Towards a New Architecture of Adult Benefits

1. Towards a New Architectureof Adult Benefits May 2011 Michael Mendelson

2. What we want to accomplish • Our aim today is to stimulate innovative thinking about the big pieces (core structure and functions) of a new architecture for adult benefits. • We have a more detailed paper exploring policy and operational issues in more depth, which is available on the Caledon web site. • This is a work in progress. Caledon Institute of Social Policy

3. What’s in this deck • A vision of a new architecture centered on reform of ‘adult benefits’ – i.e., income supports for unemployed Canadians – and allied services. • The deck: • Reviews the concept of ‘adult benefits’ and why they need fundamental reform • Summarizes key criticisms of the current non-system • Outlines the major pieces of a new ‘architecture’ for adult benefits. Caledon Institute of Social Policy

4. The modernization imperative • Canada’s social policy challenge is to modernize social security to meet the demands of its changing economy, demography and society: We need a new‘architecture’ to guide social policy. • Progress on the modernization agenda has been made– e.g., family policy (child benefits, parental leave), public pensions, health care, disability tax benefits. • Structural change is lacking in a vast, controversial and complex area of social policy that has no common name: what Caledon has coined ‘adult benefits.’ This is the part of the income security system most intimately connected to the labour market, and therefore most in need of modernization. Caledon Institute of Social Policy

5. Child benefits: because wages do not vary by family size Family income Adult benefits: replace or substitute for income from employment Adult benefits are a substitution for wages for working age Canadians • Child benefits reflect the fact that wages do not take into account family size. • Adult benefits replace employment earnings for the unemployed. Caledon Institute of Social Policy

6. Types of programs that provide benefits for adults in Canada today • Earnings replacement or substitution for those not working • Canada’s twin pillars are Employment Insurance (EI) and welfare, for those expected to work • C/QPP disability benefits, paid parental leave, workers’ compensation and welfare for those not expected to work • Measures to ‘make work pay’ for the working poor • wage supplements in some provinces • tax credits • Allied services and supports that are contingent upon being on welfare, EI or other income security programs • some employment programs (e.g., training, counselling) • disability supports (e.g., technical aids and equipment, personal assistance, accessibility measures) • supplementary health care (health, dental, drugs) • child care Caledon Institute of Social Policy

7. Modernization challengesfor adult benefits • Despite changes (e.g., periodic constriction of UI/EI, leaner and meaner welfare systems), the current hodgepodge of adult benefits cannot cope with profound changes in the labour market and society: • education and skills are the great divide in the knowledge economy • growth of nonstandard jobs (self-employment, contract, part-time, multiple jobs) • revolutionary rise in women’s labour force participation • marriage breakdown, single-parent families • mass immigration, overwhelmingly to largest cities • low birthrate means that Canada must rely more heavily on immigration for labour supply • persistent poverty, yet half of low-income Canadians work • persistently high unemployment in some regions and communities Caledon Institute of Social Policy

8. What a modern system of adult benefits should provide • Temporary earnings replacement for all unemployed Canadians. • Long-term income support for people with severe disabilities and others who cannot reasonably be expected to earn most of their income through employment. • Access to services (e.g., employment, supplementary health care, disability supports) for all low-income Canadians, whether on income assistance or in the workforce. • Policies and programs to make sure that work pays. Caledon Institute of Social Policy

9. Towards a new architecture of adult benefits • We envisage a three-tier core adult benefits system. • The three tiers would fit into the context of an overall system architecture including allied services and benefits. Caledon Institute of Social Policy

10. Tier 1: Unemployment Assistance • A modernized program of time-limited income support for the temporarily unemployed, with a non-contributory income tested component and a contributory income replacement component working together, analogous to OAS/GIS and C/QPP. • Temporary Income (TI) • time-limited (e.g., six months) income-tested component that is non-contributory serving temporarily unemployed • time limits could be adjusted to be regionally sensitive • could also deliver paid parental leave and other social benefits • could be delivered as tax credit with retrospective income testing or through a current income reporting system • Employment Insurance (EI) • contributory social insurance component provides enhanced income replacement • simplified structure with little or no regionalization (which is instead shifted into income-tested component) • New governance and financing arrangements could be considered. Caledon Institute of Social Policy

11. Tier 2: Employment preparation • Income support and employment services for employable persons who have been unemployed for a longer time. • the main replacement for welfare for people who can be expected to earn their living through work and who have exhausted TI. • Unlike welfare, the main focus of the program would be to ensure active search for and preparation for employment, rather than policing the benefit system. Benefits would be contingent upon clients agreeing to an employment preparation plan. • interface with clients would mainly be with ‘opportunity planners’ who would provide access to employment services . • would require greatly simplified benefit system, which would be wage-like (flat-rate, bi-weekly, could include CPP contributions) and contain few discretionary elements. Emergency needs could be met through a Social Fund. • No fixed time limit, but not expected to provide permanent lifetime support. Caledon Institute of Social Policy

12. Tier 3: Basic Income • An income-tested safety net for those who cannot reasonably be expected to earn an adequate income from employment • mainly people with severe disabilities, many of whom are now forced onto welfare • Long-term support (not time-limited) • Need to work out subrogation issues so that Basic Income is paid after other programs like C/QPP-D and private disability, not before. Caledon Institute of Social Policy

13. Allied services and benefits • In addition to the core three tiers, a new architecture of adult benefits should extend support to the working poor in order to break down the welfare wall, providing better and more equitable support for all low-income Canadians not contingent upon being on welfare or some other income security program: • adequate child benefit and child care services • supplementary health and dental care • disability supports and other social services • social fund (emergency needs) • supports for working poor (e.g., minimum wages, labour standards, wage supplementation, targeted tax relief) Caledon Institute of Social Policy

14. A new Canadian architecture for benefits for working age adults Caledon Institute of Social Policy

15. Engaging in federal-provincial dialogue • While there has been significant disenchantment with substantive federal-provincial negotiation, due mainly to the failure of the 1990s Social Security Review, there are other successful models of major negotiated program changes, namely the Golden Era programs of the 1960s (Canada Assistance Plan, Canada Pension Plan, medicare) and late 1990s’ NCB (which got its major political push from the provinces working together). • Because of the inextricably entwined responsibilities of the orders of government in Canada, there is no alternative but to engage in a concerted federal-provincial exercise in order to achieve major reforms. • Given the package’s promised enhancement of federal responsibilities, most provinces would be eager to engage with the federal government. The social policy area recently has established cooperative precedents through the NCB. Caledon Institute of Social Policy