply beyond the reach of everyone on welfare. For example, rent for an average one-bedroom apartment in Toronto was 146 percent of the welfare income of a single person categorized as employable. A single disabled person and a single parent with one child living in Toronto each needed 85 percent of their entire incomes from welfare for rent alone.
• At minimum wage, only in Montreal could the single parent with one child and the couple with two children afford average-priced apartments. Everywhere else, average rents were unaffordably high.
• Even for most low-wage workers, average-priced apartments were still unaffordable. The exceptions were the two families with children in Montreal and the couple with two children in Calgary.
• For average-wage workers, rental accommodation was surprisingly difficult. In Montreal, all average-wage workers could afford average-priced accommodation, but in Toronto, Calgary and Vancouver, this was the case only for the couple with children. Even average-wage workers in Toronto needed 40 percent of their income for rent.
• For the purpose of this paper, the Council considered rent of 30 percent or less of take-home income as the marker of affordable housing,

• Child care is a necessity for single parents of young children with full-time jobs. Bizarrely, no child care system exists in Canada, despite the fact that provincial governments promote the move from welfare into the work force.
• Only Quebec provided child care that was affordable to low-income workers. In 2000, the majority of Quebec parents had access to five-dollar-a-day child care.
• For minimum-wage single parents in Ontario, Alberta and British Columbia, average rents and child care costs exceeded take-home incomes. Low-wage single parents were not much better off. In British Columbia, for example, average rent and child care costs took over 85 percent of take-home income. Unless these workers found lower-cost child care, either by making other arrangements for their children's care or by getting child care subsidies, these families could not afford their basic needs despite year-round work.