Scaling the welfare wall

Posted on March 24, 2008 in Governance Debates, Social Security Debates – comment/editorial – Scaling the welfare wall
March 24, 2008

When someone in Ontario is forced by circumstances to go on welfare, there are many financial barriers to getting back into the workforce. The cost of transportation, clothing and child care can add up to far more than a minimum wage job pays. Together, the additional costs of working add up to what’s known as “the welfare wall.”

But one barrier virtually guarantees that poor people stay poor. That is the means test, which requires recipients to use up almost all of their assets and savings before they can apply for welfare. If they try to get back into the workforce, they have no financial cushion to pay for these work-related expenses or unexpected bills.

When the Mike Harris government slashed welfare benefits in 1995, it also reduced the level of assets a welfare recipient could keep. For a single person, the level was reduced from $663 to an even more meagre $560. A single parent with one child saw her asset limit drop from $5,000 to $1,487.

Governments worry that if people are allowed to keep savings when they go on social assistance, welfare caseloads will rise. But in jurisdictions with no savings limits, that hasn’t been the case. Ohio, Virginia and Illinois all removed their asset limits in recent years, and it had no affect on their welfare caseloads.

In fact, if people know they have a safety net to get them through the rough patch of moving from welfare to work, they are more apt to make the leap. That was the conclusion of a high-powered Toronto task force of business, labour, academic and civic leaders, which recommended in 2006 that those savings limits be raised significantly.

As part of its strategy to fight poverty, the Liberal government should seriously consider this recommendation, which would cost taxpayers little but help people out of the poverty trap.

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