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SOCI - Standing Committee

Social Affairs, Science and Technology


Proceedings of the Standing Senate Committee on
Social Affairs, Science and Technology

Issue 2 - Evidence - Meeting of December 13, 2007

OTTAWA, Thursday, December 13, 2007

The Senate Standing Committee on Social Affairs, Science and Technology met this day at 10:45 a.m. to examine and report on the impact of the multiple factors and conditions that contribute to the health of Canada's population — known collectively as the social determinants of health.

Senator Art Eggleton (Chair) in the chair.


The Chair: I call this meeting to order. Welcome to the Senate Committee on Social Affairs, Science and Technology. Today, we will be examining poverty, homelessness and housing.


Our committee has two subcommittees. One is the Subcommittee on Population Health, and the other, the Subcommittee on Cities, studies the major challenges that face our cities. As poverty, housing and homelessness are issues common to both subcommittees, we have decided to meet as a full committee.

We are also building upon some previous work that has been done in the Senate on the matter of poverty. The 1971 report headed by Senator Croll comes to mind, as well as the 1997 report by Senator Cohen entitled Sounding the Alarm: Poverty in Canada.

At the same time, our study is complementary to the work being done by the Standing Senate Committee on Agriculture and Forestry, chaired by Senator Fairbairn, who is also a member of our committee. At the request of Senator Segal, they are dealing with the issue of rural poverty.

Today we have two panellists instead of the more frequent four, so we have a good opportunity for dialogue. Dr. John Richards, Professor, Public Policy Program, Simon Fraser University, has written extensively on social policy in Canada, primarily via the C.D. Howe Institute, where he holds the Roger Phillips chair on social policy.

Earlier this year, the institute released one of his articles, entitled Reducing Poverty: What has Worked, and What Should Come Next. We have been reading about that.

Another report, which got more attention last year but is still very current, comes out of Toronto.

Mr. John Stapleton, who is a Fellow at St. Christopher House, is here. He is the former research director for the Task Force on Modernizing Income Security for Working-Age Adults, MISWAA. The task force was made up of more than 50 civic leaders, supported by a working group of more than 40 experts on income security. In fact, when they unveiled the report in Toronto, I was there.

Gentlemen, you may make your presentations in the order we have on the list or you can switch it around, whichever you like.

John Richards, Professor, Public Policy Program, Simon Fraser University: Thank you for the invitation. Poverty is a scourge, and I congratulate the committee for wanting to address the issue in depth. My colleague John Stapleton and I will disagree on certain matters, and I trust you will push us hard. This is a subject of eternal importance. It is not one that your committee or I or Mr. Stapleton will resolve this morning, but it is one that every civilized society must address.

I wrote this latest report slightly tongue in cheek. I wanted to force onto the table the good news of the last decade, namely, that by one standard measure of poverty in Canada — the after-tax low income cut-off, LICO — poverty has declined by a third in the last 10 years. Another favourable trend, which you can see in the short document I prepared for you, is that the employment rate has dramatically increased over the last decade. This is, undoubtedly, good news.

Why has there been this significant decline in poverty? Obviously, the economic recovery matters a great deal. I stress, at a level of generality, three broad public policies. One of them — and to be crude about it, it is of a soft-love nature — the National Child Benefit System, was very beneficial. It eased the welfare-to-work transition for low- income people with children; it enabled families to leave welfare at a lower income level; and it provided income for people slightly above the welfare level. It was never intended as a program to increase income for those without earnings. The program was designed, in consultation with the provinces, with the intent that they reduce welfare benefit levels dollar for dollar for the child benefit payments.

The provinces undertook, given the savings in welfare budgets, that they would apply the savings to other programs of value to low-income families with children, such as improved child care and earnings supplements.

In the report that I wrote and in the summary that I have provided you, you can see that I place a great emphasis on employment. Another piece of the good news of the last decade has been a dramatic increase in employment income among at-risk groups of people, such as single-parent families. The poverty rate remains far too high, but it has dramatically dropped, from over 50 per cent a decade ago to roughly a third now.

The median market income, which you can see in the figure I have provided to you, has increased impressively. Primarily, there has been an increase in the employment rate among this category of families. All of this is good news.

Employment has many benefits. There is the obvious benefit of improving income. In longitudinal studies about poverty, working parents as role models are important, independent of other factors, in increasing the probability that children born into poverty will complete high school and avoid teenage pregnancy. These are two powerful indicators of escaping poverty intergenerationally, namely, completing high school and avoiding teenage pregnancy.

For the first time among rich countries, the poor tend to be more obese than the well-to-do. This is a curse. Employment, in part, aids in avoiding the lifestyle diseases associated with inactivity.

Finally, particularly among men, protracted unemployment is conducive to depression and perverse behaviour, including suicide.

For all of these reasons, employment should be central to anti-poverty policy.

I come to another point. If Mr. Stapleton and I have disagreements, it is that MISWAA and Caledon Institute of Social Policy, with their proposals of guaranteed annual income-like programming, have tended to minimize the professional responsibility of social workers. When speaking to students, I often say that social workers are equivalent to GPs, general practitioners in the health service. A GP is the gateway to expensive health services. He or she must make decisions about what is best for the patient. In many ways, a good professional social worker must do the same, making the decision, for example, as to whether the applicant is mentally ill, physically disabled or employable. Errors will be made, inevitably, but we cannot eliminate this important function.

There is a danger in Ottawa, where what Ottawa can do to relieve poverty is primarily the organization of transfer programs, to underestimate the importance of this role. In the last decade, what we have seen in provincial social service ministries, independently of party — and I am not making the case for any political party, whether it be Mike Harris or Conservatives in Alberta; I come from a Prairie NDP background — the provincial governments decided to exercise that social work function more ambitiously.

Those were some very general introductory remarks about what has happened in the last decade. Before I yield the floor, let me quickly speak about what I believe are some severe pockets of poverty that the committee should pursue further and where both federal and provincial intervention is required.

If you turn to page 4 of my presentation, you will see that I placed high on the list kindergarten-to-Grade-12 education among the poor. Canada has a reasonably good kindergarten-to-Grade-12 system by international comparative standards. There is a new Organisation for Economic Co-operation and Development-Programme for International Student Assessment study, OECD-PISA, which came out last week, but what PISA or OECD cannot get at is the dropout phenomenon. There is nothing more important, in the long run, in trying to minimize poverty, than to improve the next generation's acquisition of education.


In the current issue of the magazine L'actualité, a colleague of mine, Pierre Fortin, has an article on the tax system in Quebec. I would like to quote you the final paragraph of that article:

. . . our main weapons are a merciless fight against dropping out and strong support for staying in school. It is a proven fact: education is still the best way of increasing the number of people with good jobs. . .

That is very well put. I could not have said it better myself.


Here, Pierre Fortin, who is perhaps the premier economist of my generation in Quebec, makes the point that must be made. In any report that you deliver, I trust you pay close attention to the problems of education among the poor and what can be done. There is no one silver bullet. I do not believe general universal child care is required as a high priority social program. I very much believe that early childhood education amongst disadvantaged groups is required. This is a program that the Americans have endlessly evaluated since the Great Society programming of this nature in the 1960s. It is extremely important.

I turn to Aboriginal poverty. While I was here in Ottawa, I gave a seminar on Aboriginal policy. I have written a good deal on Aboriginal poverty. The problems are multiple. They are compounded by racial tension and a sense of past injustice. However, I am not one to believe anthropology and law are the primary ways to resolve and address Aboriginal poverty.

There is a tendency in Ottawa to say that we have accorded the design of social programming north of 60 to the territories and on-reserve to bands of First Nations, as you have preferred to define them, and that is it. It is not good enough. The on-reserve education performance is egregious. It should not remain unexamined. This is something about which I have written extensively. Michael Mendelssohn, from the Caledon Institute of Social Policy, has written extensively about it; others have written about it. There must be professionalism brought to on-reserve education.

We must realize that approximately three quarters of Aboriginal kids are studying in provincial school systems, not in on-reserve systems. Only one third of the Aboriginal population lives on-reserve, and of that one third, roughly one third of the kids is studying off-reserve. Provinces are doing better, but not nearly good enough.

I take the occasion to congratulate my province, British Columbia. It is the one and only province that publishes at a school level evidence on performance of Aboriginal kids. If we are worried about Aboriginal poverty, and if we feel education is crucial, the first approach should be to find out some facts. We know very little about the performance of Aboriginal children going through kindergarten-to-Grade-12 systems.

Your committee could potentially put the boot, gently, to both Aboriginal leaders and provincial governments to document what they are doing. How can we possibly achieve the noble target of a Kelowna accord to close the gap in terms of high school completion rate between Aboriginals and non-Aboriginals if we do not have a clue what is happening to kids from kindergarten through Grade 12? At the end, we then find we have high dropout rates, and Aboriginal kids are not making it.

There are many other points to be made.

Given my time, I would invite Senator Keon to pursue matters of population health and poverty when we have time to talk.

We deinstitutionalize too many mentally ill. We do need to address issues of housing among mentally ill. Welfare caseloads have been halved over the last decade and an increasingly high share of welfare caseloads at the provincial level are people with physical and mental disabilities. My colleague Mr. Stapleton will talk about marginal effective tax rates. I cannot resist, as an economist, making a few comments about this.

We have enthusiastically tried to solve poverty by means of targeted transfers, of providing income to the poor on a rules basis and then clawing it back as people become less poor. We have done this to, for the sake of informally describing it, the $20,000 to $40,000 family income group, people who are near-poor. They are obviously not poor and destitute. Over that entire range on average in Canada, the effective tax rate for a family with one kid is over 50 per cent; for two kids, 60 per cent. I am embarrassed that in my home province of Saskatchewan, with which I was involved in public policy in the 1990s, there was a $5,000 income range in the late 1990s, where the effective tax rate was 91 per cent. That meant that over this range, to earn an extra dollar, the family kept nine cents. We must realize that among people in this income range the actual tax rates are far less important than the clawing back of targeted transfers, which begin at about $20,000. If the personal income taxes, payroll taxes, clawing back of the National Child Benefit and clawing back of provincial top-ups are added up, then bizarre situations arise of people with earnings of $25,000 who, if they earn another $100, get to keep $30. This is not acceptable.

My final point is, I am a great fan of earnings supplements as a way of making work pay. It is no good just to talk about it in principle; we need to talk about its application and implementation.

The Chair: Thank you. John Stapleton, take equal time.

John Stapleton, Fellow, St. Christopher House, Toronto: Thank you, Mr. Chair, honourable senators and guests and my colleague John Richards.

I was invited to start out with a short comment on a report just published by the Metcalf Foundation called Why is it so tough to get ahead? That report is in your dossiers today. Mr. Richards has given a good introduction to that. It studies three different groups of people in poverty enclaves in Toronto, in North Rexdale, Parkdale and Downsview, and talks about what happens to people receiving social assistance, as well as receiving or living in public housing, and the effects of high marginal effective tax rates.

My principal proposal coming out of that is that if governments remain addicted to high marginal effective tax rates, which it seems they are — it is a somewhat intractable dilemma — then at that point where children move from supported independence around the age of 18 into true independence, we try to take a time out and freeze-frame perhaps the various different clawbacks that take place and try to allow a calming zone for three or four years so that we are able to leave that underclass behind.

That is sixty-two pages brought down to about a minute of comments. That is where that report comes down. I hope it is of interest to you.

In my remarks, I will cover whether poverty in Canada is getting worse or better, whether poverty activists misuse poverty data, whether welfare reform has worked, what the role of income security is in poverty reduction, what governments can do, what Canadians think and, finally, as an ending note, whether poverty is worth resolving.

I must admit, that is a tiny bit unfair in my remarks, but I have indicated to Mr. Richards that I will not only cover his commentary for the C.D. Howe Institute but also some of his audience and the people who have written about his report since then — for which he is not, of course, responsible.

In a nutshell, looking at whether poverty in Canada is getting worse or better, poverty in Canada is improving or worsening depending on the period of measurement.

If one measures from the end of a prolonged structural recession, for example, at 1994 or 1995, to the end of a long and sustained period of growth, such as 2005, then many measures will show dramatic reductions in poverty. This is what Mr. Richards has done for the C.D. Howe Institute commentary on reducing poverty. Similarly, if one measures from the top of an economic cycle to the top of a recession, which sometimes happens, then many measures will show dramatic increases in poverty.

These observations show how important it is to measure poverty between comparable points in Canada's economic cycles. This has been done, I would say, fairly by Campaign 2000, although a recent editorial in the Ottawa Citizen would disagree. The report card for 2007 uses comparisons of the top of the cycles for 1989 and 2005, and they show that poverty in Canada, despite the extremely long period of recovery we have had over the last 10 years, has stayed roughly the same at 11.7 per cent.

MISWAA tried to recession-proof our interventions in poverty. Canada's interventions against poverty should not be dictated by where we are in any economic cycle, and the whole concept behind the recent MISWAA report was an attempt to recession-proof our approach to poverty and income security. The task force came to what I believe is the important conclusion that responding to poverty during recessions and doing nothing during better times, as is often what happens, is not good for Canada and makes matters worse when inevitable downturns occur.

This is not just another economic cycle. It is also a deeper and more troubling issue concerning the most recent era of economic growth. In the interests of time, I have a long quote from an economist Armine Yalnizyan, and I will go to the bottom of the page. She notes:

When Richards points to reductions in poverty rates since 1996, the immediate answer must be that poverty rates are better than in the mid-1990s. However, they could scarcely get worse after two profound periods of labour market transformation — in the wake of the 1981/82 recession and the 1990/91 recession. The economy has been remarkably robust for more than a decade; and Canada has been at or near the top of the growth in the G7 for most of this period. But if Canada's economy is failing to meet people's basic needs in these the best of times, do we think it's going to get better during a recession?

My second point question is with respect to whether poverty activists misuse poverty data, because certainly a number of articles have come out in recent weeks on that. I note it as a troubling recent trend in editorials and newspaper — the Ottawa Citizen, Margaret Wente —where writers have noted that anti-poverty activists have a tendency to use misleading or questionable statistics in order to further their anti-poverty agenda. Examples include anti-poverty activists' use of comparison periods that show poverty in its worst possible light; failure to use comparison periods that show poverty as decreasing; low-income cut-offs that are not real poverty lines according to Statistics Canada; and a failure to show success stories. The point is sometimes made that activists are members of an entity that some members of the media call the poverty industry, and that it is in the activists' self-interests to show poverty in its worst possible light in order to keep their agenda on track and to further secure their own jobs as part of this poverty industry.

We have already noted that using the comparison period of 1995 to 2005 compares a trough in a sustained economic cycle to the top of that cycle. This is also what the Ottawa Citizen has done, what Ms. Wente has done and what John Richards has done. Comparisons, I would say, are irresponsible, and it would be similarly irresponsible for anti- poverty activists to use these periods.

Statistics Canada disavows that their LICO as a measure can be used as a poverty line. It is equally worthy of note that Canada, unlike the United States, for example, does not have an official poverty line. We are in that minority of countries that do not have an official poverty line. As a result, no matter what line is used, there will never be official sanction. Andrew Jackson of the Canadian Labour Congress, CLC, recently noted the following in his letter to the Ottawa Citizen:

The Statistics Canada low income (LICO) line used by Campaign 2000 is indeed not an official poverty line, but it is the best measure we have.

He notes:

Poverty measured by the Market Basket Measure, a measure developed by governments to judge the number of those who cannot meet basic needs, is at roughly the level as indicated by the LICO measure.

I will now turn to whether welfare reforms worked. Many journalists and academics who have written about welfare reform in the 1990s have made two key points. The first is that the upturn in the economic cycle simply does not and cannot explain the very large drops that occurred in welfare caseloads in the latter part of the 1990s. The second point is that as we climbed out of recession in 1980s, welfare programs continued to grow in their generosity and caseloads grew even though the economy improved throughout the late 1980s.

In fact, Mr. Richards makes the same point in his commentary.

In answer to the first point, it is not hard to conclude that if a government closes the doors to its public assistance programs, there will be fewer people in receipt. Exit surveys show that approximately 60 per cent of those disentitled traded welfare poverty for working poverty, while 40 per cent went elsewhere. Sixty per cent equals a grade of C, and that is not good enough, especially when most of those making the grade are now in the ranks of what we call the working poor.

The fate of the other 40 per cent of disentitled people is a Canadian tragedy. They are homeless in our parks, sleeping on our streets and living in enclaves of poverty throughout Canada. There is also no question that the number of people receiving social assistance continued to grow throughout the 1980s in Canada as times improved. However, welfare programs have traditionally operated in the shadow of the unemployment insurance, UI, program, as it was then called. UI was excessively slashed, resulting in caseload increases in welfare programs through the late 1980s. When UI caught cold, welfare caught pneumonia during that period.

With the even more drastic cuts of 1993 during the tail end of the more recent recession, caseloads climbed, reaching post-depression highs before welfare started to close its own doors with absolutely predictable results.

Just as an aside, in Ontario, in July 1935, we reached the apex, where 15.5 per cent of Ontario's population was on public relief; and in 1991-1992, we got to about 12.7 per cent of Ontario's population. It really was a post-depression high.

Therefore, to conclude that welfare programs were increasing in size due to their generosity simply ignores the social policy environment. We must always remember that welfare is the last payer in the income security system, and it is the final net that catches everyone not caught by others.

I will now turn to what I call welfare pathology. The arguments favouring welfare cuts do not just concern issues of generosity leading to higher and higher numbers of people receiving benefits. There is a deeper argument here, that there is a substratum of people among us who are somehow suspect in their own personal goals. These are people who would find it preferable to live on the very low amount of money provided by welfare programs rather than be self- reliant. For them, higher welfare is somehow the clarion call to a life of dependence.

The use of concepts such as tough love and soft love invite readers to see themselves in the patronizing role of parents of the poor. We treat the substratum of people who do not share our values as suspect strangers, not as our familiar neighbours. Of course, we seldom personally know people in the welfare substratum; although, both John Richards and I do deal with such people on a weekly basis. However, we are invited to understand that they are constantly at the ready to leave work and self-improvement behind at the slightest sign of generosity in our income security system. In his article Reducing Poverty: What has Worked, and What Should Come Next, John Richards appears to suggest that receipt of public assistance leads to withdrawal of labour on the part of those who receive these funds. He notes in turn, as he has noted this morning, that this leads to pathologies such as teen pregnancy amongst young women and depression amongst men.

If it is true that receipt of income from the state has these effects, then perhaps we should begin to worry about our seniors and our children, who may also be compromised by the ravages of income security measures designed to help them make ends meet.

In short, those who champion welfare cuts play to that audience that has already been seduced by the idea that the problem with welfare is the people who receive it.

Anti-poverty activists and think tanks of every ideological stripe have argued for years that welfare ensnares and entraps people who try to climb their way out. However, rather than looking to new designs for income security programs suggested by MISWAA, think tanks and others, in order to reduce the role played by welfare programs, those favouring cuts see the best possible solution in the form of disentitlement, resulting in the dual hardships of working poverty and homelessness.

Many of the people Mr. Richards describes as social policy success stories will not be able to save for retirement or support their children in post-secondary education. Disentitlement policies blame the recipient for the bad design of welfare programs and the lack of intervening programs. It is a classic case, as John Kenneth Galbraith said, of hitting people over the head and then blaming them for falling.

I have a few notes on what we spend on income security. Right now, it is an easy number to remember — and I hope you do — that Canada's income security programs spend more than $100 billion a year in transfers to most Canadians. Families with children receive $10 billion; our senior citizens receive $50 billion, about half the money paid out; persons with disabilities receive almost $25 billion in transfers; and social assistance and the employable case load receive about 5 per cent of the $100 billion spent — depending on how it is defined and how people who are sick are accounted for, then it could be as high as 10 per cent.

As far as welfare and an anti-poverty agenda are concerned, no one seriously sees welfare as the centrepiece of anti- poverty strategy. Welfare needs to be redesigned and its role reduced. Why do we constantly hear about the problems and issues that beset welfare programs when anti-poverty measures are contemplated?

Canada needs more than just income security. In addition to decent income security programs that shrink the role of welfare, it is our programs, such as improving affordable child care, housing, post-secondary education, language instruction for newcomers and training programs, that lead to the better jobs and standard of living that most Canadians want.

We also need to address income inequality to increase our overall standard of living. Growing income inequality is destructive to our basic social fabric when those at the bottom are groups that are disadvantaged in multiple ways, such as recent immigrants and many First Nations people.

Rather than dismiss or minimize the problems of poverty, we should reflect on policies needed to address it: higher minimum wages, better access to employment insurance, higher child benefits, affordable housing, training programs and those policies that will lead to better jobs.

What can government do?

The current federal government has scheduled $191 billion in cuts during the first 21 months in power. That is over 20 times the cost of our social assistance programs now, all the way across Canada.

Eighty per cent of Canadians believe that poverty is a serious problem, and 75 per cent believe that government does not do enough to resolve it.

Is it worth resolving? I believe that it is all the more compelling to address a problem now, once progress has been made, as Mr. Richards noted. The logic of those who favour disentitlement appears to be that making progress is a signal to abandon the search for solutions and shelve our plans to make further improvements. I believe Canada deserves better.

The Chair: Thank you very much to both of you for very thoughtful submissions.

Professor Richards, you have said that poverty is a scourge, and you have outlined a number of points that you believe make it a scourge. You talk about the need to address education, the school dropout problem, Aboriginal poverty, the mentally ill and physically handicapped, et cetera; yet you use statistics that give comfort to those who do little to address this scourge by saying that poverty has been reduced by nearly a third.

You use the low-income cut-off measurement in your poverty statistic, and even Statistics Canada says it should not be used for that purpose. Do you have other statistics that you use to justify that position? What about the comment Mr. Stapleton made about child poverty being at roughly the same level as it was in 1989 when the House of Commons said that it would eliminate child poverty by 2000? That does not seem to coincide with this one-third reduction.

There are other statistics too, and that is always the danger of statistics; they can be read many different ways. In Toronto, we hear of statistics about the gap between the rich and poor widening. We have a number of neighbourhoods in Toronto. Thirteen were identified by the United Way, in their poverty by postal code, as being severe pockets of poverty. Are you not letting the politicians off the hook on these issues when you say that it has been reduced by nearly a third?

Then we also hear many stories about people who try to break down the barrier of the welfare wall, who go out and get some part-time employment, and many of these people are single mothers. They end up getting a part-time job. In Ontario, they lose much of their welfare as a result of that — I believe 50 per cent. They can also lose their medical and dental benefits, and they have additional costs to absorb travelling to and from work. When you add that up, it does not pay to get off welfare. They want to, but the system makes it difficult to make ends meet.

If they have a child at home of university or high school age who gets a job to help out, that can affect their rent as well. They end up having to pay more rent. There are many people hitting this wall. What about those people? Are we really reducing poverty when we look at those cases? If the statistics are true to some extent, do they really measure what is actually happening out there? This concerns me. Does it not belie what you have said, that poverty is a scourge, and we need to address all these issues?

Mr. Richards: There is more than one question in that initial statement. If you will allow me, I will try to break it up.

On the discussion of the statistics, I did not expect, when I published this monograph, that so much of us in the media — in The Toronto Star, The Globe and Mail and elsewhere — would decide that we all needed a statistics exercise.

The low-income cut-off, LICO, has been used in Canada as the informal benchmark for poverty for nigh on 40 years. Is it a good one? The intuition behind it is to say that people spend on necessities. Let us take the income level at which we expect people to spend 20 percentage points more than average to be poor. There is an inherent arbitrariness to it. The reason I chose it is precisely because it has been used in Canada so extensively. There have been attempts to come up with more absolute measures — very conservative measure on the one hand or the market basket measure on another.

Internationally, people frequently use something called a low-income measure, which is the fraction of the population with incomes below some fraction of median income. It, too, is arbitrary. Personally, if I could replay the last 50 years, I would suggest that we use the low-income measure as probably a better measure, making it more easily comparable across countries.

Nonetheless, we are Canadians, and only in Canada do we use something called the LICO. In this particular exercise, I was not about to get into a statistical discussion about how to measure it.

The second question evolves around the matter of the time period that I used. I do accept a certain critique on that. If I was to redo this paper, I would give you the type of tables and figures that I provided to you in the small supplement. If you turn to pages 7 and 8 of that, you will see that I have given you three time series dating back to the late 1970s.

On page 7, you have the LICO post-tax poverty rate as well as Canadian welfare utilization rates, which is the proportion of Canadians in receipt of general welfare. On page 8, you will see the data on the employment rate.

You will note that we have increases in poverty rates during recessions and declines in poverty rates during times of economic recovery. We managed to reach the minimum, in the order of a 10 per cent poverty rate, where we are currently, in the late 1980s. However, we did it at a time when we were relying quite extensively on social assistance.

In Canada, welfare utilization rose dramatically during the early 1980's recession, and it did not retreat nationwide. By the end of that recession, we still had nearly as many Canadians proportionately utilizing social assistance as we had at the worst of the early 1980's recession.

At the time, there was a general sense among many poverty activists and officials responsible for social policy saying that it was all right that we rely on this as a means of alleviating poverty. The moment that the recession hit in the early 1990s, we had a phenomenal increase in utilization of social assistance.

Many of the innovations that took place in the mid-1990s admittedly were not motivated by social concerns or policy activists such as Mr. Stapleton. Canada was in very dire fiscal straits. People were seriously talking about major sell-off of Canadian debt. They were talking about trusteeship for my province of Saskatchewan as well as the province of Newfoundland. Many changes were made under fiscal duress, to medicare, public spending and, among other the programming, social assistance. Provincial governments decided they simply could not afford a pattern of social assistance generosity as had been the overall strategy in the 1980s.

Ironically, it began with an Aboriginal social assistance minister by the name of Mike Cardinal in Alberta, who was, by all accounts, the pioneer in applying stricter social assistance protocols. Dire predictions were made about the impact on poverty.

I do defend what I argue in that we have a healthier situation now than we did in the late 1980s. Employment rates are higher, and the benefits of employment among at-risk groups are higher than when in the late 1980s, we were relying more on social assistance.

Certainly, child poverty is still an issue. I am not implying some world view that we have the best of all possible worlds. However, in Ottawa, where Ottawa has dollars, they tend to see all problems as similar to nails and they have a hammer, so they want to bang on them with a bigger transfer.

There is a tendency in Ottawa not to be involved in social policy administration and not to take seriously enough the implementation difficulties which are, to the extent that public officials grapple with them, much more so at the provincial level.

By all means, let us do a better job of early childhood education among the poor. Let us get that program nailed down more precisely and better than we have.

Are we letting politicians off the hook? I do not want to let politicians off the hook. I spent half of the report talking about serious pockets of persistent poverty that need much more detailed attention. I have no intent of letting politicians off the hook. I do not, however, believe the solution in general is increased general transfers.

The Chair: Mr. Stapleton, do you have any comments on the question?

Mr. Stapleton: I do not disagree with anything Mr. Richards has said in terms of those caseload increases in the 1980s and what happened in the 1990s; all of that is true.

However, the idea that the problem with welfare was the people who are on it — in other words, because of an economic downturn people go onto social assistance — and that the spur of poverty — in other words, disentitlement is the answer to it — as opposed to reforming welfare design seems to me to be quite wrong-headed.

In fact, I disagree with another point; I believe we do need more income transfers. I pointed out in my earlier remarks that of our entire income security system, the portion that is devoted to social assistance for employable persons is 5 per cent at low estimate and 7 per cent at a high estimate. We have gone too far the other way. In other words, we need to have more income transfers.

When we go back to the image of self-sufficiency, very few of us are truly self-sufficient and truly self-reliant. We all depend, to one degree or another, on infrastructure, government services or various supports. We have gone too far in the other direction. We relied too much on social assistance. We do need these intervening programs to be in place for people, especially ones who are trying to escape, as Senator Eggleton put it, the welfare trap.

Senator Munson: I would suggest that we must have a different type of dialogue when we talk about working with poverty. Attitudes must change in the sense that we are always using phrases such as ``those people,'' ``people over there,'' ``us'' and ``them.'' We have to get around that.

I spoke to a group of people in Renfrew County recently, which is not too far from Ottawa. I was shocked to learn that within the room, both parents of the poor children who live there are working. You mentioned, Dr. Richards, that employment rates are higher with at-risk groups, but that is not good enough. The problem is that these jobs are seasonal and minimum wage.

There are families out there where two members of one family are working overtime. From my perspective, this is the new face of poverty in this country.

Dr. Richards, you emphasize the importance of employment to get individuals and families out of poverty, yet you say that minimum wage employment will not get a family out of poverty. If employment is not enough, what else do we need to do?

Mr. Richards: That is a nice entree into the subject of earnings supplements. This is a bit of jargon that academics, social policy types and administrators are familiar with, but maybe it is worth a general introduction.

Over the last century, the income level possible without formal education has either declined or stagnated in all industrialized countries. The result has been that those people without formal education, or with limited formal education, working full time can often find themselves in poverty, as you are describing.

What do we do? In the long run, ideally, we minimize those who fall through the cracks of the kindergarten to Grade 12 education system, but that does not address your immediate concerns. Much of social policy in industrialized countries — Americans, to give them credit, have pioneered this — have turned to earnings supplements to try to get people into the workforce. There are many psychological benefits for people working relative to not working and long- term benefits for children's success. As you rightly say, working full time at a low wage can result in a family still being poor. Therefore, supplement the earnings.

I would have liked to have had a colleague Rick August here this morning, but he could not come. You can make note of his name and talk to him independently. He is a senior official in the social services in Saskatchewan and probably the single most knowledgeable Canadian on the implementation of earnings supplements.

Saskatchewan introduced a program in the late 1990s, which is very generous in supplementing earnings among people in the workforce. It is also designed with a so-called quick delivery system, whereby minimum paperwork is needed; earnings can be reported via touch-tone telephone and a supplement payment can be received in a credit union account in Swift Current, Saskatchewan, in two weeks, so the supplement feels like wages.

This is an excellent program. Other provinces have copied it, but have not done it as well as Saskatchewan. The federal government is introducing a tax-based equivalent — the so-called Whitby joke about the constituency of the federal finance minister. It is a tax-based program that tries to do the same thing. It really addresses a somewhat different problem, that is, the people who are stable in the labour force and trying to increase their incomes. It has benefits; it does not tackle as well as does the quick delivery provincial system, the idea of providing a very strong incentive for the unemployed to get into the labour market.

Both the federal tax-based system and provincial quick delivery systems are ideal programs to make work pay — to use the slogan — and to some extent resolve the problems you are concerned about.

Senator Munson: Since 1995, Professor Richards, you said that Ottawa has penalized frequent users of employment insurance, and that is a good thing — I believe you said that. You then said that prolonged unemployment leads to depression; and yet you seem to imply that cutting off benefits will make them less depressed. I am trying to make sense out of that. Why should unemployed, laid-off people, ``be penalized''?

Mr. Richards: There is a long discussion behind this of which you are probably more familiar than I am, senator, as to the appropriate role for unemployment insurance. Is it an income of last resort, or is it a program intended as replacement income for those who experience unanticipated unemployment? The boundary between provincial social assistance and unemployment insurance became very blurred by the mid-1990s.

The program of unemployment insurance was in danger of losing credibility among Canadians. The idea that it be a top-up for seasonal wages was what most Canadians felt the role of unemployment insurance should be. Consequently, the reforms made in 1995 and 1996, as with other reforms, impacted the health system severely as well. Some of them were good and some bad. We had to make some tough reforms to our social policy framework. We could not carry on with the social policy network programming as we had put it in place in the 1960s and avoid a fiscal meltdown.

I put it to you that the basic purpose of unemployment insurance is income for those who face unanticipated unemployment. To the extent that we are facing, and do face, not just in Atlantic Canada, problems of poverty among those with work, we should be addressing it primarily by programs other than unemployment insurance.

Senator Munson: I do not want to ignore Mr. Stapleton, but Mr. Richards intrigues me. You write that tough love policies that restrict access to social assistance and reduce benefits have an adverse effect. The minority who do not obtain employment become worse off. You then point out that the problems of poverty persist and highlight six areas or pockets of deep poverty that need to be addressed.

Is it possible that tough love policies have contributed to the problems now being faced by some of those pockets of deep poverty that you have identified? Can you explain what you mean by worse off? Why and in what way are these individuals worse off?

Mr. Richards: I come back to this crucial fact that many of the changes made to our social policies in the mid-1990s were broad-brush programmatical changes imposed on the federal and provincial governments because of fiscal duress. One measure of making people worse off is the so-called poverty gap measure. I presume you do have a copy or have downloaded the report. It gives some data. I invite you to see the matter further on page 6 of the report. The poverty gap is a measure of the income of those who fall below whatever poverty measure we are using.

There is an indication of matters getting worse because there has been a 5 per cent increase in the gap. This is actually measuring it the other way around. This is the gap between the poverty threshold and the income of those below it. We could do it either way, measure the income of those below it or the gap between the threshold and the income.

Matters have got somewhat worse for the smaller percentage still below it. I do not want to be casual about that. I admit that I am a comfortable, well-paid, middle-class professor. I happen to live in a poor neighbourhood of Vancouver, but I am certainly not poor. Overall, my neighbourhood has improved over the last 10 years. I am very conscious that there are many people who are still very poor and suffering in ways that income does not measure.

The Chair: Before I move on, Mr. Stapleton, did you want to comment at all on any aspects of the questions?

Mr. Stapleton: Yes. Working poverty ought to be an oxymoron in Canada, but it is not. The idea that people can be working full time at minimum wages and still be poor is really a disgrace in Canada. I do not agree with the idea of the tough love and soft love analogy with which we are being presented. It is interesting that term ``tough love'' came out of a company called Synanon in the United States. It was a particular approach to treating addicts. It had a 10 to 15 per cent success rate, and, as a result, the company closed down some decades ago and went out of business completely.

Tough love, similarly as an analogy, ought to go out of business here. When we talk about employment insurance, for example, I talked to a woman at St. Christopher House last week who was making 43 per cent of the minimum wage at $7,200 a year. She pays the employment insurance, EI, premium as a percentage on that $7,200 a year and has utterly no prospect of ever qualifying for that program. She simply will not get enough hours within the variable entrance requirements to do so.

Consider someone at 43 per cent of the minimum wage, who is categorically ineligible for welfare and unemployment insurance no matter how you look at it, and then say that the government has done good things with EI over that term. The statistic is that 22 per cent of people unemployed in the city of Toronto are eligible for EI, and we have upwards of $54 billion in EI surpluses in the General Revenue Fund. I would say that we have gone too far.

Senator Trenholme Counsell: Thank you, gentlemen, for the most inspiring and informative presentation. I will zero in on Dr. Richards' point about kindergarten to Grade 12 education among the poor. I thank you for your strong remarks on early childhood development and education.

The studies have shown that the largest number of vulnerable children is in the middle class, considering the learning disabilities and all the developmental problems. Many lead to vulnerability in terms of school. I want to tell you a story and ask if there are other examples in Canada that could support this idea and maybe advance it.

In Saint John, New Brunswick, we have a very strong anti-poverty initiative that is led by the most senior member of the Irving family. Mr. J.K. Irving has been named a champion of education by The Learning Partnership in Canada. Saint John is always high on the list of cities with poverty. Sometimes, it is number one per capita, but I hope it is not number one now. Mr. Irving has challenged other business people, within his group of companies as well, to work with children and youth. As a physician, I always consider treatment and prevention and this is, in a sense, both because we are dealing with children who are already vulnerable.

Theses business people have turned talk into action and have been immensely successful. They show these children that they care, and they give their time, whether it is to meet and read, take them to a basketball game, buy them a basketball or skates or take them to an art exhibit or a play. The people who work under these very successful businessmen in a number of companies are working directly with children. They have reduced the dropout rate by 50 per cent in one or more of these schools. An increasing number of companies are becoming involved. This is a great success story, I believe, about addressing poverty very early on. Mr. Irving has said that if we do not reach these children by the time they are in grade 6 or 8, we will lose them. There are some exceptions, of course, but that is the philosophy.

I would like you to comment on this, Dr. Richards, and tell me whether this is happening in other cities and towns, whether it is a model that, in your view, has merit, and whether you would promote it.

Mr. Richards: Thank you, senator. I do not know of this particular Saint John program. Coincidentally, I gave to my students an assignment in which they were hypothetically policy analysts for one of the 10 provinces. They had to submit two policies to their deputy, who was going to attend a meeting of provincial deputy ministers of social services where they would discuss future long-term programs.

I will go back to the two students who represented New Brunswick and tell them to look up that particular program.

Senator Trenholme Counsell: It is Partners Assisting Local Schools, PALS.

Mr. Richards: To generalize your point, much more can be done at the level of municipalities by engaging employers, trade unions and school administrators in easing the school-to-work transition. There is no single silver bullet.

Local businesses offering summer jobs to students who do their Grade 10 algebra or provision of a short-term incentive to kids who come from a culture where dropping out is acceptable can have an effect. My hat is off to the business people in Saint John, New Brunswick, who are taking seriously what they can do at the high school level.

Senator Trenholme Counsell: No. They are working in the elementary schools because they say if we have not got them motivated to learn by Grade 6 to 8, we have lost them. Having them believe that they can be someone engaged in sports or drama or whatever is the key.

Mr. Richards: I assumed it was with the higher grades.

I will turn in a minute to my colleague Mr. Stapleton, who has more concrete examples of that. At the elementary level, much of the discussion is about the role of early childhood education and after-school programming as a way of supplementing reading, writing and arithmetic skills among potentially excluded families. If the business community takes it upon themselves to do that, then all the better. I do not want to back down from the value of the secondary level, where most dropouts occur, and, therefore, programs of the business community are crucial.

If you are interested, I will give you some of the slides that I used in a lecture on Aboriginal poverty yesterday in British Columbia. The figure I have in my mind is of a cohort entering the B.C. school system in Grade 8 in 2000 and the proportion of Aboriginal kids who graduated six years later, which was only about 40 to 45 per cent.

I invite Mr. Stapleton to comment.

Mr. Stapleton: I believe that the importance of education, especially early childhood education among poor people, is paramount. When people grow up in environments where child care is not necessarily available and parents go out to work from morning to night at low-income jobs, the children are often found in front of television sets after school. They see an example in their parents that is not necessarily a good one in terms of the programs on which their parents are forced to rely. Much more could be done in the schools and with our income security program so that people would have the opportunity in schools.

I especially note the kids who are wards of the Crown and go back and forth from their own homes to the care of child welfare authorities are particularly at risk. According to one study, their rate of graduation from high school is about 8 per cent. Much more could be done in our social programs. One of my principal conclusions is that if we were to make our income programs much more generally available, we would begin to see improvements, and that would be an important part of the mix.

Senator Fairbairn: Your comments are much appreciated, and I have listened carefully. The one issue that always comes to my mind, and to the minds of many around this table when we have these discussions, is literacy.

There have been efforts to create a system in every part of Canada for disadvantaged children and adults who are having a great deal of difficulty living their lives. All levels of government ought to have some common pathway so that they can offer literacy encouragement and assistance throughout this country.

We were very close to having an agreement among all of the provinces, the territories and the federal government a few years ago. Then it disappeared, along with a good chunk of money that might not have been viewed as a large sum of money to many people, but in the literacy world, it was profound.

All the senators fought to get help for a very useful group of organizations who were taking this issue down into the towns and cities where people were having difficulty. It cannot be done with just goodwill; some financial assistance is needed.

Oddly enough, on that issue, the federal and provincial governments were getting along very well. They were working on a pan-Canadian strategy, and then it went down the drain. The situation has been improved in the past year and a half because there was a fuss; but how far the improvement will go, we do not know.

However, we do know, whether it is Aboriginal people or young people in school, the foundation of it all is where they live, who they live with and what chances those people have to start a life.

It is such a difficult issue and no one wants to believe it. It cannot be fixed overnight with the snap of a finger. It cannot be bought; it has to be learned.

What are your thoughts about the widespread presence of illiteracy?

Mr. Stapleton: There is a very important event happens with a child when he or she enters what we call the early years and then moves on to the middle years. There is a saying that a child learns to read and then reads to learn. That particular time where they are moving from their first early experiences with reading and into those seven-, eight- and nine-year-old years can be the really important years for early literacy.

In single-parent families that are experiencing very deep poverty, the parent does not have much time to devote to reading to children. Reading to children is a very important part of those early years and the parent needs to have that time.

If those parents are unavailable to do that because of inconvenient work hours, such as split shifts, overnight shifts, late night work at call centres and restaurants, et cetera, then the situation arises where the children are likely to be parked in front of a television. We need to start to stabilize these people's lives.

Income security is part of that, and there are many other different parts of it, as you know. Mr. Richards has noted the issue of depression, which is one of the most important factors in terms of whether children gain early learning — and certainly literacy — levels.

A calm zone needs to be created in terms of a family situation where the mother and father are available to assist in teaching the children at home. Providing that type of home life is an extremely important part of early learning. We do not find that much with poor kids. There is much more that we can do.

Mr. Richards: I have a quick supplement on that. It is an occasion to give some praise to the British Columbia government and to repeat a theme that I made in my original presentation. It is the only province that is recording outcomes among Aboriginal kids. Again, approximately three quarters of Aboriginal kids are not in on-reserve schools, they are in provincial schools.

To address your point about literacy, I turn to a slide I used in a lecture I gave yesterday. The slide shows the performance in British Columbia schools at the Grade 4 level, which would be kids roughly ages 8 or 9, as measured in the reading component of the exam. In terms of raw numbers, the province gives out the percentage of kids who are performing at or above expectations for their age level. For the overall population in British Columbia of kids in Grade 4, the reading component was about 80 per cent; four out of five kids were reading at acceptable or superior levels. Out of Aboriginal kids in the provincial school system, it was three out of five.

That is a piece of evidence to your point about the importance of literacy. Already, we are seeing Aboriginal kids at that level reading below expectations of the teachers in the primary school system. Having cited that three out of five figure — in other words, two out of five not reading at level — there are some schools that are doing much better than that and others that are laggards. That is another aspect of this data: There are huge variations across schools; it is not uniform.

We ought to look more closely at the school districts and the schools that are doing well. What are they doing right? I am doing this work now in British Columbia, the one province where it is possible to take the schools where the Aboriginal kids are performing well in reading, writing and arithmetic. We are trying to discover what the patterns are. Is it teacher motivation, working with Aboriginal people in the neighbourhood, school administrators who quantify and are concerned with these matters, et cetera? There is no one simple answer, but your general point about the importance of literacy is well taken.

Senator Fairbairn: I have a quick comment. This has always been one of the foundation difficulties in all the years I have been involved in this — and definitely more so in the Aboriginal communities. Parents and adults can be become learners if they have the opportunity. That depends on us — governments and people on the ground who are working on these issues — to get together and give them the opportunity.

The parents themselves surely are the first teachers. If they cannot send their children off with the ability to read books and care about them, they are in trouble even before they get into the schools.

Mr. Richards: As a quick aside here, in the last 15 years, I have worked extensively in Bangladesh. There has been a massive increase in school enrolment — an order of magnitude of three times — where the problems are very acute. Many of the parents are illiterate; now we are trying to raise boys and girls to become literate and know how best to go about it.

To your colleagues who are interested in the Canadian International Development Agency, CIDA, tell them to spend more attention to education programming and what we Canadians, with our practical experiences on this issue, have to say. Tell those folks in CIDA to pay more attention to education programming in the countries in which we work.

Senator Fairbairn: It is a foundation issue.

Senator Keon: It is fascinating listening to you. Your attempt to dissect this enormously complex situation and present it to us in as simple a form as possible is interesting. It is in a form that perhaps we can begin to understand and begin to address its components.

I want to come at you from two directions. The first is poverty itself, and the second is poverty as it relates to population health. Let me deal with poverty itself.

The most encouraging part I heard was the Saskatchewan program. I have heard a little about it before but not very much, so we obviously have to look into that further. Would you both tell us a little more about that program so that we can begin to grapple with some concepts that might work in dealing with poverty itself?

Mr. Stapleton: Thank you for your question. In terms of dealing with income supplements, it was in the Speech from the Throne that the federal government announced the Working Income Tax Benefit. It will be implemented in the New Year. The jury is still out on how responsive that program will be. Professor Richards has questioned it and thought perhaps that that program is better placed at the provincial level than at the federal level.

The responsiveness of the federal income tax system is getting better all the time. If we go back to 1978, we first saw yearly benefits provided through the tax system. With the Goods and Services Tax Credit, the credits became quarterly and, finally, with the National Child Benefit Supplement, the benefits are provided on a monthly basis. With the Canada Child Tax Benefit, for example, there is a statement that goes out in July of each year to all parents who receive this benefit that tells them what their benefit will be for the next year. Unless the child no longer lives with the parents or they have a tax audit or something of that nature, then that is the amount they will get for the next year. They are in a position to plan their lives around that amount. They can do this because, unlike welfare benefits, other benefits and public-housing rent that go up and down, they can rely on that amount. It is very important to have benefits of that sort.

During the work I do with low-income people in Toronto, they always talk about not just the adequacy or the stigma of benefits but about the reliability of benefits. As we expect with our paycheques, they come in reliably, and we generally know what the amounts are. That is not true for welfare benefits, public-housing rent or child care subsidies, necessarily.

As a result, people do not have the ability to organize their lives properly. I have one comment about the Working Income Tax Benefit: If the federal government is able to pay out money on a monthly basis, planned 12 months in advance so that people can rely on it, then I feel we would have something where people will be able to address the issue of working poverty. Those people will be able to plan their lives in a productive way.

People are put in an incredible bind with the type of working income tax benefit that is dependant upon whether or not they work from week to week. It puts them into a boom-and-bust cycle. That happens in the welfare system because people do not know where their next dollar is coming from. Rather than having programs being overly responsive and highly fluctuating, the idea of having stable benefits is more important. The idea of these benefits being responded to every couple of weeks is not the way to go.

Mr. Richards: My comments are slightly at odds here. I do not want to cover up what is something of a disagreement between my colleague and me. I place importance on employment and its multiple benefits, for example, the role modelling of the parent and the relief from depression. In doing so, I am prepared to trade off some of the undeniable costs that are implicit in a provincial system that is very closely tied to employment income against Mr. Stapleton's preference for a more stable transfer that in its limit becomes equivalent of a guaranteed annual income. I am not saying that Mr. Stapleton advocates that. However, Mr. Stapleton's tendency is to stress the idea of getting income to families regardless, and my emphasis is on employment regardless.

A mistake in Canadian social policy writ large over the last 25 years was to not place enough importance on employment among the at-risk community. Some of the real problems have arisen from not placing enough emphasis on employment. I am not impugning the morality of people in marginalized communities. However, I do know reserve communities, low-income communities and ghetto-like neighbourhoods in Canadian cities where the norm of non- work is acceptable. It leads to major pathologies, but it is an acceptable way of living to rely on transfer income of one shape or sort.

It is extremely important to make work pay among those who are marginalized. The great virtue of a provincially- run quick delivery system is that the earning supplement feels like wages. It can be there in that credit union account of someone, for example, in Swift Current, Saskatchewan, within two weeks. It can be generous, and should be. At this point, it only applies to working parents with children. I have no objection to the idea that it be extended to low-skill adults living alone. There is severe poverty among the unattached.

A final caveat is that earning supplements, similar to any other form of targeted benefits, get clawed back beyond some threshold. The committee should rap the knuckles of both the federal and provincial governments for generally ignoring this problem. Both Ottawa and the provinces have created situations where those working poor above the welfare threshold levels do not contemplate taking advanced training because if they get an extra $100 a month, they lose $75 of it in a combination of EI premiums, CPP premiums, cut backs on child benefits, et cetera.

My beloved Saskatchewan is not innocent to that critique.

Senator Keon: It has been my impression that we can target pockets of bad health, for example, poor maternal and child health. We can address poor child health in a number of ways, but most effective will be the Healthy Schools Program, if we can get one going across the country. We can also target maternal health now.

Do you feel we can indeed target these pockets of poor health and make recommendations about the improvement of poor health in an environment of poverty?

Mr. Richards: The quick answer is, yes, I feel we can make improvements. I am guilty, perhaps, of an over emphasis on the Aboriginal population, a group with which I have been studying and working for nigh on 10 years now.

If we take the broad sweep from 1975 through to now, the first 15 years we improved the quality of maternal and other health services available to Aboriginals. In the mid-1970s, we had two and half times the infant mortality rate among the on-reserve Aboriginal population relative to the Canadian rate, which is atrocious. With the improvement of services, that infant mortality rate is now very close to the norm for all Canadian children.

On the other hand, if we look at the last 15 years, since 1990, there has been virtually no change in the gap in life expectancy at birth among Aboriginals. We got that gap from 12 years, which it was in the mid-1970s, down to six years by 1990, primarily by improving the services provided.

However, in the last 15 years there has been essentially no change. I attribute that primarily to lifestyle diseases that cannot be addressed by improvements of services. They are, for example, child obesity issues that then translate into adult onset diabetes. There is the phenomenon of depression, particularly among boys. In Nunavut, five out of six Inuit suicides among young people are boys, not girls.

All of the issues of the pathologies of unemployment hit boys worse than girls. I am guilty, perhaps, of overemphasizing this theme of employment as part of anti-poverty policy. I do it because, in my reading of the literature, not enough attention is paid to the beneficial effects of employment among those who we should be targeting because of our concern about poverty. Nonetheless, I am not trying to ignore Mr. Stapleton's concerns.

Mr. Stapleton: The quick answer is that there is a fellow by the name of Christopher Sarlo, who works for the Fraser Institute, who supplied the lowest possible poverty line for Canada. His amount, which is as close to an absolute poverty measure as we can get for a single person, is $9,856 per year, and that was a couple of years ago. The current social assistance rate for a single person in Ontario is $7,200 per year at the maximum, if received for the full year.

The woman that I talked about earlier, who also received $7,200 a year as a part-time security guard, cannot make that poverty line. She is $2,500 away from what the Fraser Institute believes is the lowest conceivable amount of money one can survive on. The short answer to your question, as put, is, no.

Senator Cordy: Thank you very much. It certainly has been a good discussion. We can all take away from this that the issue of poverty must be addressed by looking at multi-faceted solutions. There is not just one thing we can do, unfortunately. For any solution, we would all like it to be simple, but we understand it is not.

I agree with the comments that employment and parents as role models is a very positive aspect. It provides income and self-esteem, which would then bring better general mental health to the family and all of the facets that we talked about earlier.

When we look at people who are on welfare, we can look at all the different numbers, but we still have poverty in Canada. We talk about children and poverty, and that means families are in poverty. When we have people on welfare in the community, we seem to give the families on welfare enough money to exist but not to get out of that system.

We hear about the ``poverty cycle'' or the ``welfare cycle,'' and it seems to me that to take that step out of welfare really requires us to do more than what we are doing now.

I know in Nova Scotia recently, there was a big discussion because welfare recipients were supposed to get a big raise. The raise was less than $10 a month. To get an extra $10 a month or a couple of dollars a week will not change anyone's life.

How do we get people off this welfare system? What can we do? We put people in these positions, for example, where they are on welfare, but they have no transportation to get to a job because they cannot afford a car, and they also have child care issues to deal with. We do not make it easy to take the first step out of welfare.

Mr. Richards: Senator Cordy, you have made the first and most important point. Poverty is a multi-dimensional problem to which there is no one answer. If I have carved a niche in this debate, it is my emphasis on employment.

If I were a deputy minister in a provincial government responsible for the social services budget, and I was considering how to spend an incremental X million dollars that have been accorded to my ministry, to be blunt, I am unlikely to look first at the welfare benefit levels. I would look more carefully at trying to improve an earning supplement. Make work pay more. The parent is then in a better position to use child care or find appropriate child care.

Not to be facetious about it, but public transit in Canada is abysmal. My students describe buses in Vancouver as ``loser cruisers.'' We are quite willing to spend $2 billion on a public transit system addition to carry people from the airport to downtown Vancouver in time for the Winter Olympics. We are not prepared to operate a decent bus system.

Your point is well taken about the costs of getting to work. Why is it that we seem to be able to find X billion dollars for subway systems or other high-profile issues, and we do not pay attention to making the lowly bus work?

I am not trying to be glib in answering your question; I am just illustrating the multi-faceted nature of the problems we are talking about this morning.

Mr. Stapleton: This same question could have been asked in 1947 about our senior citizens because we had an old age program that was exactly the same as welfare. Over the next 30 years, we moved them from a program that was basically a welfare program to the modern old age security and GIS system we have now, and that has taken most seniors out of poverty.

The same question could have been asked again in 1995 and 1996 when we had, generally speaking, most poor children on welfare programs, and now we have the National Child Benefit, NCB, and the National Child Benefit Supplement, NCBS. When we put them together, we have done something that is sometimes called taking children off welfare.

There is absolutely no reason in Canada that we cannot ask the question you have just asked. If we are able to move seniors and children off welfare programs, why can we not start to talk about moving working-age adults off welfare programs?

I agree with Professor Richards to the extent that he sees working as a solution. We are in a country that has net labour market demand. All we need to do is start with the in-work benefits that Professor Richards mentioned. Although we disagree a bit on design and how they should be done, we agree that we need basic programs. It is not a guaranteed annual income because first, it is not a guarantee as we designed it; second, it is not annual; and third, it is not really what we would call any form of income. However, it does start to talk about having a generally available benefit in place.

For seniors, we have a general benefit in place, as we do in old age security, an income-tested benefit, a registered program called Registered Retirement Savings Plan, RRSP. In addition, we have a supplement or what the government matches with that in terms of tax deductions. We have the same for children — a basic child benefit, an income-tested benefit called the NCBS, and we now have the Registered Education Savings Plan, RESP. We also have the benefits back in terms of learning bonds and education savings grants. There is absolutely no reason we cannot do the same for working-age adults and provide a real model for this. It has been done twice. It was done in 1947 and in 1995. Let us do it again.

Senator Cordy: With respect to working-age adults, you have both given a good description, but it is of steps we can take. We now have a labour market with much part-time work and contract work, which means no benefits, so there is a disincentive in some cases to get back into the workforce because of the clawbacks. You mentioned an earnings supplement, which we should explore.

People also lose benefits. I know of a case in Nova Scotia where someone actually had to leave their job because they could not afford to buy medicine for their children, and so the family was far worse off. Have you thought about easing people into the workplace with some of the ideas that you have already mentioned, but also having communication between government departments in order to have some benefits?

Mr. Richards: There are many hidden barriers to employment in the loss of services as people move from welfare to being regular citizens. They might lose dental or transportation benefits. There are many administrative problems of that nature.

To address your immediate example of pharmaceuticals, the increasing importance of pharmaceuticals as a component of health care has been a significant change over the last generation. When Tommy Douglas, from my province of Saskatchewan, introduced medicare in the 1960s, pharmaceuticals were relatively far less important. Now, symbolically, they have exceeded payments to physicians as a share of the health pie; yet we do not have a decent, universal pharmaceutical insurance program. There is nothing easy about that. It requires tough-minded deputy ministers who are able to organize formularies and make decisions about the structure of that. I invite your committee to have a page or two discussing the case for a pharmacare insurance program.

Mr. Stapleton: Professor Richards talked about effective marginal tax rates for people receiving ``in-work benefits,'' and to an extent I agree with him. However, we still have welfare programs in Canada. Certainly the ones that disentitled people throughout the 1990s had recovery rates of 100 percent. The answer in Professor Richards' article is to disentitle people. My answer would be to create these in-work benefits and benefits outside of welfare for working- age adults as we have done for seniors and children.


Senator Pépin: I would like to come back to the education of children. Some children drop out of school because they are not motivated. You also talked about targeted early childhood education.

At the present time, primary level education is mandatory in Quebec. If we did the same thing with daycare services, they would be available to everyone, and parents would not be forced to pay a minimum fee of $7 or $10.

Do you not think that would be better for children? They would enter primary school better prepared, because they would already have been stimulated. This would also enable parents to find employment.

If children are supported from the age of one or two years and are stimulated on a daily basis, they will find it much easier when they get to primary school, and that could result in fewer children dropping out later on.

Mr. Richards: You raise an extremely important point. I am not an expert on child care centres in Quebec, but the program is universal there. Very few studies have been conducted that examine the program's performance.

And I may be wrong, to be perfectly frank. The only study carried out by important academics showed that in two- parent families, there was no major psychological improvement. However, a vast quantity of studies do show that, where unfavourable conditions are present — for example, in single-parent or poor families — this is extremely important.

I come back to my training as an economist. We always think about the cost. The cost of this daycare program in Quebec is extremely high. It costs the province more than $2 billion per year. So, I put the question to you: if you were the minister responsible, would you spend $2 billion on this program, rather than focussing on the disadvantaged, and possibly spending more on other programs that could contribute to supporting and employing the poor?

In terms of what has generally occurred in Quebec, the ones who have benefited most from $7- or $10-a-day daycare are people who are well off. In terms of the users of the program, a disproportionate number of people who are relatively well-off have access to the best daycares.

In my opinion, inadequate attention has been paid to the benefits these institutions provide, if they can be properly targeted. But if we are able to properly target them, I believe that is a completely different priority. Whether we are talking about Aboriginal people where I am from, in the Prairies, or single-parent families living in depressed areas of our cities, this is a program that should be critical, although we are still grappling with the budgetary issue. Quebec is one of the provinces having the most difficulty grappling with this issue.

Senator Pépin: I know there are daycare centres where parents pay nothing thanks to social programs, and that are visited by a psychologist-psychiatrist every two weeks who meets with the children to try and determine if they have specific problems and what can be done to help them. I agree with you: choices have to be made in terms of how our budgets are to be used. However, I still believe that in single-parent families, this would give the mother an opportunity to find a job and, in most cases, we are talking about single-parent families.


Mr. Stapleton: I would like to add that there is a recent publication by the OECD, called Babies and Bosses — Reconciling Work and Family Life: A Synthesis of Findings for OECD Countries. It cites Canada as an example. Of all the OECD countries, Canada is in dead last place in terms of having children in school before the age of 5. It is not something that we are doing particularly well, certainly in terms of comparison with other countries.

Another issue it points out specifically for Canada is that our lone-parent contingent who are not in work are amongst the most impoverished people within the OECD countries. They make a special case of Canada, saying that more should be done in this area.

Senator Trenholme Counsell: Hear, hear!

The Chair: We have the report of the OECD under consideration also in this committee. Senator Trenholme Counsell has particularly been interested in that report and what you have just talked about.

Senator Brown: I am fascinated by the two gentlemen's presentations. I believe one of them has the solution for the current problem. I have been hearing for over a generation, almost two, that welfare was no good, that as soon as people started to earn a dollar, they took it back from them.

It is time we all united to have clawbacks removed regardless of where they lie, whether in benefits for dental care or whether they are some type of fee for welfare or whatever. That will at least help to take care of the generations that now exist in poor conditions, and for their children.

For the future, I believe — and I think Dr. Richards believes — that employment is probably the most important issue we have. People basically respond to reward. I thought I was responding to that when I came to the Senate, but now, with the hours I am spending, I am thinking maybe it is a punishment rather than a reward.

In any case, I sincerely believe that people do respond to reward. The employment issue is an emotional one. Employment prevents depression and heightens self-worth. It has many effects. We all know how important it is.

Lastly, I want to talk about the future, which everyone seems to believe is literacy for the children. I was watching a fascinating program — it may have been 60 Minutes. It was about an American who is extraordinarily successful with computers. He wants to do something for literacy for children. He developed programs, and he is taking laptops and such around the world. This gentleman is extraordinarily ambitious. He is not just talking about giving laptops to disadvantaged children in the United States or in Canada, but rather on a worldwide basis.

At that point I began to question it. This man believes giving children, in Bangladesh, for instance, computers will make them literate. I thought they probably do not have any power, so once the battery runs down, it would not work.

However, he created something similar to the way we used to play with tops, where we jerked the cord to make it recharge, and it is connected satellite. To end the story, he is after not a million children but a billion children in the world. One of the major companies tried to buy him out, and he basically told them to take off, and now they are actually working with him.

It is a ray of light that I have never heard before in regard to literacy for children.

The Chair: Thank you, senator. Are there any comments from our panellists?

Mr. Richards: This gentleman was considering the Bangladesh power system when he was designing these computers. The computers have a crank, so they can be powered manually until the thoroughly unreliable Bangladesh power system comes back on.

The Chair: Senator Kroll's report, as I mentioned at the beginning, dates back to 1971. He advocated a guaranteed annual income. Nowadays, the language is more along the lines of negative income tax. One of the organizations we have had before the committee — maybe Campaign 2000 or the Caledon Institute of Social Policy, I cannot remember — have a new phrase, but it is similar types of universal systems that are broad reform systems.

I would like to hear from both of you as to what is right and wrong about that type of a system. I would also like you to put it in the context of a recession not just current context. The economy has been pretty good. We talked about Professor Richards' statistics earlier with respect to the time it has taken, but what if we do go south on the job market? You place a lot of emphasis on unemployment. What if suddenly we do not have a healthy economy and we have a recession? Then what? Particularly, how does this negative income tax — or whatever you want to call it — program relate?

Mr. Stapleton: The problem with the guaranteed annual income is not the program itself but its reputation for getting something for nothing. Canadians — and I suppose people in other lands too — have rejected the idea of getting something for nothing.

We have to use different language. We have to get out of the language of ``guarantees'' and ``entitlements'' and that sort of thing and talk about what people really need. That is why I like your comment about recession.

During the good times, we tend to build welfare programs up, and then as soon as we get to a recession, we do not have any money any more, so we disentitle everyone. Mr. Richards seems to believe this is a good thing.

We need to look at recession-proofing these programs. We do not say to senior citizens or children, ``We have hit a recession, so we will drop your income by 20 per cent or 10 per cent; we will tighten up all the rules so that you cannot receive it.'' Apparently, we still find ourselves able to afford those types of programs.

More generally available programs, certainly programs that supplement work and support work, are the way to go, because we are in a period of net labour market demand. Providing a little extra money to people to help them make ends meet because they cannot do it working will not cause them to say, ``You have given me a little income, so I guess I will go and quit my job.'' That is not how any of us think. It is certainly not the way poor people think. They get trapped in these programs precisely because of the situation where, as Senator Brown noted, if they earn a dollar, they lose a dollar. That is not what has happened with our children's or our seniors' programs.

We can afford to, as we have proved, put these programs in place and make them recession-proof. If we talk about a guaranteed annual income, the best kept secret in Canada is that we do have a guaranteed annual income now in terms of the goods and services tax credit. It is just at an extremely low level.

Mr. Richards: Senator, let me take your two questions in reverse order. To summarize, what happens with a recession, and what about guaranteed annual income or negative income tax?

To answer the recession question, surely social assistance is the appropriate response in the context of recession. It should be generous and accessible. However, it should be a program for which eligibility is determined by social workers, for whom I have used the analogue of the health system and the role of the general practitioner. I do not think of social assistance as an entitlement program.

Yes, we have experienced 10 years of economic recovery and an increase in the employment rate, all of which is to the good, and it has lowered poverty. I also feel it is very good that we have reduced, by roughly half, welfare utilization. Mistakes have been made, but it is part of the package of incentives that has increased the employment rate, which is an important theme I come back to. For most people, most of the time, employment income is the basic source of income.

Mr. Stapleton refers to the fact that obviously we took tremendous steps to reduce, and nearly eliminate, seniors' poverty by a type of guaranteed income for those over age 65. The crucial distinction is self-worth, and all of the other ancillary benefits from employment we are not expecting from those over age 65. This parallel falls precisely because of that. We obviously do not expect those employment rates for those over age 65, and unfortunately I will get there sooner than I would like. There are massive disincentives to employment.

We do not worry about them very much, although given the fiscal problems we may be facing with an aging population and a burgeoning health budget, we may look more seriously at the disincentives to employ those over age 65.

To return to your first question about a guaranteed annual income, this is a complicated question. However, I ask what level of generosity we want to prevail among those who are poor, with no earnings, such as, for the sake of a number, $15,000 for a parent with a child. If we maintain a reasonable incentive to be employed by using a low clawback rate, we wind up with people in the $30,000 to $40,000 family earnings range facing inordinately high tax rates. We have created a huge budgetary burden. Among those who are really poor, with very little or negligible earnings — for the sake of argument, under $10,000 or $15,000 — we say if they are qualified and considered eligible, they will get some income. This is perhaps not enough, according to Mr. Stapleton, and I have some sympathy for his argument that we should consider increase to welfare benefit levels; but we cannot afford to think of this in the regular pattern of tax clawback incentives. We will have to claw this back pretty aggressively at the rate of 75 per cent in most provinces.

The reasoning is valid. We must be humane and generous to people who do not have any earnings, but these people often have multiple problems. There may be problems with mental illness and physical disabilities. They are in contact with social service agencies, typically.

I am most concerned about the clawback problems when we are considering, for example, the single mother, earning $25,000, who faces an effective tax rate of 80 per cent. That is atrocious. It is expensive to deal with these problems. It is far more attractive for a political party to design its program for the next election with its anti-poverty programming — and I am delighted to see the Liberal Party interested in raising the profile of poverty — and to say that they will increase a certain range or variety of transfers. What is to be done about the clawback issues among the near poor seems to be very murky. That is not to excuse Saskatchewan, which was a very bad example of this 91 per cent.

Senator Munson: Mr. Stapleton, I liked what you said when you said that we did it for seniors; we did it for children; we must do it for working-age adults. At the beginning of our discussion two hours ago, you threw out that figure — which I do not believe we paid attention to — of $54 billion in employment insurance that sits there. Previous governments were accused of hoarding the money, and opposition hammered them over that. Once they get into government they find out they like the money. This present government is the same way. In the spirit of Christmas and the holiday season, what are we saving this money for? It is not for a recession. The government — no matter of which political stripe — is just holding on to the money and ignoring, from my perspective, the working-age adults.

Mr. Stapleton: I gave the example earlier of the person working at $7,200 a year, $2,500 below Christopher Sarlo's absolute poverty line for Canada. That woman pays into the EI fund to help create that $54 billion in surplus when she is absolutely, categorically ineligible for that program. That $54 billion, of course, is not there because it has been put into budgetary surpluses, which form a new program called Advantage Canada that will perhaps be servicing corporate tax cuts. It seems to me that you are absolutely correct. We should be using those funds to make people, such as that security guard, not only eligible for EI but also to ease the burden on her to pay into the fund in the first instance.

Mr. Richards: To call it a premium, senator, is kind of an Orwellian newspeak. It is a payroll tax. All of us around the table could agree on one small reform: that we have a ceiling on the EI premiums to be paid, and maybe a floor on income below which it does not kick in.

The Chair: Maybe we should make it a real insurance program.

Mr. Richards: Then the two of you would have discussions.

The Chair: It has been most interesting and we value the input of both of you today.

The committee adjourned.

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