British Columbia’s lowest-paid workers finally got a raise last spring, when Premier Christy Clark announced the first increase to the province’s minimum wage in 11 years. The wage increased by $1.50 to $10.25 an hour, in one year bringing it up from the lowest in the country to tie for second highest with Ontario, just behind Nunavut’s $11 per hour.

But even with an increase, full-time minimum wage workers in B.C. aren’t earning enough to meet Statistics Canada’s low-income cut-off line (commonly cited as Canada’s poverty line) for families. Raising the minimum wage also does little for people who can’t work full-time, can’t work at all, or who can’t find work. That means the recent rise in the minimum wage, welcome as it is, won’t do much to rescue the one in 10 households now living below the poverty line in this province.

But if a higher minimum wage isn’t enough, then what income policy is the best choice for eradicating poverty in British Columbia? Economists and social policy groups have no shortage of solutions to suggest. Ideas include a so-called “living wage,” higher welfare rates, a universal guaranteed minimum income, even something called a “Demogrant.” (For a more complete list, see the sidebar to this article, “A Glossary of Anti-Poverty Policies.”)

For the Tyee Solutions Society, I’ve been exploring the pros and cons of three of the most widely advocated of these proposals to put an end to poverty: the living wage, a guaranteed annual income, and government wage subsidies. I spoke to anti-poverty activists, social policy theorists, academics, and economists. Some have devoted careers to advocating for a specific method; others take a more flexible approach to reducing poverty.

Reports in the days to come will detail the merits and drawbacks of a guaranteed annual income and of government wage subsidies. We start here with a look at the pioneers who are turning the idea of a living wage from generality into a meaningful number.

The difference a living wage made for one mother

When Alex Moya started as a shipper/receiver at software maker SAP in Vancouver last September, she was earning $15 an hour. Almost $6 above minimum wage at the time, it was enough for her to get by. But still, she admits it was sometimes “stressful.”

When SAP became a “living wage” employer earlier this year however, Moya’s salary jumped to almost $19 an hour. It was a big help for a young mother who, along with her husband, has a young daughter in daycare and commutes from their home in New Westminster to work in Vancouver.

“Just to have extra cash, it helps for those things that you’re not prepared [for], like if your car breaks down or something happened to your computer. I don’t feel so stressed out. I feel I can have a little bit of extra cash for the ‘just-in-case’ things,” she says.

“I feel like I can have a more normal life, like if I want to just go out and have a dinner or go to the theatre, I have that extra money.”

Unlike a minimum wage, a living wage is calculated using the cost of living in a specific municipality. The idea is that the salary you make should be enough to cover the cost not only of food and shelter, but also of transportation, basic medical care, household goods, school supplies and clothing needs. Differences in rent and food prices mean living wage rates vary across the province.

Anti-poverty advocates like the Canadian Centre for Policy Alternatives, First Call: BC Child and Youth Advocacy Coalition, and half a dozen public sector unions support the idea through A Living Wage for Families Campaign. The non-partisan organization pushes municipalities, private businesses, and the provincial government to adopt living wage salaries for their own and their contractors’ employees.

Each year the campaign releases an updated calculation of living-wage rates for full-time work in several B.C. municipalities. They range from an hourly wage of $14.16 in Cranbrook to $19.14 in Metro Vancouver. Those rates may be lowered, however, if they’re matched with benefits like health and dental coverage, day care subsidies, or bus passes.

For Michael McCarthy-Flynn, director of the campaign, it’s the best method for eliminating poverty for workers who don’t meet the low-income cut-off lines: “It’s a wage that will lift people out of poverty and it’s based on the sophisticated methodology that looks at the basket of goods that the average family needs.”

The basket is quite limited: the “needs” it recognizes include food, clothing, rent, healthcare, transportation and education costs. Notconsidered needs are debt payments, retirement or education savings, home ownership, caring for a disabled or elderly relative or covering emergency costs like car trouble, vet bills or any of those other “just-in-case” moments Alex Moya used to worry about.

And the idea has its detractors. They say a living wage does nothing for people who for a variety of reasons aren’t working. When B.C.’s unemployment rate sits at just about six per cent, tying a poverty reduction strategy to work, they argue, won’t solve income inequality.

Living wage catches on in BC

Although living wage campaigns sprang up across the United States and the United Kingdom in the early 1990s, they’ve only come to the forefront of B.C. anti-poverty discussions in the last decade.

It’s a theory at least two municipalities have already bought into. New Westminster made history in 2010 when it became the first municipality in Canada to adopt a living wage for its workers and contractors. The Capital Regional District of Esquimalt followed suit in January 2011.

This April the Qualicum School District became the first district in the province to adopt a living wage strategy. Over 130 municipalities in the U.S. and more than 100 U.K. employers have also adopted living wage polices.

Several B.C. employers have also embraced the living wage. The most high profile is VanCity Credit Union, which officially joined the ranks of living wage employers last summer. Others include non-profit organizations like the BC Teachers’ Federation, United Way of the Lower Mainland and The Canadian Cancer Society — B.C. and Yukon Division, as well as for-profit companies like SAP’s Vancouver presence and Now Communications.

A public for-profit software company, SAP’s involvement with the Living Wage for Families Campaign started with its pro-bono development of an online living wage calculator. It grew into a living wage commitment from the Vancouver office when managers there realized how the campaign fit into their social and economic sustainability goals.

“SAP is a global multinational company, and we’re very much interested in doing good in the world,” says Kirsten Sutton, managing director for SAP Labs Canada. “But what’s most important is for each location to make sure they’re doing good in their community, and for us here [instituting a living wage] was one way to do that.”

Most of SAP’s own Vancouver employees were already making above the living wage, so the firm’s effort focused on the 50-plus contractors who provide its office custodians, security staff and facility managers. (Shipper/receiver Moya is actually employed by Compass Group Canada, an SAP contractor.)

Sutton says it means paying more money for these contracts. But for their office it’s important not to pass the poverty on: “A good business these days is not just a bottom line,” she insists. “It’s worrying about many other things.”

During the run-up to last November’s municipal elections in B.C., the Living Wage for Families Campaign joined 54 other organizations in a push to convince candidates in Metro Vancouver to support a living wage for workers. Although the effort failed to persuade additional cities to adopt living wages, most of the candidates contacted expressed interest in the idea, even if they did not immediately endorse it.

And the campaigning seems to be paying off in other ways. While the election season was on, the Columbia Institute commissioned a poll asking a representative sample of voters whether they would support their town or city adopting a bylaw to ensure all municipal employees and contractors adopt a living wage. Over 67 per cent said they would.

A partial answer at best

While that kind of support may be promising for the future of municipal employees and contract workers, critics point out that a living wage benefits only people who are able to work, and can never be more than one part of a broader poverty-reduction plan.

“A successful, comprehensive, poverty reduction strategy would include some policy to deal with adequate wages,” says Margot Young, a University of British Columbia law professor. “But [must also] ensure those who aren’t in the paid labour sector have an ability for flourishing, both economically and in terms of participating in the community, that is just and fair.”

Young co-authored a report on the more inclusive idea of a guaranteed annual income for the Canadian Centre for Policy Alternatives (one of the groups with a seat on the Living Wage for Families Campaign advisory committee). It’s a subject we’ll look at in the second part of this series.

Living Wage campaigner McCarthy-Flynn accepts Young’s criticism. “The [guaranteed] income is looking at people who are on welfare, ensuring that they have a dignified existence and [getting] rid of the bureaucracy, whereas the living wage looks at the working poor,” he reasons. “So they’re sort of complementary rather than in competition.”

Simon Fraser University economist Krishna Pendakur endorses paying workers enough money to live on, but he’s uncomfortable with policies that favour select groups. Because only a handful of municipalities and businesses yet endorse a living wage policy, that’s exactly what it does.

“One obvious mechanism the state has is to pay its own workers a lot,” he says. “But not everyone gets to be a public sector worker.”

It’s an investment: McCarthy-Flynn

Then there’s the cost of implementing a living wage. Although it’s difficult to determine what the total cost would be because of the range of living wages across the province, the average hourly wage for workers over 25 in B.C. is significantly above the living wage for a four-person household. Many people’s wages wouldn’t change at all under a living wage.

But according to the Canadian Centre for Policy Alternatives, in 2008 almost eight per cent of the population earned less than $12 an hour.

McCarthy-Flynn says cost is a poor excuse for inaction. He believes governments and employers should see a living wage as an investment in the future, rather than an expense for today.

“We seem to be very good at spending money on poverty after it exists, ” McCarthy-Flynn says, “rather than investing in programs that will prevent poverty from happening in the first place.” Those, he says, “are, one, cheaper, and two, a lot better socially in the long run.”

McCarthy-Flynn cites a CCPA report which estimates an annual poverty cost of $8.1 to $9.2 billion in B.C. alone. A large chunk of that money goes to pay for the healthcare and policing costs associated with poverty.

By comparison, the same report put the cost of a comprehensive poverty reduction plan at $3 to $4 billion per year.

Another CCPA report Working for a Living Wage: 2011 Update cites a finding that employers who paid a living wage in the U.K. saw a decrease in employee absenteeism. Unchecked absenteeism in Canada, itestimated, costs employers up to $6 billion per year. Other changes that came with a U.K. living wage include a reduction in staff turnover, improved performance and production and greater customer satisfaction.

The centre’s research doesn’t directly link a reduction in health costs with a living wage. But it does cite evidence that higher stress levels among low-income households relative to those in the mid-to-higher income bracket lead to poorer overall health and a greater use of health services in the long-term.

To McCarthy-Flynn, a living wage would allow those who have been taking the most from our social safety net to start paying back into it. That, he argues, benefits more than just the people at the lower end of the economic scale.

“If people get a living wage and are lifted out of poverty, they have a higher opportunity to become fully engaged, productive, contributing members of society in terms of the economic return they give and the social return,” he says.

Growing support in the business community and the wider population for instituting a living wage hasn’t been enough to sell B.C.’s Liberal government on raising the provincial minimum wage again any time soon. Its NDP rivals have come out in support of indexing the minimum wage to inflation; it’s unclear whether those changes would become reality should the party come to power in next year’s provincial election. And plainly, when one British Columbia household in 10 struggles below the low-income cut-off line, getting everyone to a living wage is going to take more commitment — from government, the business community and most of all, voters.

But the living wage isn’t the only policy device to help get us there. We’ll look at others in reports to come tomorrow and Wednesday. 

< http://thetyee.ca/News/2012/05/14/Living-Wage-Enough/?utm_source=mondayheadlines&utm_medium=email&utm_campaign=140512 >

__________________________________________________________

A GLOSSARY OF ANTI-POVERTY POLICIES

Paul Taylor grew up using food banks. He served on the board of directors for Toronto’s Daily Bread food bank, one of the largest in the country. And when the CBC hosted its 25th annual funding drive for the Greater Vancouver Food Bank last December, he and some colleagues walked over to give the public broadcaster a thank-you card, along with an important message.

“We wanted to say thank you, but the CBC could better leverage their reach,” he tells me over tea at the Downtown Eastside Neighbourhood House, where he serves as executive director. “We wanted to ask that they listen. What low-income people are really after is justice and the ability to have enough money to buy their own food.”

Since taking the position nine months ago, Taylor has been vocal in his criticism of the role of food banks in our society, a role he believes allows government to shirk its responsibilities under the declaration of human rights.

Longtime advocate for the homeless Judy Graves called Taylor “one of the most exciting things to happen to Vancouver.”

“Holy crow, does he get it,” says Graves. “He gets it in the big picture and gets in the small picture, and he’s definitely the wave of the future.”

Taylor is quick to acknowledge, and he respects, the moral imperative that people feel to help out in whatever way they can. But hunger is not an issue for charity, he says, and he and others at the Downtown Eastside Neighbourhood House are “not here to convince people of deservedness.”

“Food,” says Taylor, “is a fundamental human right.”

How food became charity

It’s true that Canada signed and ratified the UN Declaration of Human Rights in 1967 — and other international agreements following — that guarantee the right to food.

But it’s not entrenched in our constitution, our domestic law. The right to food is particularly problematic in the Canadian context, because social rights, like welfare for example, are provincial responsibilities.

Their last hope is Frances Lankin. And they’re no longer sure whether she’s a friend or a foe.

Two months from now Lankin and Munir Sheik, co-chairs of Ontario’s social assistance review will release their blueprint. Their aim is to turn the province’s threadbare, demeaning welfare system into a modern income security system.

Initially, the 880,000 people who depend on social assistance — which includes welfare and disability support — regarded Lankin, former president of the United Way of Greater Toronto, as their champion in the corridors of power. She knew they couldn’t live on the province’s meagre allowance. She knew they needed affordable housing and child care. She knew the system stripped them of their privacy and their dignity.

But in recent months, doubts have set in. The commission’s discussion paper in February was vague and unsettling. Last month’s provincial budgetwas ominous. And the rumours they’re hearing scare them.

Last week, three Torontonians who live on Ontario Disability Support (ODSP) met at a supportive housing agency to share their concerns. All have mental disorders. All agreed to use their real names regardless of the stigma or the possibility of reprisals.

“I used to think the goal (of the review) was poverty reduction,” said Youssef Camara. “Now I think it will produce the reverse. I truly believe people will be worse off a year from now.”

Camara has severe clinical depression. Until last month he was working for a non-profit agency. Then his contract expired. He is looking for a new job but it’s hard to find an employer who will take a risk on a worker whose illness could flare up anytime and last for months.

That unpredictability, he explained, is why people with psychiatric disorders worry about the commission’s suggestion that disability support recipients deemed capable of working should be required to look for employment.

Sandra Smith, who has schizophrenia, figures she could work two days a week. Her medication, Risperidone, saps her energy and has other side-effects (insomnia, muscle stiffness, irritability).

Michael Koo puts his limit at 20 hours. And they might not be weekly. His disease, bipolar disorder, is cyclical.

“If the government wants us to work, why doesn’t it hire us to work with mentally disabled clients? It’s already paying us,” he pointed out. (ODSP recipients get a monthly benefit of $1,064.)

Camara wants to know who will decide which ODSP recipients are capable of working. “We don’t need another layer of bureaucracy.”

Last month’s budget heightened their fears. It froze welfare rates and halved this year’s promised increase in the Ontario Child Benefit.

(Last Friday, Premier Dalton McGuinty, hoping to win the support of the New Democratic Party, proposed an amendment that would give disability support recipients a 1 per cent increase in November. With inflation running at 2.2 per cent, this would still mean a drop in their buying power.)

“Why does this government consider it progress to move a person from severe deprivation to working poverty?” Camara asked rhetorically. His answer: “The intent of everything they do is to shrink funding.”

“It’s not just us,” Smith stressed. “More and more families are falling into poverty. It’s scary.”

Now they’re hearing speculation that Lankin and Sheik will propose that Ontario Works (basic welfare: $599 a month) and Ontario Disability Support ($1,064) be collapsed into a single program. That alarms them. They need the extra money for medications, supportive housing and transportation to hospitals, clinics and doctors’ offices.

Oppressive and unfair as the current system is, they can’t afford to lose what they have. And they don’t trust Lankin — or anyone else — to keep them whole.

As the conversation ended, they tried to explain what it’s like to be poor and disabled in Ontario. “It’s like you’re always being judged and found guilty of some crime,” Koo said. Smith gave it a name: “the crime of being sick.”

< http://www.thestar.com/opinion/editorialopinion/article/1166017–hopes-fade-for-humane-welfare-system-in-ontario >

Editor:

Are you prepared to give up $13,000 during your golden years? MP David Anderson and Prime Minister Stephen Harper think you are. That’s what the average Canadian will have to give up thanks to the federal budget introduced by the Conservative Party last week.

The Budget cuts retirement benefits by raising the age of eligibility for Old Age Security and the Guaranteed Income Supplement from 65 to 67 years, forcing Canadians to postpone their retirement for two years. For low income seniors it’s even worse. They stand to lose up to $30,000 which could hike seniors’ poverty by up third.

It’s a massive hit to the least-well off. It’s mean-spirited and it’s wrong.

The Conservatives offered zero financial analysis to justify the cut because there is none. The OECD, the Parliamentary Budget Officer and other leading experts have all confirmed that Canada does not face a pension crisis.

The Conservatives are also using the Budget making deep ideological cuts. They are cutting $310 million from Agriculture and Agri-Food, threatening farm risk management programs that have seen family farms through flood, drought and disease. They are cutting $166 million from Aboriginal Affairs, reducing funding for the fastest growing and most impoverished group in the country.

How skewed are these priorities? Take a look at what the government is not cutting: polls, advertising, bigger jails and stealth fighters.

Canadians should be asking Stephen Harper and David Anderson how they can justify such a small-minded Canada.

Bob Rae – Leader of the Liberal Party of Canada

< http://www.swbooster.com/Opinion/Letters%20to%20the%20editor/2012-04-03/article-2946514/Rae-argues-retirement-benefits-cuts-a-massive-hit-to-Canadians/1 >

Unions and anti-poverty advocates are pushing for Ontario’s social assistance benefits to be increased by more than half.

Advocates are holding press conferences across the province in a bid to stop the Liberal minority government’s proposed changes to benefits in the latest budget.

They say Ontarians on social assistance are already suffering and the changes, if approved, would in effect be a reduction in benefits.

“It’s a horrible budget for working people,” said Patti Encinas, vice-president of the Ontario Council of Hospital Unions and a Hamilton-based health care worker with the Canadian Union of Public Employees.

Encinas said the changes would have a trivial impact — 0.072 per cent — on Ontario’s finances, but worsen the lives of the poor dramatically.

“That’s like robbing your kid’s piggy bank to make a mortgage payment,” said Encinas.

Instead, the groups are calling for benefits to be increased by at least 55 per cent. And though that may sound like a lot, advocates at a press conference Wednesday at the Belleville Public Library said it can be done merely by rolling back corporate taxes to the previous rate of 14 per cent.

Liisa Schofield, an organizer with the Ontario Coalition Against Poverty, said former Progressive Conservative premier Mike Harris cut welfare rates by 21.6 per cent in 1995. Increasing them now by 55 per cent would merely compensate for that and adjust for inflation, she said.

Schofield said the base rate for welfare in Ontario is $599 per month.

“This is an economic crisis that poor people did not create,” Schofield said. “Nobody can survive on $599 a month.”

Schofield and others said boosting rates would be an investment because increased benefits would mean healthier people, reducing the need for future health spending.

They also said all parties must be prepared to address the issue.

“The number-one determinant of health is your income,” said Encinas. “People who don’t have enough money to live on are far sicker.”

Schofield said the proposed budget, coupled with reductions to other social programs, have both human and economic impacts.

“These cuts don’t just mean numbers to us; they mean people’s lives. It means people’s health. It means that in the long term the government is going to pay more in terms of the health of poor people than they would if they raised the rates.”

Alexandra Bell is a local advocate who serves on the board of the Community Health Centre of Belleville and Quinte West and works with other social organizations.

She said people receiving insufficient help may seek odd jobs only to claim the income and have benefits clawed back. They may also use food banks and have difficulty eating a healthy diet, especially given rising food costs, she said.

Bell said the desperation caused by being on welfare can cause people to take the first available job. If they aren’t well-suited to that job, she said, they may end up back on welfare.

She said she struggled during her eight months on social assistance and it makes a person reliant upon the system instead of being productive.

“Not only is your bank account low, but your morale is low,” she said.

“There’s a huge segment of our population that we’re not allowing to raise themselves to their potential,” Bell said.

“All it’s going to do is create a cycle where you’re paying more money into health care; you’re paying more into educational services because these people are not healthy or well.

“And now they’re having to access more programs and services to get themselves better as opposed to hitting at the root,” said Bell.

“Give them something that gives them dignity … so that they can live and be functioning members of our community — because that is what they want,” she said.

Advocates are planning a series of public meetings on the issue for late spring or early summer.

luke.hendry@sunmedia.ca

< http://www.intelligencer.ca/ArticleDisplay.aspx?archive=true&e=3527730 >

Canadians are by now aware that the federal government will increase the age of eligibility for the Old Age Security benefit from 65 to 67 years of age. Canadians with disabilities are more than a little concerned about how the change might affect them.

It is well documented that Canadians with disabilities disproportionately live in poverty when compared to the general population. Between 45 and 60% of those on social assistance have a disability and this number continues to rise. Many have been, and will continue to be, excluded from the current labour market unless significant new initiatives are created to remove barriers to employment. Let’s get something straight: the Old Age Security benefit is a disability issue!

Old Age Security coupled with the Guaranteed Income Supplement benefit is better than any social assistance program in Canada. Sadly, many people with disabilities are looking forward to turning 65 because they will have a better income benefit. Increasing the age of entitlement for the OAS benefit will force persons with disabilities to live in poverty longer. Is this what Canadians want?

The Old Age Security benefit, while the foundation of Canada’s retirement policy, doesn’t exist in isolation. Many other benefits are designed to work in tandem with it. This raises a number of questions for those individuals and organizations which advocate on behalf of Canadians with disabilities.

For example, will increasing the age of entitlement trigger a change in the Old Age Exemption in the Income Tax Act? And will Long Term Disability policies now extend benefits to age 67? Currently LTD claims end when an individual becomes eligible for the Old Age Security benefit. Would such a change increase premiums?

We also have some questions around the Canada Pension Plan. Will CPP benefits also change the age of eligibility? And would such a change apply to both the early retirement and full benefit?

Finally, we are concerned about how the provinces might react to persons with disabilities remaining on social assistance for a longer period of time? We are concerned that this may result in the reduction of benefits or limit future improvements.

Disabled people tend to have a lesser life expectancy. Should an exemption be made for persons with disabilities in regard to a change in age eligibility for OAS and CPP? The other long-term option as advocated by the Council of Canadians with Disabilities is for a greater federal role in a basic income support program for people with disabilities who have been excluded from the labour market. A “first step” would be to make the Disability Tax Credit refundable.

One of the current proposals for reform of the Canada Pension Plan include allowing people to claim early (currently at age 60) and continuing to work. Individuals would continue to pay premiums; however should they become disabled they would not be eligible for CPP-Disability because they’ve taken CPP. CPPD is a better benefit. Disability increases with age, working people will still pay a full premium but not be eligible for full benefits (CPPD). This doesn’t seem fair.

Our concerns are valid and deserve some answers from our elected officials.

(Harry Wolbert is a disability rights advocate)

< http://www.winnipegsun.com/2012/04/04/oas-changes-will-hurt-disabled >

The McGuinty government believes that protecting social services is smart public policy.

We are continuing to take strong action to help children and their families achieve their full potential. The Harris-Hudak government cut social assistance rates by 22 per cent – we are holding the line on social assistance rates, not cutting them back. That government also left the minimum wage frozen for eight years and increased the hardships of those most in need of help. Our investments have removed 20,000 children from poverty. The income tax cuts we introduced in 2009 mean 90,000 low-income people pay no income taxes at all.

We are committed to increasing the Ontario Child Benefit to $1,310, although on a slower schedule than we would have liked.

The choices we are making are fair, balanced and reasonable. Our government has presented a strong plan to strengthen the economy and protect the gains we have all made in education and health care.

Dwight Duncan, Windsor Minister of Finance

< http://www.ottawacitizen.com/opinion/letters/Smart+public+policy/6419800/story.html >

For Sharon Norman, Ontario’s budget plan to freeze welfare rates this year is proof the McGuinty government was never really committed to cutting poverty.

“What was the point of all of those meetings and consultations on a poverty reduction strategy anyway?” she said Tuesday, referring to the province’s 2008 plan to cut child poverty by 25 per cent in five years.

The welfare freeze means Norman and some 880,000 other adults and children living on Ontario works and the Ontario Disability Support Program will be squeezed even more by inflationary increases in food, rent and other necessities.

With the latest Consumer Price Index pegged at 2.9 per cent over last year, the freeze is, in fact, a cut, anti-poverty activists say.

Norman, who has been looking for office work since 2009 when her husband left and the economy tanked, struggles to survive on $599 a month from Ontario Works.

“A lot of the order desk and reception jobs have moved north of the city. I don’t drive. I can’t even get to an interview,” said the 51-year-old Toronto woman.

As a volunteer at a west-end food bank, Norman receives an extra $100 a month to pay for transportation. But all of that extra money goes toward paying her $690 monthly rent.

With just $9 remaining, she is forced to rely on meals from soup kitchens and groceries from food banks. And with no money for TTC fare, she has no option but to spend hours a day walking across town to food banks, volunteer activities and appointments.

She knows she should try to find a cheaper apartment, but after losing so much, she can’t bare to lose her home too.

“It is safe and clean and as a single woman, I can’t imagine moving,” she says, tearing up.

Norman was also shocked at the budget’s plan next January to eliminate two benefits that help people on welfare with urgent housing-related expenses once every 24 months. The community start-up and maintenance benefit covers expenses such as the cost of replacing a bed-bug-infested mattress or moving. The home repair benefit pays for emergency plumbing, roof patching and damage due to fire or flooding.

Half of the $120 million annual spending from the two benefits will go to municipal housing and homelessness initiatives available to all low-income Ontarians.

But anti-poverty advocates said the move cuts an already small pie in half and spreads what’s left even thinner.

In addition, the budget is also capping health-related discretionary benefits for adults on Ontario Works, which pays for things like funerals, glasses and emergency dental care. The measure will save $14 million this year and $20 million next year

The welfare cuts in Tuesday’s budget are on top of the previously announced $90 million in budget savings achieved by delaying a hike in the Ontario Child Benefit to the province’s poorest children.

Norman, who is part of Put Food in the Budget, a group calling on the McGuinty government to introduce a $100 nutritious food benefit, can’t understand why the province’s most vulnerable are being forced to bear an even heavier burden.

“How do they expect people to survive?” she asked. “It’s beyond me.”

< http://www.thestar.com/news/canada/politics/article/1152810–ontario-budget-2012-welfare-rate-freeze-really-a-cut-activists-say >

The federal government has been floating one-sentence options for cutting the Old Age Security (OAS) program — causing a media flurry, and heated public debate. The only details provided to date indicate that changes would focus on those aged 65 and 66, and that it would not be implemented until sometime after 2020.

But what would have happened if the proposed government changes to OAS had been fully implemented in 2011? That is, what if OAS would not have been paid at all to 65 and 66 year olds last year, assuming the Guaranteed Income Supplement (GIS — the income tested benefit that is part of OAS legislation) remained unchanged?

This is an important question to ask, since the primary reason provided by the government for cuts to OAS is to make the program more fiscally sustainable — to save money, in other words.

But OAS is only a part of Canada’s retirement income system that includes other major programs and tax provisions, so cutting OAS would cause ripples throughout the system. Creating a hypothetical scenario helps to see how far the ripples from the cuts might reach.

Since the federal government is short on details, I have used Statistics Canada’s Social Policy Simulation Database and Model, and my own assumptions to create the calculations and interpretation of the results. If OAS had been denied to all 65 and 66 year olds in 2011, the overall costs of OAS would have dropped by about $4 billion. But because OAS is included in taxable income, there would also have been a drop of roughly $500 million in federal income taxes and a $300 million decline in provincial income taxes.

Further, because these seniors (the 65 and 66 year olds) would have lower disposable incomes and hence less money to spend, there would be over a $100 million drop in federal GST and almost a $200 million drop in provincial sales and other commodity taxes and health premiums.

The bottom line: the net fiscal impact of such a cut to OAS, in 2011 terms, would be a fiscal savings for the federal government of about $3.5 billion, but combined with a $500 million loss in tax revenue for the provinces.

Further, the almost 700,000 seniors age 65 and 66 would also have had reduced incomes unless they compensated — for example, by working more, or drawing down more of their savings, or moving in with relatives. If they didn’t, the number of 65- and 66-year-old Canadians falling below Statistics Canada’s after-tax Low Income Measure (LIM) would have more than doubled from about 50,000 to almost 120,000 (with a further 15,000 in their 60s but not exactly age 65 or 66).

Such an increase in low-income rates — most analysts refer to them as “poverty” rates — would likely be offset, at least in part, as many of these seniors would go onto provincial social assistance programs. Federal cuts in OAS would be shifting costs to the provinces, in other words.

To avoid hurting the poor, the government could offset the cut in OAS for those with lower incomes by increasing GIS benefits by a corresponding amount.

But this change would dramatically reduce the fiscal savings for the federal government to about $500 million, taking into account changes in lost federal income tax and GST revenues. The provinces would still lose about $350 million because non-taxable GIS benefits would be substituted for taxable OAS benefits.

So what is the federal government going to do?

Will the cut in OAS save billions in federal spending, while shifting hundreds of millions in revenue losses to the provinces, and more than doubling the poverty rate among affected seniors? That’s what the 2011 hypothetical scenario indicates would happen.

Or will the cut — with a possible modified GIS — protect the most vulnerable seniors, but save far less for the federal government, and still hit the provinces with large revenue losses?

This would mean that the net effect on the fiscal balances of both levels of government combined — what ultimately matters to taxpayers and the economy — would be essentially nil.

On Thursday, the federal government will table the budget and we will see if and how crucial details of the OAS cuts will be addressed. Let’s hope the government does not chose to reverse one of Canada’s greatest social policy successes of the last half century and increase poverty rates among Canada’s seniors.

Let’s also hope it doesn’t choose to shift hundreds of millions of fiscal burdens to the provinces in the name of improving its own fiscal situation. And let’s hope it will not approach public policy with a narrow focus that pays no attention to the realities of a shared jurisdiction and the complexity of programs forming Canada’s retirement income system.

Michael Wolfson is an expert adviser with EvidenceNetwork.ca, and Canada Research Chair in Population Health Modeling/Populomics at the University of Ottawa. He is a former assistant chief statistician at Statistics Canada, and spent several periods during his career in the federal public service developing and advising on pension policy.

< http://www.thestar.com/opinion/editorialopinion/article/1152793–oas-savings-could-turn-out-to-be-costly >

The numbers are far from reassuring. In 2001, one Canadian in eight was over age 65. By 2026, one in five will have entered their golden years. Yet in spite of the aging Canadian population, more than 60 per cent of working Canadians currently don’t have a workplace pension. And even those who do are not guaranteed retirement security.

Further, as employers increasingly opt for defined-contribution rather than defined-benefit pension plans, the burden of managing the risks associated with a pension — such as longevity and the market performance of assets — has shifted to the worker. Access to a stable, secure and adequate standard of living after retirement is becoming increasingly rare for middle-income Canadians.

While the traditional defined-benefit pension plan remains the primary model for occupational pensions — where they exist — defined-benefit plans have been in a slow and persistent decline for more than two decades. And while this shift may have curtailed pension costs for businesses, it has also left workers more vulnerable financially, since many are not equipped with the resources to plan effectively for retirement.

With respect to the policy reform proposals currently on the table, there are ways to improve pension coverage and better manage risk for pension members, while also providing cost predictability for employers. Expanding the CPP/QPP would indeed be worthwhile but, it appears unlikely to be undertaken in the current economic and political environment. Meanwhile, the recently proposed pooled registered pension plan (PRPP), lacks mandatory employer contributions and will do little to reduce risks for individuals.

However, in a recently published study by the Institute for Research on Public Policy, we propose a voluntary pooled target-benefit pension plan (PTBPP). It involves commingling assets across all participating workplaces to maximize scale efficiencies in investment and to manage actuarial risk. Employers’ matching contributions would be mandatory but fixed, as in a defined-contribution plan. As with the PRPP, it would be available to individuals and the self-employed.

Most importantly, upon retirement, members could expect a benefit within a target range, depending on market performance. We propose a benchmark of 50 per cent income replacement, requiring a slightly higher contribution rate than in many defined-contribution plans today.

While the target-benefit design would not eliminate the risk that benefits could decrease due to market underperformance, the model proposed includes mechanisms to mitigate this risk. The plan would be managed by actuaries and investment managers, instead of by workers. To curtail administrative costs, the PTBPPs would be required to maintain a minimum pool of $10 billion, and management fees would be capped at 40 basis points, considerably more cost-efficient than most defined-contribution plans and RRSPs today, which typically pay 250 to 300 basis points.

The extent to which higher management expense ratios can severely limit capital accumulation over an individual’s working life and, thus, pension outcomes is dramatic. Consider two middle-class workers who work 40 years, have the same earnings history and contribute regularly to their pensions. One has a pension fund which pays management fees of 40 basis points, while the other pays fees of 150 basis points. The worker in the more efficient fund will receive a benefit upon retirement 18 percentage points higher relative to annual salary than his/her peer.

The PTBPP could be implemented within the legislative framework recently created for PRPPs, but this would require concerted action by the provinces.

On balance, the proposed PTBPP would provide better pension coverage, cost efficiency and retirement income security for plan members than would PRPPs or most current private group or individual plans. While the PTBPP would not solve all the challenges facing Canadians in securing their retirement incomes, it should yield less volatile costs than traditional defined-benefit plans and be more cost efficient than defined-contribution plans.

For employers, the advantages are undeniable. The PTBPP model is more sustainable than a defined-benefit plan, and it limits risk much like a defined-contribution plan. For a typical defined-contribution or group RRSP plan, total contributions may be slightly higher under this model, but employers would gain immensely improved benefits for their employees. Employees would still face some pension risks under this plan although, with the impact of pooling, the risks would be minimized in a more efficient and effective way than in a defined-contribution plan. For members of a defined-benefit plan facing the prospect of conversion to defined-contribution, the PTBPP would provide a better alternative to preserve future benefits.

Perhaps most important for policy-makers, the PTBPP is a timely proposal with the potential to address many of the limitations of the PRPP within the framework of Bill C-25.

Given the uncertainty surrounding the future of pension reform in Canada, it should be viewed as a key step forward.

Robert L. Brown and Tyler Meredith are the authors of “Pooled Target-Benefit Pension Plans: Building on PRPPs,” published by the Institute for Research on Public Policy ( www.irpp.org). Brown is a member of the executive committee of the International Actuarial Association. He was research chair for the Ontario Expert Commission on Pensions in 2007-08. Meredith is a research director at the IRPP.

< http://www.thestar.com/opinion/editorialopinion/article/1147889–fending-off-canada-s-pension-crisis >