Proceedings of the Subcommittee on Cities
Issue 3 - Evidence, May 29, 2009
OTTAWA, Friday, 29 May, 2009
The Subcommittee on Cities of the Standing Senate Committee on Social Affairs, Science and Technology met this day at 9:08 a.m. to study current social issues pertaining to Canada's largest cities.
Senator Art Eggleton (Chair) in the chair.
[Translation]
The Chair: Welcome to the subcommittee on cities; we are studying poverty, housing and homelessness.
[English]
We are dealing with the income security today. I will introduce everyone shortly, but I will bring you up-to-date first on where we are.
We were mandated a couple of years ago as the Subcommittee on Cities to look at a number of social issues facing large cities in our country. We initially took on the issues of poverty, housing and homelessness. That is what we have worked on to this point in time. That is two years, except we have actually had less than a year of work on it because we have been through two prorogations, one election, and summer recesses.
We are not yet finished. However, as you may know, we published a report on issues and options last June, which included 103 ideas that had come our way. We are now proceeding toward the last report that will come out in the fall. It will ask people to comment on our issues, options and various other ideas that may or may not be included in that particular paper.
We will finish our hearings. We have had hearings and fact-finding tours to various cities across the country. We still have more to do on that. On the tours we are looking for promising practices and different programs and services in different cities across the country largely operated by non-governmental agencies. We want to see whether we can help facilitate sharing of information and ideas that might work in other places in some fashion. We hope to have this all done by the end of June. Havi Echenberg will then be putting the report together for us. We will consider the final recommendations in the fall.
We will start with the premise that the system is broken and needs fixing. We have heard substantial evidence to that effect. We will look initially at measures that could be helpful to some of our more vulnerable groups in the immediate term. Those measures would build on the system we have now. We would also look at an overhaul of the income security system, which is what we are talking about today, plus getting into the area of a national housing and homelessness strategy. We will also address the big picture and big vision needs.
Today our topic is income security. I want to welcome you here and I want to briefly introduce everyone, although I suspect some of you already know. I have known Laurie Monsebraaten since my city hall days. She has been with The Toronto Star all her life. She is a social justice reporter. She has written widely on social issues, including poverty, housing and income security. She will relieve me of trying to orchestrate the meeting. She will moderate and keep us all focused in trying to get through the different themes on the agenda you have before you.
Next we have Senator Wilbert Keon. He is the vice-chair of our Social Affairs Committee. He just finished a report on population health, which will be introduced in the Senate next week. The social determinants of health are all very interrelated to this. In fact, we held a number of joint meetings.
Next is Senator Joan Cook. She is from Newfoundland and Labrador. She knows all about community accounts, which is a great system they use down there and she might get that in at some point or other.
[Translation]
We also welcome Marie-France Raynault, Associate Scientific Director, Population Health, and director of the Département de médecine sociale and of the Programme de résidence en santé communautaire at the Université de Montréal.
[English]
Dr. Raynault worked in a poor district in Montreal for 13 years and then studied epidemiology and became a public health specialist, working mainly with homeless people. She was the co-chair of the task force mandated to design a strategy for preventing poverty in Quebec; and Quebec, of course, is one of the better examples in our country for poverty reduction strategies.
Senator Hugh Segal is from Kingston, Ontario. His views on guaranteed annual income are well known, as were the views of the previous Senate committee that studied poverty in Canada, under Senator Croll. It is that report that we are also updating, and you, I am sure, will talk a lot about that as we go.
Miles Corak did not have far to come. He is a professor with the University of Ottawa's Graduate School of Public and International Affairs. He has published numerous articles on topics dealing with child poverty, access to university education, intergenerational learning, education mobility and unemployment. His most recent research deals with the definition of poverty, with child poverty in the Organisation for Economic Co-operation and Development, OECD, and with the socio-economic status of immigrants and children of immigrants. Those are some areas that we are very grateful to have your input on.
Michael Mendelson is not here yet. We had a last-minute change of committee room. I hope that has not caused him a problem. Hopefully he will be here soon. However, I will still introduce him now. He is a senior scholar at the Caledon Institute of Social Policy and he has held many senior public service positions prior to his appointment to Caledon. He was a deputy secretary of the cabinet in Ontario. In Manitoba he was secretary to the Treasury Board, deputy minister of social services, and served as assistant deputy minister in various Ontario ministries.
Sid Frankel is an associate professor, Faculty of Social Work, and the director of the Child and Family Services Research Group at the University of Manitoba. Mr. Frankel teaches in the areas of social policy and research methodology. He is past president of the Social Planning Council of Winnipeg, a board member of the Winnipeg Operation Go Home, and a steering committee member of Campaign 2000.
Evelyn Forget is a professor and academic director at the Department of Community Health Services, also at the University of Manitoba. She has published a number of books, papers and articles on economics and population health, and is currently working on a study on the North American guaranteed annual income social experiments in the 1960s and the 1970s.
Then we have Senator Yonah Martin, who is from British Columbia. She is one of our new senators and she is a contributor to our deliberations.
Last, but by no means least, is Michael Prince, a professor of social policy at the University of Victoria. He teaches policy and organizational analysis and public administration. Current research interests include trends in social policy over the past 25 years and the next generation, federal-provincial relations, Aboriginal governance and policy-making in disability, politics and policy issues.
Havi Echenberg is our researcher from the Library of Parliament, and Keli Hogan is the clerk of our committee.
I will now turn the floor over to Ms. Monsebraaten.
Laurie Monsebraaten, Columnist, The Toronto Star: Welcome everyone. I am looking forward to a lively debate this morning about the various aspects of income security.
The committee has been hearing various options over the last few months and indeed years, and today we are hoping to drill down on what specifically should be the federal role in fixing what Senator Eggleton has aptly described as a system that is clearly broken.
We will start with some comments from Michael Prince.
Michael J. Prince, Lansdowne Professor of Social Policy, University of Victoria: I will start with the first theme. There are a couple of questions. One is what the federal role should be. I would like to make a couple of contextual observations and present my own views as to what it has been in the recent past and what it is in current times.
The struggle today will be to not ignore the realities of the current recession, but to look further ahead and do some planning. I think there will always be that tug in all of us. Our heads and our hearts will consider both current problems and issues.
This is the first post-UI, post-CAP recession. When we changed and terminated the Canada Assistance Plan in 1996 and converted Unemployment Insurance to Employment Insurance in 1996-97, we had 14 years of sustained employment growth in this country and balanced budgets, which increasingly is looking like pretty good times depending on what family or community you live in right now. To Oshawa, Ontario, or Windsor, Ontario, those sound like pretty good times right now.
We are in slightly uncharted waters in that we have had some fundamental policy changes done in the 1990s and early part of this new century, with the benefit of not having tested out what the new programs would do under a deep recession.
I have some general observations. The federal government has served a major role in income security since the 1920s. One can go back even earlier to World War I with veterans in 1919. It has been about an 80-year to 90-year history now.
Compared to the provinces, the federal government is the primary government in the country in income security. There have been many changes in the last five to ten years, some positive, some negative. The positives I would highlight are some at the federal level of benefits for children, students in post-secondary education, veterans and working families, to some extent.
However, I think the federal role in income security has seriously declined in the last 10 to 15 years in some important program areas in other population groups, including the welfare poor or the low income, the unemployed and the disabled. There have been some minor changes, some minor benefits for these groups, but by and large, as large constituencies or populations in Canada, these groups could look at the federal role in income security 10 or 15 years ago as compared to today, even before this recession hit last summer or fall, and see that the federal role has declined or diminished.
As Senator Eggleton said in his opening remarks, there are some challenges around short- to medium-term imperatives for addressing pressing needs of vulnerable populations, as well as the obligation of our policy-makers to look further ahead for some thoughtful medium- to long-term significant change.
Where do I think the federal government should go? There is the modernization of employment insurance. I can dwell on that more, but there is a need for a basic income for Canadians with disabilities. There is a real need, as we are seeing recently, with provincial reviews in at least three provinces and now a recently announced federal review of pensions and retirement income under the Canada Pension Plan. There is also a continuing agenda to address families with children living in poverty.
I will stop there and look forward to the rest of the day.
Ms. Monsebraaten: Thank you. That was a great overview to see where we have come and where we need to be going.
Mr. Corak, could you give us an opening statement and some starting remarks.
Miles Corak, Professor, Graduate School of Public and International Affairs, University of Ottawa: Thank you. Certainly, there is little to disagree with in the way Mr. Prince started, so my comments may be directed at a different level, more at a level of principles and leadership.
If one looks internationally and compares how countries have progressed in reducing poverty and child poverty, for example, internationally, one of the key ingredients — granted that institutions differ greatly across the OECD — is a sense of leadership. When the person at the top says this is a priority, it focuses energies throughout the entire system.
In Canada, we have a history of setting that kind of tone. During the 1990s, we said we would reduce the deficit to zero; and by golly, we did that. We said we would set a goal of zero inflation; and by golly, we did that. We also said we would eliminate child poverty, but, by golly, we did not do that. I think that happened not for a lack of mechanisms but basically political will. We were mired in the child poverty debate around issues of definition.
To pick up one thing that Senator Eggleton said in introducing the morning, there is an information role here as to what is best practice across the country. We have other models as well. For example, how do we deal with health care? There is a sense that we understand what our goals are, those being high-quality and accessible care for all Canadians. The federal government certainly has a financial role to play in that, but it also has an information brokerage role, a way of saying that things are not quite doing well in particular parts of the country. One could imagine the federal government also being in that role.
What is the target for poverty? We need to come to an agreement on how that should be measured, as for example Tony Blair did in the late 1990s in the United Kingdom. He said there was to be a goal, and that society, in a matter of two or three years, established how it would measure that goal. Since that time, the government's attention has been focused on this issue, the press's attention has been focused on clear indicators, and the government has been held to task for that goal.
If we can articulate a clear goal, put into place an agreed-upon information structure to measure that goal and continually expand the importance of that goal across the country, I think that would send a signal of leadership and focused attention.
Ms. Monsebraaten: Thank you. That is a very helpful observation and good recommendation. Mr. Mendelson, please proceed.
Michael Mendelson, Senior Scholar, Caledon Institute of Social Policy: Thank you for holding this event. I am very grateful to be able to be a part of it.
In discussing the federal role in income security, it might have already been said, but I think it is important to remind ourselves again that the federal government already has a dominant role in income security. Depending on how one counts the Canada Pension Plan, whether one counts it as a federal program or federal-provincial program, it is about 85 per cent or so of total income transfers to individuals currently.
The provinces' role is critical and especially important because the provinces are responsible for many of the programs that end up being the programs of last resort, especially social assistance. In terms of dollar amounts, it is relatively small.
Therefore, when discussing the federal role, we are not really talking about whether there will be a federal role in income security. The Canadian Constitution, as it has developed, in reality has a dominant role for the federal government right now.
In our thinking about what the federal role should be, many people here will be familiar with a paper we have prepared at the Caledon Institute where we already set out our grand vision on the new architecture for income security. That paper reflects the concept of what the federal government is good at and can do.
I suppose our concept can be summarized as the federal government is good at programs that require the paying of a cheque and not much interaction with citizens. The payment of a cheque can be determined by a few simple tests and by using the income tax system, and the federal government is quite able and competent to do that. It can operate a program that can be coherent and hopefully consistent across Canada in a way that ties us together and provides significant support to Canadians.
In particular, we have to remember that it is the federal government that ultimately has the store of fiscal resource, monetary policy and so on, so it is appropriate that the federal government have a substantial role in that regard.
We see the provinces being good at those programs that require significant interaction with citizens. They require an ongoing, intimate — if I can use that word — relationship with a recipient of an income security program, while that also means a significant what we could call in some circumstances case management or administration of the program.
In that respect, we have an outline of what a program would look like, and there are two ends to it. At the one end, there are those people who are actively engaged in the labour force right now and who will remain so. The research is pretty clear; it shows that people who are actively engaged in the labour force and who are looking for employment do not require significant degrees of assistance and intervention. In fact, that kind of intervention can, it seems from the literature, delay the finding of a job and make it more expensive rather than making it quicker.
The kind of assistance that someone needs at the end where they are already engaged in the labour market and where we are not talking about significant human capital upgrading is really something in the order of perhaps assistance with writing a CV or participating in job clubs. Also, importantly, with respect to labour market information — what we used to call labour exchange — making that kind of information easily and readily available. There is not much intervention, but there is assistance.
In this respect, we have outlined two key programs for people at this end of the labour market, and that is the continuing existence of unemployment insurance, if I can use the generic term rather than the title, which is Employment Insurance. We would like to see the continuation of unemployment insurance, but we would like to see that program related more clearly to the contributory side of it, so that at both the macro level and the micro level we would like to see a program that is more clearly on a social insurance plan. Micro level deals with the individual contribution, and macro level deals with the overall premiums contributed by employers and employees.
Complementing that program, particularly if it follows more of a social insurance outline, we have labelled a second program that would accompany it, being a temporary income program. I am sure there are 10,000 people who can think of a better title, but the concept of a temporary income plan is that it be a program that is very non- interventionist, based upon if there is financial need for a person who is unemployed temporarily, for say six months. It would not be asset-tested, it would not be welfare, and it would have a very low level of intervention and a very simplified rate schedule, not like social assistance at all. It would be a parallel program along with unemployment insurance, and we think the federal government could run that, although there are also ways it could be run by the provinces. Who runs it is not all that materially important. I would see it as, ultimately, a federal financial responsibility. I could talk about why.
I know we have limited time, so I will speed up. I will briefly mention that the other end of the program is people with very high and continuing needs but whose continuing need for financial assistance is pretty predictable. Those would be people who, mainly because of significant disability, cannot reasonably be expected to earn an adequate income from employment. We have described that as a basic income program for persons with disabilities. I would see that as quite simply being administrated by the federal government as an extension of CPP disability benefits. Whether it would be federal or provincial is another issue, because you have the Quebec Pension Plan disability benefits, but I would see it as a federal program, ultimately.
The provinces' role would be for those people who need assistance in order to earn adequate income from employment and who should be expected to engage in the labour market. That would mean human capital acquisition, and it might mean training or even basic skills that come before training.
That is the outline of our new architecture and how we see the development of programs. As you can see, it very much has to do with relationships with the labour markets, which we think is the right way, analytically, to look at these issues.
Regarding the process to achieve that, another role of the federal government is as the organizer and convenor. I would argue that since the early 1970s we have not had a significant federal-provincial engagement on the overall system of income security. That was the review led by Marc Lalonde when he was minister. I do not count the other ones as significant federal-provincial exercises. The one that was in the early part of the Chrétien government was not engaging the provinces.
Therefore, the first role of the federal government, if you want to get from here to there, would be to call together a federal-provincial exercise in reviewing the income security system from the ground up. By that, I do not mean two months' worth of one-hour dinners but a real exercise that would engage people over a period of a year or so.
Ms. Monsebraaten: Thank you, Mr. Mendelson. Those are some thoughts to consider.
Dr. Raynault, would you give us an overview of your thoughts?
[Translation]
Dr. Marie-France Raynault, Associate Scientific Director, Population Health, Université de Montréal: Mr. Chair, thank you for having me. Why has a public health physician come to a Senate committee to talk about income security?
In Montreal, there are times when, depending on the cycles of the economy, up to 33 per cent of the population lives below the poverty line. The result is that, on several occasions, we have been able to observe that this situation causes health problems. In fact, for us, it is the greatest health risk factor in Montreal.
Therefore, as our concern is for our population to remain healthy, we are interested in solutions. The best way to investigate how to keep our people healthy is to compare ourselves with countries that have succeeded in achieving very positive health indicators and that, curiously, have, at the same time, also succeeded in having very low poverty rates.
These international comparisons lead us to look at social safety net programs. As we look at the economic literature that we felt we had to examine, we see that short-term solutions, or those that focus on individuals, on people who are down on their luck, only serve to highlight a pre-existing vulnerability, a vulnerability that could have been prevented by social investments that were universal, rather than being targeted to individuals.
When we look at effective social safety net programs, we see that the state plays a major role in investing in social capital in the broad sense, not just as last-minute income support for someone who has fallen on hard times as the result of a professional setback. The government really is at the heart of those investment choices and that mentality. I invite the government to adopt a preventative approach, well before problems occur. Prior investment in social programs of all kinds will make income support less important.
My definition of the word ``social'' is very broad. Education is part of it; we must also make sure that we have a viable job market that protects people from poverty rather than one that threatens to destabilize them at any moment. The federal government certainly has levers at its disposal.
The clear correlation between inequities and poverty can be seen time and time again. Once more, the federal government can establish standards so that our Gini coefficient does us more credit.
The last point that I want to make about the federal government's role is that, for people who have become poor or vulnerable, the prevailing discourse is very important. The social perception of poverty, the perception of the disadvantaged or the unlucky, can mean social programs that either provide help or assign blame. It is particularly important for us to remember this in times of economic recession, because many people, certainly the most vulnerable, are going to fall down. We then need to see the big picture: the federal government's discourse must be one that helps them up, not one that blames them for having fallen.
I am a long way from being an expert in the harmonization of federal, provincial and municipal programs. But I do know that there is a very close link between what is in the provinces' court and what the federal government decides to look after. I know that the link between Employment Insurance and ``assistance emploi'', as it is called in Quebec, forms such a continuum that there is certainly a need for harmonization, and a need for the federal government to consider the consequences of this decision or that decision.
I would like to speak about municipalities quickly. I lived in Europe for several years and municipalities in Europe were much more active in income support and in providing social services to their citizens. I find that the close connection means that programs are perhaps administered more appropriately than when they are defined in broad strokes at a higher level. The federal government has a role to play in deciding what will be transferred to the municipalities and I invite it to consider that role carefully.
In closing, I am of two minds about federal mechanisms in one aspect. I find that the federal government, more so than provincial ones, has the ability to establish pilot projects and social experiments. More could be done, I feel, in social experimentation and documentation, because often whole programs are launched without really having been tested. In medicine, we are very familiar with things that seem like good ideas, but, when you test them, you find that they can have a number of side effects. I feel that the same applies to social programs.
One of the other reasons for my ambivalence is that we have to be careful that initiatives are sustainable. Often, when such and such a program has been shown to be really very useful, we end up further behind because the provinces cannot carry it on. I feel that we have to be careful about the consequences of experiments of this kind, though I still consider them to be really important.
The federal government could establish standards for Canada as a whole using best practices, not only from community groups, but also perhaps from provinces that have had considerable success in the war on poverty, such as Quebec.
In terms of child poverty, Quebec has managed to arrange things in recent years so that two parents and two children are not significantly poorer than two adults with no children. It makes a great difference in making young children less vulnerable. It has a great long-term effect on the ability of children to grow up appropriately and to become active and productive citizens.
The federal government could find out which provinces are doing the best job and arrange for the other provinces to achieve the same results.
[English]
Ms. Monsebraaten: Thank you. Those were some good suggestions for the federal role in taking the best practices and making sure the rest of the country hears about them.
Mr. Frankel, if you would like to give us your opening remarks and then we will conclude with the opening remarks of Ms. Forget.
Sid Frankel, Associate Professor, Faculty of Social Work, University of Manitoba: I have heard a lot that I agree with, and I am pleased to hear it. I would just like to make a couple of contextual comments.
One is that I hope you are not too exclusively concerned with the concept or principle of the federation. I hope that the pragmatics of what the federal government is now delivering, which Mr. Mendelson has talked about, and what the provinces are delivering, and how they interact, will weigh heavily in your view as to what the federal government should continue to do and how it should expand.
The second contextual comment I would make is that it is not useful to think of income support as separate from some public services that are essential for those in low income. We cannot fix the whole problem by improving household income and household economies. In some cases, we need public participation in providing or improving the infrastructure. Here I am thinking about social housing, for example, and about child care. It is rather an artificial and not useful distinction to put those kinds of public services in a different envelope because of how essential they are.
I would argue that the federal government has three roles.
First, there is a primary role in direct delivery of income support programs. I will rephrase some of what Mr. Mendelson has said. Maybe he will disagree with some of this, but I think programs that meet more or less three criteria are best delivered by the federal government.
The first criterion is that they require little or no discretion in delivery. I think Mr. Mendelson made that point. The second criterion is that they would significant already benefit all Canadians in a particular eligibility category, so that the benefit is of sufficient size such that it means something in every province and in every territory. I am not making an argument for equal benefit, of course. The third is that there is a kind of normative sense, a normative definition, that the benefits support core Canadian values and that they are a way of operationalizing the benefits of citizenship, aspects of Canadian identity, so that they will have continued support, and the federal government needs to have continued support.
I think most income security programs, but not all, meet those criteria.
The second role, on the public service side, is that the federal government has an important continuing and hopefully expanding role in supporting social investments by all provinces and territories, especially in child care and housing. There should be national framework programs that are used as a basis for agreements with the individual provinces. One might add services for low-income Aboriginal Canadians there in some way, where the federal government has a special responsibility.
I think there is a third role in the current context. As Mr. Corak said, we need leadership. In Canada, the leadership on poverty reduction, I would argue, has come from provinces: first from Quebec; from Newfoundland and Labrador; from Ontario in the area of child poverty; and laterally, and less significantly, from Manitoba in the last week.
We see a movement happening. I do not think we should encourage a battle between the federal and provincial governments about who will be the leader. I think the federal government should say: Some good things are happening. Let us look at them. Let us make individual agreements with the provinces to support what is good; and where provinces have not begun, let us try to convene an agreement with those provinces.
It is important that the new architecture Mr. Mendelson talked about is widely supported. I would certainly support it. However, there is a kind of residual group there that is left with the provinces, the kind of mid- to long-term, non- disabled unemployed. They are currently served, if I can use the word ``served'' correctly, by provincial social assistance programs.
Those are poor programs. They are inadequate in terms of the benefits they provide. There is, for example, strong evidence that children in those families, even if those families are only on social assistance briefly, are being damaged. We can measure the damage in morbidity for a range of diseases, at least throughout their early adulthood and into middle adulthood. Those are highly stigmatized programs. Therefore, there is an argument for local administration, but there is also a downside to that local administration.
As Mr. Mendelson and others have shown, the programs provide disincentives to joining the labour market, unintended side effects, if you will, sometimes called a wall or a cliff. The interesting thing is that more social assistance recipients go out and work, even though they do not achieve increased incomes.
Provincial and territorial social assistance programs need to be fixed. Provinces and territories do not seem to be ready to do that on their own. As the Canada Assistance Plan ended, there was a race to the bottom, not to the top.
I think the federal government has to get back into that business. The federal government used to be in that business in two ways: through supplying more money and through enforcing more conditions. I realize how difficult those initiatives are, but that is something that the federal government has to begin working on.
Evelyn Forget, Professor, Community Health Sciences, University of Manitoba: I am here primarily because of work I am currently doing on guaranteed annual income. In particular, we have been able to go back and confront the income experiment of the 1970s, the Canadian guaranteed annual income experiment, with some different data than was collected.
We used the health administration data, the data that is generated by the administration of the medicare program, to show that people who were registered as subjects in the guaranteed annual income experiment showed a reduction in the utilization of health care services and, in particular, hospitalization, relative to a series of well-selected controls.
We were able to document, then, some cost savings associated with guaranteed annual income, so it will not surprise anyone here to hear that I am a great advocate of schemes that resemble guaranteed annual income.
Much of what I want to say has already been said by Mr. Mendelson. The great successes in addressing poverty have been measures like the Old Age Security program, OAS, and the Guaranteed Income Supplement, GIS, which is effectively a de facto guaranteed annual income program. We might want to expand the national Canada Child Tax Benefit, as well as the role of the federal government in addressing child poverty through that program, but that is a de facto guaranteed annual income program.
I think the federal government is particularly positioned to expand those kinds of programs through an existing architecture of refundable tax credits. The great gap in the system right now is direct income support for working-age Canadians, including people with disabilities. That, too, could be addressed using the same kind of mechanism.
Regarding provincial capacity, I agree with a number of commentators who have argued that provinces are best suited to direct delivery of particular social programs addressed to particular groups — things like the development of supportive housing for people living with mental health issues or addiction issues, and programs addressed to people living with disabilities.
I think provinces are best suited both to make those kinds of decisions and to enact those kinds of programs, because it is much easier for constituents to hold provincial governments accountable rather than federal governments. If decisions are made at a local level, they will be more accountable to the people there. As a researcher, I recognize that if we have competition between the provinces around how those programs are delivered, then we will have a series of natural experiments. We can learn a lot about the best way to deliver those programs. The federal government, as Mr. Mendelson stated so well, is particularly good at directing income support and things that can be delivered through the income tax system in particular.
The Chair: I will start with Mr. Corak. You talked about the U.K. experience, how they proposed targets and timetables and how they had the political will, the leadership at the top. You outlined that and we are aware of that as a model. You also mentioned that in 1989 the House of Commons put forward a resolution on eliminating child poverty by 2000. Of course, nothing came of it. Obviously, there is a big difference in setting goals. If you do not have the meat behind it — that is, if you do not have the programs behind it and keep on top of it — setting a nice goal will not accomplish anything.
Since we are talking about guaranteed annual income, there have been lots of suggestions about guaranteed annual income, but they have all been suggestions to look at it, study it or something like that. Nothing ever came of any of them, starting back with Senator Croll's report in 1971. There must be something behind these goals.
I am thinking ahead to this committee's report. We could come out with goals that call for a 50 per cent poverty reduction by such-and-such a year, or 30 per cent. These kinds of goals have been around the provinces and have been proposed by political parties. Would it not be better to come out with more specific changes and programs and, ultimately, an overhauled system — that is, be more prescriptive — rather than to set goals that seem to go off into the ether and are never implemented? What is your thought about that?
Mr. Corak: That is a fair comment. I could echo back exactly what you said to me, but switch ``goals'' with ``programs.'' We have had many proposals and programs, but they have never gone anywhere. Ultimately, we did not reduce child poverty in the way that was stated because we did not really want to do so; it was not for lack of programs.
I am not trying to suggest that the committee should come up with these goals without backing them up, but at some point we have to say that this is what we want to do as a society. I think Mr. Mendelson articulated it more clearly than I did, as a federal-provincial engagement and a discussion over this. It is quite laudable that we have a federal system and that there are all these experiments. However, if we do not have a broker in the middle to learn from the experiments and some energy there to push those forward, then we are in a sort of stalemate. It is through those goals that I am looking for that kind of energy.
The Chair: This question will go to Mr. Mendelson, but it arises from Mr. Frankel's comments. I have a chart here. Regarding the programs that you propose, Mr. Frankel seems to be suggesting that some people would still fall through the cracks. The programs that you have are based largely on people who are employable — maybe some shorter term and some longer term — and need different levels of support or on people who are not employable because they are disabled. That depends on how broad is the definition of ``disabled'' that you use. He is registering a concern that there are still some people who fall through the cracks here. What you are trying by the system you have here is to get rid of the provincial welfare systems as we know them today, which I think is a good idea. Would anyone fall through the cracks in the system that you described?
Mr. Mendelson: I think every system has cracks. Let us be realistic. It is useful to point out that even in the societies that have been most successful in reducing poverty in the Nordic countries, still 3 per cent or 4 per cent of the population is in poverty for a variety of reasons. As long as we have a free society where people make their own choices, and I think that is the right thing, there will be people who will decide to make poor choices and will be left out.
Yes, there will always be cracks. I use the terms ``disabled'' and ``employable'' because they are short forms and easy to use, but they are not really the criteria I would like to use. I would like to use the following criterion: Is it reasonable to expect a person to be able to earn an adequate income from employment? That is a different kind of criterion. It is really not about employability; it is about whether it is reasonable. We have lots of legal cases where the concept of ``reasonable expectation'' has been outlined. Is it reasonable to expect people to be able to earn an adequate income from employment, especially if they have assistance in getting skills up to a grade where they can then go on to acquire better human skills?
I see the role of the provinces as running what used to be a welfare system but would be redefined as an employment system. It would be redefined as a case-managed system where the main objective is to get people to a point where they can engage in the labour market and earn a good income from employment. In many cases, that will be a difficult and long-term struggle. It might mean even trying to achieve literacy skills as a two-year exercise. After literacy skills, there would be another year of getting basic high school equivalence.
We see a substantive, deeply engaged, case-managed system. The first question for a person is not, ``What are your financial needs?'' The first question is, ``What are your human capital needs,'' if I can use the term ``human capital.'' For some people, that term is odious, but I will use it as shorthand. This would be a system that could provide the financial assistance that people need while they are reengaging in a society. Some people will choose not to do so. That is their right. If that is the way they want to carry on their lives, so be it. However, that is the kind of system we envisage.
We have not thought through the social services aspect in detail. On our diagram, we talk about child care and housing. Yes, those are very much part of the package. Obviously, if you have that kind of case-managed employment and employment-oriented system at the provincial level, child care is an integral part of that system. If you cannot offer child care, then you cannot have that kind of system. Child care is a core necessity of that.
I do not know whether that answered your question, senator.
Senator Segal: I have a few questions. I will ask them all so that people can think about the answers.
Professor Prince, in view of the 25 federal programs that we have listed here, and in view of some of the holes you made reference to over time, would it be your general advice that the federal government would do best to collapse some of those programs and to bulk up the contribution in the areas that were referenced by Dr. Raynault, Mr. Mendelson and Mr. Frankel with respect to support, or do you think the federal government's leadership is best exercised through this myriad of programs, which obviously come at different parts of the problem?
[Translation]
My question to Dr. Raynault is about the links between poverty as a social reality and community health, as a basic indicator. If community health is in federal jurisdiction, is the federal government attacking the problem of eliminating poverty the best way to go, or do there have to be different programs for different aspects of community health, in your view?
[English]
Mr. Corak, I want to be sure I understand the numbers, and you have done the comparative work. The best numbers we have had from the Library of Parliament, and these are 2004 numbers, have been that Canada, independent of transfers related to health care and education, spends about $130 billion a year in transfers to persons grosso modo. I would be interested in knowing how that relates, in your judgment, to what goes on across the OECD, to the extent your research can be helpful in that respect, and whether anyone around the table has a different view as to whether that number has changed markedly in the period since 2004.
Mr. Mendelson, part of what has typified post-war income security programs in Canada has been proceeding by those categories of target that are deemed to be politically non-objectionable. Mr. Prince mentioned veterans after World War I, R.B. Bennett and Mr. Borden and all the rest. We have then proceeded to the aged and a whole bunch of other categories because they were all seen to be politically acceptable at the time. That leaves us, of course, with the group that was left out, referenced by Dr. Frankel, namely, people of working age who do not have an apparent disability but are not in the workforce and do not have any income.
Let me say as a former competitor in another think tank that I do not think any think tank in the country has done as great a job of shaping and helping to put together social policy innovation in a way that brought governments along, of all affiliations, than Caledon, to their great credit.
Based on what you have seen and your provincial background in Ontario and elsewhere, is it your judgment that we cannot get out of that box, that we have to proceed only by targets that are politically acceptable or non-objectionable and that we do not have the capacity to show leadership beyond that range?
Ms. Forget, based on your Dauphin research, what would your answer be to the question under Theme 1? Based on what you saw in the Dauphin Mincome experiment research, if the federal government had to make choices, what should their first priorities be and what should we consider in our report on that issue?
I have nothing more to ask.
Mr. Prince: In the interests of other senators, who I hope have equally long lists of questions, I will try to be brief.
On the question of the profiles, about 60 per cent of the federal expenditures of $130 billion is on seniors, so OAS, GIS, spousal allowance and I would add the Quebec and Canada pension plans, QPP and CPP. That is not federal dollars, but mixed. Employment Insurance, EI, would have certainly gone up since 2004, as would have social assistance, so I am sure the number is higher than $130 billion now. The main client groups are seniors, disabled and children, and social assistance recipients were probably fourth in 2004 and are probably moving up in terms of relative shares by population groups.
How do we get from here to there or whatever? You said there were 25 programs. I do not have a list before me, but you could probably add tax expenditures to those if they are not on the list and probably easily get up to 50 or 60 federal programs.
In the short term, I think the real politik is minor tinkering and reforms. Frankly, I am quite disappointed by all the federal political parties right now in their lack of imagination on EI — all of them. They all are engaged in very minor tinkering of a very major and important program. The other end of the spectrum is the big bang approach, the overhaul taking the 25 or 30 programs and merging 5 or 10 or 15 of them. I am not particularly a proponent or believer of that myself.
I am more inclined to be somewhere in the middle between strategic reform within population groups. I am attracted by John Stapleton's presentation and his notion of DNA in Canadian social programming. That speaks to our history and to our people and our values. Ed Broadbent might have brought in a resolution in 1989 that, for lack of wanting to be embarrassed, everyone passed. In a federal system, Prime Minister Tony Blair, with a platform from the Labour Party and a unitary state, has a very different way of approaching poverty reduction. We are just not there as Canadians.
The House of Commons Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities touring the country now is not being met by a public groundswell for poverty reduction. I applaud the provinces that have taken leadership, and it has been the result of particular local social movements.
My inclination would be to look more strategically at particular programs —EI, CPP and some others.
My final comment refers to a comment by Dr. Raynault. With the cancellation of CAP in 1996, the Government of Canada basically severed any direct solidarity with the poor people of this country. The question is, do we want to reconnect in a direct way in solidarity with the poorest of this country or not?
[Translation]
Dr. Raynault: Thank you for that question that I am delighted to answer. Age is the main determinant of poor health. We all know that. But there is a great deal of correlation between age and socio-economic status, if only because poorer people do not live to be old enough to be ill for a long time.
But, after age, the main determinant is clearly socio-economic status. In Montreal, it has been calculated that, if poor areas like Centre-Sud and Pointe St-Charles had the same level of income as richer areas like Westmount or the West Island, there would be as much of an increase in life expectancy as the health system and the social improvements have achieved in the last 15 years.
It is much more powerful than everything that can be done in health. And it is certainly the best health investment that is clearly in federal jurisdiction, which no provincial government could ever challenge.
In the area of child poverty, I should also add that, since 2005, we in Quebec have had experience with substantial investments that have strong public support. Despite the fact that the government currently in power contributed to the assistance, it still made attempts to reduce it, specifically by increasing rates for daycare. The government then met a great deal of public resistance, with the result that, now, income support programs for families, such as parental insurance, such as daycare, are supported to such an extent that the government would not dare to attack them. On the contrary, it is expanding them. That is a win-win situation for both sides.
[English]
Mr. Corak: I cannot update you on the overall levels of the amount of transfers internationally. We can certainly have a discussion about levels, but what is also important — as I think has been hinted at here — is distribution. We want a society in which the relatively disadvantaged gain more from these transfers.
In some cases in Canada you see that ringing true. For example, the country that spends the most per student on education in the OECD is the United States, way more than anyone else. Yet, the system that those monies engender is one in which the relatively advantaged benefit more. The country that spends the least on education per student is Finland, and yet you see the impact of education on education test scores and on social mobility greatest in Finland. Therefore, it is not just how much you spend.
I think the lesson to draw from the comparative work is how you spend it matters as well.
To get back to the issue of targets for a moment, one thing that does distinguish Canada is that there is no agreed- upon measure of what poverty means in this country. It seems that at a basic level you would want to coalesce your energies around some statistic that society agrees upon as an indicator of what we want to move forward. We have that agreement on the unemployment rate, and look how it has fixed energies over the last couple of years.
To the extent that we can get specific indicators like homelessness and disability, we are in a much better position. However, when we talk about something as elusive as poverty and relate that to monetary transfers, the debate gets very confused very quickly.
Mr. Mendelson: Before I answer my question, I will say that in looking at the question of inequality, beyond the question of poverty, inequality is really one of the markers of population health differences, not just poverty. It is very important to remember that.
In looking at inequality we must look not only at transfers but at taxes and the tax system. We have to look at the tax-transfer system as a whole, and that is only looking at non-market income. More important is the underlying distribution of market income in determining inequality.
I would like to point out that we cannot have a low-poverty society if we have a high-poverty economy. It does not matter how deep we try to fill the hole with transfers, if the hole is getting deeper all the time because market income is becoming more unequal, we will not be successful. In fact, that is probably a lot of the story of Canada in the last four or five years.
A recent OECD study does a very good comparative study of trends in income inequality, which I am sure you have all seen. I would suggest you look at it.
To address Senator Segal's question, it is true that the highest degrees of success we have had in addressing poverty have been to carve out the non-objectionable parts. That is one lens to look at it. Another lens to look at it is through a labour-market perspective.
Free labour markets have struggled with the issue of how we can provide income assistance to individuals that is sufficient but does not have a negative impact on the labour market. That discussion has been going on literally for the last 200 years or so, since the beginning of a modern labour market when people were freed from peasant labour and making their income in kind.
There has not really been an entirely successful answer to that question. That is one reason we talk about restructuring in terms of the labour market. Another way to look at it is that we have carved out those aspects of the income security system where we can say we do not have to worry about significant labour market interaction with respect to these aspects of the labour market: with respect to old age, and some with respect to disability. We certainly could go further because, as was pointed out, working-age persons with disabilities, even in those provinces like Ontario that have a more generous program, are not treated very generously. We have not addressed poverty among persons with disabilities.
I think the non-objectionable part of the program initiatives that can be taken is precisely that they can be segregated somewhat from the effect on the labour market. Where we have intervened is in programs that do have an interaction with the labour market. They have been carefully designed so as to encourage labour-market participation, as with the child benefit or the Working Income Tax Benefit.
I think that is another lens to look at it, and neither lens is incorrect. If we understand it that way, we can then ask ourselves how we can design an architecture that provides adequacy but is realistic about what the expectations are for the interaction with the labour market, and does not pose an unrealistic, utopian perspective where we can pay everyone some amount of money and they will all be happy and it will not matter what they do. That will not work.
Ms. Forget: The biggest surprise we encountered when looking at the Dauphin data was that we found a whole cohort of adolescents who finished high school and who in some cases presumably went on to college and university. There were people who ought not to have been in high school, according to historical trends, and after the money stopped flowing in the Mincome experiment they did not continue.
There is a bump in educational enrolment of adolescents in grades 11 and 12, and I think that is one of the more significant outcomes of the experience. I might note that the adolescents were not registered as recipients in the guaranteed annual income program; their parents received the money. Their parents were not disabled; they were working poor, for the most part. They were people whose incomes were supplemented. We found evidence of that showing up in all kinds of different ways. We saw a collapse in fertility among women under age 25; girls were staying in school longer and marrying later.
I think that is one of the most significant outcomes we saw in the experiment. One of the greatest things such a program generates is that kind of investment in human capital.
Senator Keon: I thank you all for your insightful comments. As some of you who have appeared before my subcommittee may know, we have just completed a report on population health, which will be out on June 4. Consequently, I have looked at poverty, not in depth, but as one of the major contributors to health inequities.
What interests me in the discussion this morning are a couple of comments from Sid Frankel and from Michael Mendelson. I think Mr. Mendelson has been before me three times already, so I should know what he has to say.
Ms. Forget, I want to compliment your group in Manitoba for superb work and your report and so forth.
I want to focus on what Mr. Frankel said, coupled with some things Mr. Mendelson said. I would like you all to address this. As I remember what Mr. Frankel said, you cannot correct poverty by targeting poverty alone. I believe it is one of the components that puts a segment of our population down, but they cannot get out of it by targeting poverty alone. You have to help them up.
Far too often government programs have operated on the major premise that if you are poor, you will always be poor. Let us keep it simple and flat; pour some money in there. I do not think that is the solution in isolation. It is a help, but not the solution.
It is my belief that until we present an architectural model to the people who really know what they are doing — the people in the communities — we will not eliminate poverty. The architecture will help navigate the system at federal, provincial, territorial, civic and, particularly, community levels. One will be presented in our report on population health.
More important than money is the sense of self-worth that people can gain by being useful citizens, whether as volunteers or with an active job and whether mentally or physically handicapped, et cetera. Once they are part of the overall productivity of society, it changes their whole operational frame of mind.
I want you all to address that.
Mr. Frankel: When we think about poverty reduction, it is also important to think about poverty prevention. We have a three-legged stool here. One leg is income support, hopefully a restructured income support system in the way Mr. Mendelson is talking about. Parenthetically, I can say he is also talking about a fundamental, principled redesign of provincial social assistance away from a program oriented towards low benefits and high monitoring to one that is much more developmentally oriented. That is an important distinction. The federal government will need to have a role.
The second leg is public services, especially housing, child care and some of the kinds of training and career-oriented education that Mr. Mendelson also talked about. Without public participation, these will not be accessible in sufficient quality to persons with low income.
The third leg has to do with the development of local communities, not only local economies. Community economic development is important, but local social capital is also important. There is a lot of evidence that community development interventions, place-based strategies and so on are an important third leg that probably does not get talked about enough.
[Translation]
Dr. Raynault: It is clear to me that we will not reduce poverty if our involvement is solely with the poor. We have to realize that poverty is the end result of a number of deficiencies over a number of years and we cannot place all of them on their shoulders.
We have to do all we can to prevent poverty because it is a complex problem to solve once we have it. Prevention should be a much more universal approach in order to preserve a healthy middle class in Canada and to prevent disparities from becoming entrenched.
Internationally, it has long been established that the approach works. We are a northern country; I would like us to become more nordic in our approach to social inequities.
[English]
Mr. Corak: I appreciate your comments, Senator Keon. Perhaps I could respond to them by referring to some of the thinking in economics and sociology. This certainly also relates to the discussions in population health.
I appreciate that the Croll report is an important antecedent to this committee's work. The terms of reference seem to refer strictly to income security. However, thinking about poverty solely in income terms is too narrow an approach in many public policy discussions. Ultimately, we want to afford to our citizens the opportunities to participate normally in society and to give them the capabilities to lead the lives they choose to value. That is much more than money.
You can imagine thinking about poverty writ large and the appropriate programs according to different points in an individual's life cycle. If we think of the elderly widow of the 1950s and 1960s, if that woman was poor in one year, she was poor forever. It was also appropriate to suggest that money was not only a symptom of her problem, but a cause of it. The lack of funds prevented her from participating normally in society. In that case and at that stage of life, perhaps income transfers are the appropriate mechanism. One of the great success stories of the Canadian welfare system has been the decline of poverty amongst seniors.
However, if you flip this to the other end of the age spectrum — the child — we might think of the more appropriate intervention under the term investment, not income support. Money is more a symptom than a cause in the long-term consequences of child development. There is a certain amount of agreement in the literature including the findings from Professor Forget's work and other experiments. The Social Research and Demonstration Corporation did an experiment that also looked at the consequences for children. Increased financial resources lowered stress in the household and allowed more time and engagement for parents, which was important in the development of the child's engagement.
The metaphor I use is that we should be thinking about investment, not only income support in the early years. That leads to human capital development. The concern is not with the child being poor, but also the long-term consequences of that.
In the middle stage of life, we think more in terms of insurance. People are engaged in the labour market, which is how you will make your way in life. However, things happen and there is a need for social insurance.
I imagine the whole program matching up with those different needs at different points in time. That is not only money, particularly in the early years and if we are talking about people with disabilities and the early detection of disabilities amongst children.
The problem seems to be, as Mr. Mendelson alluded to, that the federal government's main role is always a cash role. Therefore, we tend to look by default to instruments that involve cash transfers.
I certainly agree with what you have said in whole. It requires a different definition of poverty, something other than simply monetary. It requires different mechanisms at different points in the life cycle to meet that ultimate need to participate normally in society.
Ms. Monsebraaten: I will take one more comment. We are at 10:30 a.m. I think we might all benefit from a short break. Mr. Mendelson, do you want to comment?
Mr. Mendelson: First, there is a definition of poverty in the Quebec legislation that is quite useful and workable. I recommend that everyone look at it because it is quite good and it is a guide.
In terms of engagement, I agree completely with what you have said, senator. It is really about dignity of human beings and our ability to feel that we are fulfilling our potential and being able to run a household that is stable for children and for everyone, not just because of investment but because children deserve to have a decent life when they are children.
However, I want to remind everyone that the majority of people living on very low incomes in Canada are working. They are engaged. In fact, they are sometimes so engaged in the community that they have two or three jobs. That is really where the majority of very low income is focused. We tend to think about the worst cases, and there are people who are definitely having a very hard time living on absolutely nothing and who are not engaged in the community and are totally alienated. However, the majority of the community is a working community and engagement is not the problem; it really is an income problem.
Ms. Monsebraaten: Senator Martin wanted to make some observations, so we will start with her observations on the first theme, move on to Senator Cook's questions and then move on to the second theme, which is how we get from here to there. Some of us have already provided some suggestions in that regard.
Senator Martin: First, I want to say that I am so impressed by the wealth of knowledge of the experts around this table, including our senators. I am new to this position, yet in the time that I have spent in these committees and on city travel, I have seen so much good that we have done in Canada. As many of you have pointed out, coordination needs to take place in order to focus all of us to move in the same direction. We are moving in the same direction, yet there are pulls from various perspectives, and that can make us feel as if we are standing still rather than always moving forward. Thank you so much for bringing your wisdom and your insights to the table.
I am a teacher of 21 years, so I feel like I am playing a role of teacher-student here. I will reflect back to you some of the key points that I heard you make because the question we studied in the first theme was ``What is and could be the federal role?'' If I could just take a moment to reflect back to you and see whether these indeed are key points. We will have an opportunity as a committee to sit down and make sure the report we table reflects the shared views. We want to make sure this is very usable, it goes to the places it needs to and we see some positive change as a result.
I enjoyed the context that you provided, really thinking about where we have come from, where we are now and where we are going. The key word I heard was ``modernization.'' We often talk about this, but it is a huge piece. How do you begin to chip away and modernize the system to reflect the changing diversity and needs that we have? That is the key word I heard throughout the first part of our meeting.
Mr. Corak, I really liked the catchphrase or the sound bite of ``information broker.'' I feel we are in a key position as the federal government in that we have the bigger picture and we can bring together a panel such as this and draw from best practices as well as knowledge from across the country.
Skipping down to what Dr. Raynault said, we also have the opportunity to go beyond Canada and be the international researchers or partners in that we can look at what is being done around the world. We talk about the global recession, the global crises and all the negative things that affect us globally, and when it comes to something positive, we need to benefit from it. I really liked what you said about that.
Coming back to the education piece, which is where I come from, Mr. Mendelson talked about how the federal government has the store of fiscal resources. For us to manage that well, we must make sure there is enough and hopefully more so that we can provide for the provinces. You all recognize the important role of provinces.
What I am hearing from all of you is the relationship piece. We are equally important partners. We are not necessarily equal in terms of the money that we bring forth, but we are equally important. None of you mentioned the municipal piece, other than to say there are many other components, but I hear from mayors, counsellors and city and community organizers who often say they feel downloaded from the province, so that conversation and relationship need to be maintained and respected.
I also agree with the contextual comments you made, Mr. Frankel, that we need to be pragmatic as well as visionary and think about what we can do. You made two key points about supplying more money and imposing some conditions, because as the federal government we have that bigger picture and can provide that framework. Regarding the three-legged stool, the piece you mentioned was the local social capital, and again, who those other partners are and what we can do as a whole community and a whole society.
Last, I come back to the relationship piece. We all recognize the role of provincial governments in maintaining the positive relationships. I have seen provinces that have more positive relationships with the current federal government and how that benefits the people of those provinces. We need to continue to do that with all governments.
I come back to the last point on education and the poverty cycle. I have seen it in the schools. The first caregivers of the kids are their parents, and no matter how much time I spend with the kids at school, no matter what role I play as a teacher, they still go back home. That poverty cycle is extremely powerful, but I believe that education is an absolutely essential piece that, as Canadians, we must value. Other countries do that better than we do; however, being from British Columbia, I can tell you that the international teachers who go abroad say that Canadian education is highly respected and regarded. As a teacher, I say we have a great opportunity to do the kind of generational change we need in schools with the younger generation.
I worked with middle schools for the past seven years, and high schools before that. We went to Calgary and Edmonton and met with young people who were homeless at 11 and 12. One of the women who works with youth at the youth program where we were said something very insightful. She said we should not be empire building because national programs suck up big dollars. Agility diminishes as it gets bigger. Outcome measures are a blunt instrument and cannot measure the specific nuances and stories of an individual client. The individual pathway cannot often be measured. One size does not fit all. That is why it is essential to have the local partners, the provincial, municipal and community groups. Poverty is a distal cause of homelessness, not the direct cause. The root cause is often the family breakdown. One of the best places to address these root causes or families is through education, but the federal government's roles, if I hear you correctly, are what you identified: information broker, caretaker of the fiscal resources, organizer, convenor, playing an international role, and ensuring that our piece as one of the legs in the tripod is strong.
Those are my observations, and you may wish to respond to anything that I have said.
Ms. Monsebraaten: Thank you, senator. That was a wonderful wrapping up of our first theme. Senator Cook, do you have anything to add? I know you were on the list. Did you have some questions on the first theme?
Senator Cook: Yes, I do. It is difficult to be focused here this morning when we are hearing so much wisdom coming at us around the table.
Mr. Corak, I want to thank you for using the word ``investment'' when we talk about our young people. Mr. Mendelson used the word ``dignity.'' If we lose those two essential elements, we will have failed. Those are my overarching principles.
There is a wonderful plan called the Canada Pension Plan, and it is fragmented into five pieces. Employment Insurance is fragmented into seven. Why, when our federal system comes up with worthwhile programs that are evidence-based or whatever, does it have to fragment them right off the bat before they are delivered? By the time you get through the social assistance plan and the block funding for education into the provinces, the municipalities in my province are basically volunteers. The responsibility has to go right through the continuum.
We have not talked about non-governmental organizations, NGOs. They are the pillars of our society at the grassroots level. If we want to run back through the federal role, we live in a federation, and most of the time the attention is a bit skewed, but this is our way of living.
Why can the federal system not design the programs with all the wisdom and the knowledge it has and let go of it to the provinces? Why are we empire building? Why can we not, as a people, let go? The face of poverty is down here and not up here.
Mr. Prince: I just got handed the cheat sheets or the notes on the list of programs. You mentioned Employment Insurance, and the seven benefits. When it started in 1940-41, there was one, and it was narrowly focused. Many occupational groups were left out. Women were not expected to be in the labour force, and we did not think about children.
In the last 40 years, since the 1970s, we have addressed issues such as adoptive parents and biological parents, maternity and parental benefits and sickness benefits. To me, that is not fragmentation; that is social policy responding to an ever-complex and changing world.
It is similar with CPP disability, survivor benefits, children benefits and retirement benefits. Those are standard features around the world in public insurance and retirement schemes.
For people who want simplicity, do not look to Canada for federalism or for social policy. This is a world of complexities. I am not as troubled as some when they see the complexities. To me, this is the story of 90 years of a country collectively, imperfectly, roughly at times, crudely at times, sometimes with dignity in mind, other times with raw politics in mind, responding however partially to different groups' needs. We are where we are now not because that is where we should be but because those are our stories. There are still voices and groups left out.
You are right about NGOs. I worked with one in B.C. quite a lot. There is a crisis in the NGO sector in this country, which is part of the legacy of the termination of CAP in 1996, the cutbacks in Canada's social transfer. We are still living the legacy today in 2009 of the cutbacks to balance the books in 1995, 1996 and 1997. We are now back in a world of deficits for perhaps four to six years. That is a terribly depressing story for those NGOs who were told they had to do their bit to balance the books the last time and have still not recovered from those deficit reductions.
You are right; there has to be the question of the federal role with regard to the voluntary sector and non- governmental organizations. I do not see them as empires, quite frankly. Again, I see these as programs that are trying to respond to needs.
For example, EI gets criticized a lot. I do not think it is fundamentally flawed; I think it is fundamentally okay. You do not hear that very often in Canada today. It is an easy program to kick around. We need to fix it, but it is fundamentally okay, in my view. We need to improve and modernize it. Beware the siren calls saying we should return it to the true insurance principles of the 1940s. We do not live in the 1940s, and we need to think about the programs of today.
When people want to simplify programs and take things out, such as taking disability out of CPP, I get nervous about that. Where will it go? Who will be its champions then?
I am happy to go into more specifics, but I agree with you about the NGOs. We need to think about them and about municipalities.
The trouble is that the federal government does not fund school boards, and that is where many of the real issues of public health and family wellness are, indirectly through equalization payments and through the Canada Social Transfer. Those are very broad and, in a sense, blunt instruments for financing critical community services.
Should the federal government become more targeted than that? I do not think so. That is not my view of the Constitution or of the federation, but that is my own philosophy. That is not to say I am not acutely aware of the needs there and the sharp gaps, and that the future of this country rests on making sure we have robust, well-paid teachers, good classrooms and well-supported health and local social services.
Returning to what Mr. Corak or Mr. Frankel said earlier, the challenge will be intergovernmental conversations around that, where the federal government at some point is prepared to bring something to the table. However, at the end of the day, I think that is municipal and provincial responsibility.
Ms. Monsebraaten: Mr. Mendelson and Ms. Forget would like to comment on that. I think Mr. Mendelson brought us into what specific changes the federal government should be doing, so perhaps we can move on to Theme 2 with some of your comments.
Mr. Mendelson: The first paper I ever published, which I think was in 1971, was called ``Many Programs for Many Purposes,'' and it was an argument that the concept of trying to take all the security programs and narrow them down to one program did not reflect either social or economic reality or the very different objectives. Social programs, for example, have been exclusively anti-poverty programs or programs that are meant to assist low-income working people. These are different objectives, and the fact that they all pay cash transfers means they are related to each other, but it does not mean they have to be identical.
Taking a list like this is sort of like in that movie about Mozart, where he says, ``Too many notes.'' Here the criticism is too many programs. The Canada Pension Plan is not really different programs; it is a pension program, so it has survivor benefits, as do private pensions.
Having said that, there is one program that is not mentioned, which might be among the most important programs, and that is the First Nations social assistance on reserve. This is the third- or fourth-largest welfare program. It is the direct responsibility of the Government of Canada, and it is probably in the worst shape of any income security program in this country.
I will not even mention the education issue on reserve, which is related. Right now, the First Nations income security on reserve is a disaster. There have been efforts — not only by this government but by previous governments — to try to bring about change, but they have not been successful. The federal programs have not been able to emulate the best aspects of the provincial program.
By and large, there has been tremendous pressure on Indian and Northern Affairs Canada, INAC, to cut costs, because although it has had some increase in its budget, it is constantly facing demographic and other pressures. Consequently, all these extras that are built into provincial programs, which are meant to get people into employment and give them opportunities, are often those for which the federal government says, ``Yes, we have an obligation to parallel the provincial program, but this is not part of the provincial program. It is not a welfare program; it is something else, so we will not do that. We pay only the core welfare program.''
We are left with a 1960s or even 1950s welfare program on most reserves. There are always exceptions where things are going great. That is a big, expensive program that is a direct federal responsibility, and I think it has to be mentioned.
By the way, Ontario has started paying the Ontario Child Benefit, and that is a significant amount of money. It substitutes for benefits that were paid under social assistance on behalf of children. That means that there has been a substantial windfall saving to the federal government on reserves in Ontario.
When programs similar to the Ontario Child Benefit were introduced in other provinces, such as Saskatchewan and B.C., the federal government agreed to compensate the province — in other words, to pay them the amount of money that was the windfall from the federal government, because the province is now paying child benefits on reserve. The benefits are actually delivered by the federal government, by the way.
So far, the federal government has refused to provide Ontario with that compensation. I do not know how much the compensation is, but it is in the order of $10 million or $15 million. Although I am not privy to secrets, Manitoba has also been talking about a Manitoba child benefit. Ontario can proceed unilaterally, but Manitoba cannot proceed without the federal government agreeing to provide compensation, because in Manitoba the cost on reserve would represent way too much of an extra burden for the province to take on. Therefore, that federal non-agreement to provide the same compensation that has been provided in the past to other provinces is an impediment to reform and lowering of the welfare wall today on reserves.
Ms. Forget: In Manitoba, INAC provides income support on reserve. In Manitoba, if someone leaves the reserve to move into the city to access health care or for some other reason, INAC will pay for three months. The Province of Manitoba picks people up at 12 months. Between three months and 12 months, no one accepts responsibility for income support for families that relocate from reserve.
I have two comments to make about policy fragmentation. There are two reasons why we end up with policy fragmentation. One, to my mind, is not a problem, and the other one is.
The problematic reason for policy fragmentation is when you have a single policy, like Employment Insurance, and you have too many targets and are trying to do too many things with the same program; on the one hand, you are trying to offer insurance in the way it was designed, and on the other hand, you are trying at the same time to offer income support. You end up with a sort of bifurcated program that could do both better than it currently does. That is problematic, and some coherence could be introduced.
There is another reason for policy fragmentation that I do not see as problematic. Sometimes when you are moving towards a particular goal, like a streamlined program, for example guaranteed annual income, political expedience means you approach it in a piecemeal fashion. You do not have one program; you might have six programs, all of which operate according to similar kinds of principles, all of which are approaching similar goals, but all of which will be more acceptable, at least in the short run, as a way of getting you where you want to go.
That leads into our second theme, how to get from here to there. I am not a policy analyst or a politician, but it seems to me that political acceptability is an important issue we need to be mindful of. If you know where you are going, it is not such a terrible thing to approach it in a gradual way.
[Translation]
Dr. Raynault: I would like to go back to Senator Martin's comment on family breakdown. We have been doing a study on single-parent families for two years. We analyzed the data in the Luxembourg Income Study to determine which families in which countries were living in poverty.
Then we looked at the sources of income of those families and we are presently analyzing the details in some sample countries. My preliminary conclusions are that, first, given the same family breakdown, the level of poverty varies widely between countries. Second, I have to say that social policies are complicated everywhere; you need a lot of patience and a lot of key people providing information in government for structures to be clearly understood.
But it is a fact that, in all developed western countries, great advances have been put in place, and, using those advances, we can see how Canada is faring. At the moment, I feel that Canada has made advances too, except that sometimes, not in a strong enough dose, meaning that the level is inadequate.
There is also a complete lack of certain kinds of policies, specifically policies on housing for single-parent families. There are different kinds of housing support programs that some people call ``support in stone'', which involves building housing units or dealing with a housing shortage. In the case of divorce, policies on access to alimony vary with each country. When alimony is not available and the state makes up for it, that makes a big difference.
We can do that kind of analysis to determine where the gaps are in our social policy system. The fragmentation complicates the picture, but it has arisen over the years to correct previous problems. In my opinion, it would be better to make sure that we have all the pieces we need and that we provide enough money before spending a lot of time on architecture to get something that is intellectually more elegant.
[English]
Mr. Frankel: I agree with many of the points about the incrementalism, but there is a downside to it, which is that the interaction of programs at the federal level with programs at the provincial level often leads to perverse effects: that is, people working more and having less disposable income. There is evidence that sometimes they lead to family splitting kinds of effects.
For a paper I am writing, I found an article from 1963 analyzing those effects in three provinces. In two of the cases, the current effects, as far as I have been able to determine, are worse than they were in 1963. We have known about this problem for a long time. We need a mechanism to fix it. If we are not yet ready to fix it in a macro way, at least at the individual level we need to have a mechanism in place to try some kind of fix.
Second, on education, as Ms. Forget has said, children living in low-income families are at much higher risk of not finishing school than the general population. The federal government, through the millennium foundation, has made some important interventions in demonstration projects in several provinces that are trials of programs to keep poor kids, and, in some cases poor Aboriginal kids, in school. Hopefully, there would be an ongoing federal role after the sunset of the millennium foundation to try to fund those programs found to be successful and to try to support provinces in implementing them.
Senator Segal: This is in anticipation of the next session. No one has to take time to answer this question now, but we talked about the different aspects that contribute to poverty and income security. Senator Martin talked about family breakup and others have made comments. I am trying to connect that to what was said earlier about those things the federal government can do something about versus those things that are best handled elsewhere.
I do not have clarity yet on this; maybe we will have it by the end of today. Let us take an issue like family breakup, which is hugely important. In your judgment, should we be making recommendations that deal with clear contributing factors to poverty, like family breakup, or should we be focusing exclusively on what the federal government is able to do within the instruments available to it and, perhaps, what convening the federal government should do with their provincial colleagues about some broader systemic changes. That is, perhaps, for the next section.
Another critical question on which I do not have clarity — and I think there are some core disagreements certainly between Senator Keon and me — is whether poverty is a cause or a result. There is a distinguished and learned view that says that poverty is a result of 1,000 other variables, for example drug abuse, illiteracy, lack of education, lack of linguistic skills, lack of capacity, lack of employment, et cetera. I think that distinguished view is of great significance to our consideration.
My view, which is substantially less distinguished, is that if we spent the entire federal budget — and I am putting this out as a question so the experts can give their views on this — on all the causes of poverty, we probably would not fix a single one of them, because we cannot. However, if we spent more or if we rearranged the $140 billion in some way where we actually zeroed in on poverty in its role as a cause of family breakup, as a cause of illiteracy, as a cause of bad health outcomes, we might have more success.
I have a view, but experts may have a different view. Today I hope we can have the views of our expert counsel who are here so that the committee can benefit from their judgment.
Ms. Monsebraaten: Who would like to take that up? That is a fairly provocative statement.
Mr. Prince: I would like to comment on the family policy question briefly. By and large, the role is provincial and nongovernmental on family resilience. Take, for example, Employment Insurance again. We have a very narrow debate in this country about it right now. It is interesting that while the regular benefits have contracted and the percentage of the workforce eligible for benefits has shrunk over the last 10 to 20 years, we have a very different story on what are called the special benefits. We have added and enhanced benefits. Canada has one of the most generous parental benefits in the world under EI. Part of that was driven by Charter cases and litigation; I will not throw bouquets of roses to too many policy leaders on that one.
EI tries to enhance income security of families with newborns, tries to protect the physical health of women who are having children, and promotes gender equity or is motivated towards that goal by enabling greater responsibility and involvement by both parents when the child is newly born. It is trying to facilitate, however imperfectly, the work- family life balance. Those are laudable goals, and I think Canadians support such goals. Quebec has gone further with the Quebec Parental Insurance Plan, QPIP, which they bilaterally negotiated with the Government of Canada in 2006. As Canadians in other provinces hear about the QPIP, they will want something like that, too. I do not blame them. It is a wonderful innovation. It adds flexibility of choice and programs; it includes the self-employed, which is a huge group — about 20 per cent our labour force that is not protected.
That is a good example, senators, of EI under the Constitution. There is no doubt about it. The Supreme Court of Canada ruled in a reference case not long ago that these sorts of special benefits are clearly within federal jurisdiction, but that does not prevent them from innovating and negotiating bilaterally with provinces on more tailored family policies.
Beyond that, the schools and some of the more developmental roles in our system and our society are provincial, municipal and city realms, but there is a role for the federal government in family policy. It has been quietly evolving. At the same time, we have had this other debate in EI that has overshadowed it, but it has been a very promising development. We need to focus attention and engage Canadians more in that kind of dialogue where federal instruments could be used to address family resilience.
Mr. Corak: I also have some comments to make at some point on Unemployment Insurance, but I will put those aside for now and try to speak to Senator Segal's second concern about the extent to which poverty is a cause versus a symptom.
To give you a little background, I will come at this from a particular angle, which is the literature on child development. I am thinking about the situation of a child growing up poor and whether money has long-term implications for that child. Do poor parents raise children who become poor adults? If this was simply a monetary issue, then that would be great. We could institute a guaranteed annual income or something of the sort and give these families money.
Senator Segal: Is that a motion?
Mr. Corak: No. I think I was echoing something I once heard.
The weight of the evidence suggests the opposite, and much more than money matters. As a statement of fact, 30 per cent to 35 per cent of children who grew up in low-income families, families in the bottom quarter of the income distribution, grow up to be poor adults. On the one hand, two thirds escape poverty across generations but, on the other hand, there is considerable stickiness. Incidentally, you also see the stickiness at other end of the distribution. About one third of the children raised by rich parents go on to be adults in the top of the income distribution, so there is a good deal of stickiness there too, which supports the point that Ms. Raynault made earlier, that equality matters, not just poverty. This stickiness at the bottom cannot, I think it is fair to say, be addressed in policy terms by monetary transfers.
Senator Martin was correct to suggest that the important influence is the family. All of this is happening within the family, with the parenting styles that parents have and the time that they have for their children.
Interestingly enough, it is not a neighbourhood effect. A very good study was done by a researcher at the University of Toronto, who has now gone to the University of British Columbia, looking at poor children raised in different housing projects in Toronto. It was a type of experiment, because when you apply for social housing, and others would know this better than I would, it is not quite a random allocation. You are allowed to turn down one of the offers you get, but the second one is hard to turn down. Your family could be sent off to a high-density inner-city housing project, or you could be sent off to a low-density, suburban location. That certainly has a different impact on the life those children live in the here and now, which is an important issue in terms of their exposure to crime and drugs and things of that sort. That is worthy of discussion. However, if we are focusing on the long-term outcome for those children, it did not really matter where they were sent. It was not the neighbourhood that had an influence on their use of welfare as adults, on the use of Unemployment Insurance and on their earnings.
Other studies have compared children with their siblings and with their neighbours. The siblings share something with the neighbours, in that they live in the same neighbourhood, but they share something else, which is the same family environment. When you look at long-term results, there is no relationship at all between the outcomes of children and their neighbours, but there is still a strong tie between the outcomes of siblings. That leads us to suggest that that is not the neighbourhood or neighbourhood quality but what is happening inside the family.
We spoke about single parents and dissolution. When you look at families in which the children have experienced a divorce, however traumatic that is for the children in the there and now, interestingly enough, it does not impact on longer-term outcomes. Children who experience a divorce have been compared to children who experience a different type of family separation. Studies have compared children who have come from bereaved families, which is the loss of a parent, to others who have lost a parent through divorce. There is no difference in outcomes on the economic side. The difference, however, is on the social side. Children who come from a divorced background tend to see marriage as a more risky option in life. They tend to put off marriage. When they do get married, their rates of separation are higher. Fertility does not seem to matter. In terms of their income, their ability to be self-sufficient and their engagement in the labour market, on average, there is no real effect.
Something more than that is going on in the family. Another line of research looked at children who are adopted, comparing biological children versus adopted children. There is also a huge difference in these outcomes. Some of it, frankly, is that parents pass on characteristics to their kids, perhaps genetic or otherwise, that are valued in the labour market over time. That kind of transmission accounts for about 40 per cent of outcomes, while 20 per cent is just luck, and the other 40 per cent is what is happening in the family in terms of parenting style and stress, and also the connections that parents have to the resources children need, such as the education system and the labour market.
Four in ten young adults have at some point in their lives worked for an employer or firm that also employed their father. That is 40 per cent of young adults who have found a job at some point, up to the age of 30, with the same firm that their father worked for. This suggests to me the important role of connections, of helping kids through a series of transitions in their lives, the last one being the transition to the labour market, how to search for a job and where to find your place in it. There is a whole series of transitions through middle school to high school, and parents are the important broker in that.
The way I look at this literature is that the family is central here. We have to think about what place the family has. The family is the crucial institution. The other two crucial institutions are the labour market and the state. We have to ask ourselves how families interface with the labour market and whether programs, federal or otherwise, somehow buffer and support families or make families convenient for the market. In some societies, social and other policies are structured to make families convenient for the market and not the other way around. In some countries, if you have a child, it is a very stressful experience, both in terms of time commitment and also financially. In other societies, like the Nordic societies, where the ethic is that the raising of a child is shared between two parents and in which social programs support that, it is a much less stressful event.
We should think about how our policies support the family, buffer it from the shocks from the labour market and help it to integrate into the market. It is much more difficult to answer, and money is not necessarily causal in that process.
Senator Segal: Except for 35 per cent of the kids.
Mr. Corak: I am suggesting that we do see this intergenerational transmission of poverty for fully one third of children, but that is a symptom, if you will. If you were to give those families money, straight cash transfers, it is not sure you would entirely eliminate that problem.
When you look at this monetary transmission, you have to think of the money as a symptom. This is not to say that it does not have some role to play. However, it is not that I get the money; it is that it reduces the stress in the household. Then a lot of other things kick into place in the way that Professor Forget described.
Writing cheques will not solve the problem. It fits into a black box and you want to understand how that black box occurs.
Often in public policy you hear politicians talking about this. I am not pointing any fingers, but it is easy to get on the child poverty bandwagon. We would like to be able to write the cheque because, in some sense, we have solved that problem.
We do know one thing the state can do. It can tax and it can transfer. We can do that so we do it. However, from my reading of this literature, while that is necessary and important, it will not solve the whole problem. You could write all the cheques you want and, in a generation, we might still see one third of those poor children growing up to be poor adults.
If you read the scientific literature honestly and objectively, some good part of the role of money is as a signal or a symptom, rather than as a cause. Then we get into the whole discussion of your third question, which is important, but I will leave that aside for now.
[Translation]
Dr. Raynault: First, I will answer your question qualitatively; then, by providing some health data, I will give you a more quantitative answer.
Qualitatively, if I am here before you today, after being a family doctor in the Centre-Sud area of Montreal for 15 years, it is because I believe the question of money is critical. In the families to whom I provide care on a daily basis, I have seen first-hand the severe stress that comes from worrying about how to make ends meet. The stress affects their daily life and leads to depression, despair and dropping-out.
Quantitatively, health studies conducted in Montreal have shown that money is a major factor. For example, it has been shown that living close to a freeway causes respiratory problems and increases the incidence of asthma in children. The choice to live next to a freeway is made only when there is no choice. We have asked people, qualitatively. They have told us that they do not like living next to a freeway and would prefer to live further away. However, if they have no money, that is where they have to live.
As for nutrition, it is all very well to prescribe a healthy diet, but these people live in places where wholesome food is not available. The food sold in corner stores is expensive and fruit and vegetable choices are limited.
Take physical activity among children as another example. In Centre-Sud, we have very often seen teachers not letting children outside at recess to get exercise, because they do not have the clothes to keep them warm.
Those two examples are related to money and to the depression it causes.
Over the years, I have seen the effects of projects that are designed to ease reintegration and increase family income. For one thing, we see people returning to work, which makes them feel better, among other things. I talked about the importance of looking good in the eyes of society, and Mr. Mendelson talked about human dignity. For another thing, problems start solving themselves. People no longer have to borrow money from a loan shark in order to get the washer fixed. That is the kind of thing that makes daily life complicated.
People living in reduced circumstances are often very resourceful. Their difficulties are just because of the lack of money, after all. Getting a bigger cheque means a lot. The ability to participate in the process of getting the cheque is very affirming. A program that allows people to get back into the job market is preferable, and it is a viable solution for those who genuinely want to do so.
[English]
Mr. Mendelson: I have lots of different angles from which to come at this. Let me start at a very general level and say that I do not believe that we, whoever we are, can solve all human problems. I do not think there is any ideal society; in fact, I do not think we want to have that kind of society.
We are not regimented. People make different choices. Sometimes they make bad choices and they have to live with them.
I do not have children but I have nieces and nephews. Anyone who has ever tried to help a teenager will know how difficult it is to help someone. I have been in this area for 35 years or so, and it is not easy to help people. It is a very difficult thing to do.
I do not know whether that is really my focus. It is one of the reasons why, coming to your question, I somewhat resist the language of investment, particularly in dealing with children. Why can a kid who is 9 years old not have a great time in summer, regardless of what happens to them when they are 10 or 20 or 30 years old? Some of it is just about trying to make people's lives better.
I see a lot of the income distribution that we are doing not as instrumental of some future benefit, but instrumental of some of present benefit, namely having a higher income. If you pay child benefits that are sufficient, people will be able to raise their children with more income. As a country, we are not doing quite as much. The Caledon Institute of Social Policy did a comparison of Anglo-American countries — Canada, the U.S., the U.K. and Australia — and we were not the best by far around our level of benefit.
I think one of the senators, or perhaps Dr. Raynault, said that it is not the program, but the amount of the program. We have some of the programs; they are designed and they could work. One of them is the Canada Child Tax Benefit. It is not quite enough yet, although it has come up.
I would also say we were a little too negative previously when we said nothing works, because we have had significant improvements. For example, the Canada Child Tax Benefit has made and continues to make a significant contribution to the reduction of child poverty from what it otherwise would have been.
Unfortunately, market income is becoming more and more unequal. Therefore, we are dealing with a situation where, like Alice in Wonderland, we have to run faster to stay in the same place. Having said that, and what we can do ideally, let us not set our goals for what we think we can do in social services so high that we always fail.
Coming back to the question, my idea is that we should try to better separate federal and provincial roles in our design, so that there is a little less overlap.
I do not think it is possible to just operate in what the Rowell-Sirois commission called ``watertight compartments.'' That will not be possible. However, it is possible to better define what is the job of the federal government and what is the job of the provincial government.
I come back to what I said in the beginning: I think provincial governments have the mandate. In fact, they have sovereignty over social services, meaning they are not subject to federal legislation with respect to social services; they are sovereign in their own right. The same applies to education, at least up to Grade 12.
I believe the provinces logically should be vested with the responsibility for the deeper interactions with citizens that are involved in social services and involved in the kind of interventions that might be of assistance to families and might address some of the issues that Mr. Corak was talking about.
Having said that, it is still the case that federal programs do have an impact on families and how they are raised. Therefore, we have to design them so that they reduce family stress to the extent possible, allow families to make reasonable choices, encourage participation in society — particularly labour market participation — and provide security so that people know that they have somewhere to turn in their old age or in the event of disability; it has to do those things. It is not like they are irrelevant, but when it comes to the deeper engagement, I would say that should be at a provincial level.
I suppose I have not answered the question for Theme 2. Are we still on Theme 1? Start by committing to a major federal-provincial review with a real plan and not a dinner of the premiers where they have a two-hour discussion and come out with a communiqué. Rather, have a significant effort, carefully planned. Put two months or three months into planning it before it even begins.
Sorry, I tried to answer Theme 1 and Theme 2, as well.
Ms. Monsebraaten: We will hear from Ms. Forget and then Senator Eggleton will move us into the middle of Theme 2 to get on with the agenda.
Ms. Forget: I have one quick comment. Mr. Corak made the point that money helps reduce stress within the family, which leads to better outcomes. That is obviously true, but it does a second thing, as well: it tends to extend the time horizon for decision making. If you have enough money, you have residential stability; you can take advantage of the programs that are offered in schools and the NGO programs. You can do all kinds of things. If your decision making is restricted to trying to decide whether to buy milk or Kool-Aid, you are not making those longer-term decisions that are useful for your family.
The Chair: Theme 2 says ``specific changes the federal government might make,'' or ``How do we get to where you think we should go?'' I want to pick up on a couple of things that were said in the first round that could use more information.
A couple of you mentioned that not only is poverty reduction important, but poverty prevention is as well. Are there any specific programs you think would be helpful in that regard? Again, thinking of the federal level, Mr. Mendelson is quite right that this is, by and large, a provincial delivery system. However, there is a federal role; many programs have federal strategies and standards that are relevant to shared programs with the provincial governments.
Anyway, let us discuss prevention and specific changes we might make in that regard. There is also the question of how we proceed to make these changes. A phrase I use occasionally — and I think Mr. Mendelson invented this — was ``relentless incrementalism.'' Was it was Ken Battle who said that? I know it came from the Caledon Institute.
Is ``relentless incrementalism'' the approach we should take? A number of you said that there are several good programs on here, and some modernization and some tinkering might make them better. Is that the better route to take or is it the Big Bang route — a big bold change? That brings me to talk about guaranteed annual income.
When politicians get to talking about guaranteed annual income, by and large they think of it as a reworking of existing programs or, as someone said, a collapse of some of this into doing that, because it is awfully hard to talk about just laying it over, particularly when thinking of the cost factor. That is especially true now when we are in a $50- billion deficit.
If you start collapsing some of these programs, what does that mean? Mr. Corak said it is much more than money that matters. What will happen if it is all done within the existing revenue framework, which is sometimes what gets proposed when we talk about guaranteed annual income?
Please talk further about that, as well as prevention, as I said. Those are things I would like to hear from you.
Ms. Monsebraaten: Dr. Raynault wanted to weigh in on the prevention issue.
[Translation]
Dr. Raynault: We have talked about income a lot, but not about wealth. Governments are doing a lot to reduce inequities in income, but the same policies are increasing inequities in wealth. For example, we can now shelter a part of our money from income tax; that is a great incentive when we have a job that brings in enough money. It enables us to build up our assets. But, for people at the bottom of the ladder, programs to help them build up their assets hardly exist. The federal government could certainly do something at that level.
As Ms. Forget said, having assets allows people to buy time, to take chances by investing in new jobs and new projects.
I think that this is an as yet unexplored area where governments should invest a little more.
[English]
Senator Cook: Mr. Mendelson, I would like to go back to those programs and the inclusiveness of them. I am searching for the federal role. What do you think the federal role should be as opposed to the provincial role? Far be it from me not to include all segments of our population.
The one that preoccupies me most is Employment Insurance. I come from an area of the country where work is seasonal. Employment Insurance standards negatively impact my people, as they do for most areas of rural Canada.
In the early 1990s, my province was hit with the cod moratorium, and 30,000 people lost their jobs. Premier Danny Williams sat down with his big minds as we have here today and said, ``What do we do?'' They developed an Internet program. You might be familiar with it. It is called Community Accounts. They put a free resource up on the Internet. The government maintains it, monitors it and says, ``This is what you look like. How do you think you can manage?''
Craftspeople, police, social workers — anyone who is engaged with the well-being of community — can pull out their needs. However, the government's responsibility is to maintain it, to keep it current and to do the research.
Mr. Prince: Regarding EI specifically, we know we have issues like under-coverage. There is some talk about the variable entrance requirements right now. If you look at today's Globe and Mail, you will see a column by Premier Gordon Campbell. It is not just about variable entrance requirements but a very innovative other way to dovetail federal-provincial roles on the intersections between social assistance and EI, in response to this recession.
The premium rate-setting process, which was changed a few years ago, needs to be rethought. The change was done at a time when there was not an appreciation of the business cycle. Mr. Mendelson and others have written about the need to return to a pro-business cycle that acts properly as a counter-cyclical or automatic stabilizer. We need to keep the EI account independent of other government revenues. There is consensus among most Canadians and politicians around the accounts and the fiscal transparency. On EI there is a clear proposal, and I like what you are saying about the role of governments, federal or provincial, as info-structures to provide economy of scale and information technologies at the community, regional, provincial or other level. The NGOs, even Rotaries or Kiwanis, do not have the funding to provide websites for information. There is a good case for pooling resources and for the federal government to play a role, certainly on programs through Service Canada and others. There has been some headway on that, but there is more work to do.
Another good question on the federal-provincial role concerns the 80 per cent of Canadians who are in jobs in the private sector who do not have pension plans other than CPP. My province and Alberta have had a joint task force looking at what they call the ABC Plan — the Alberta-British Columbia plan — to develop a kind of registered pension plan or compulsory pension plan. Nova Scotia and Ontario have also had studies on this. As well, it seems that the Government of Canada is about to launch such a study.
What role does the federal government have on its own or in partnership with the provinces in tackling the lack of coverage for 80 per cent of working Canadians? Again, this is about family policy as much as it is about income security. These people will retire into poverty. Do we double the size of the CPP? We had a great pension debate 25 years ago, and we have not had one since. Perhaps it is time for another debate. Canadians have cashed out their RSPs and are at their highest level of debt load in history. They do not have any fiscal room. They have two people working two, three, four or five jobs, and they are no better off today than they were 25 years ago with earnings.
This is a huge income security problem. Is it a national problem alone of the Government of Canada? To change CPP would need federal-provincial consensus in any case. Do we let the individual provinces, such as Alberta and B.C., develop a nice program that serves part of Canada, as we do with poverty reduction strategies? Perhaps Ontario and Nova Scotia will do something on their own. Do we simply wish the other five or six provinces good luck?
Do we want checkerboard federalism? I would like to think that there would be an intergovernmental negotiation and conversation on that. Canadians would expect their governments to work together on tackling that problem. It is a middle-class problem about poverty prevention. It would also support families and ensure resilience. Ontario's finance minister refers to it as the issue facing the next generation.
I am not sure whether it is that, but certainly it is a big problem — income security that challenges federalism and the way our governments think about each other. Registered pension plans and workplace coverage might be the area where the provinces could play a lead role on income security, and not the federal government. I am open to that. I have no particular ideology on where we might end up on the issue.
We need a national conversation on Employment Insurance. This is the first post-UI recession, so Canadians are coming to realize the gaps and the inadequacies in the social insurance program into which they have been paying premiums faithfully. They are discovering to their consternation and horror that the program is not there for them.
Senator Cook: I have one last point on my province's Community Accounts. It is enshrined in legislation with an accountability factor to report to the House of Assembly on an annual basis. It is ironclad.
Mr. Prince: That picks up on the third theme, mechanisms. We have heard the question of whether there should be a national act. I am happy to come back to that in Theme 3 about concrete mechanisms.
Senator Keon: I apologize to the panel that I have another commitment at twelve o'clock, which preceded the organization of this panel. I have been thoroughly delighted with your presence, but I will have to leave.
I have had experience in the research community with the use of pension funds for the propping up of little corporations that get started, grow and develop. These large pension funds are a tremendous economic engine, so I encourage you to speak to that again. The people who administer the pension funds have to invest to keep them alive. They are tremendous economic engines that provide income security at the end of the road.
Again, Madam Chair, with apologies, I must leave.
Ms. Monsebraaten: All right.
The Chair: Dr. Raynault has to leave as well.
Ms. Monsebraaten: Thank you for your participation, Dr. Raynault. It has been helpful.
Mr. Frankel: On the matter of poverty prevention, we need to recall that universal health care was developed to prevent Canadians who became ill from being thrown into poverty. It still performs that function. That is the rationale for unemployment insurance. The Canada Child Tax Benefit and its supplement, the National Child Benefit, and the Working Income Tax Benefit have a palpable and measurable poverty prevention effect. We have a range of programs. In some ways we have the right architecture, although it could be improved, and we have a problem with the size of the investment. We would be seeing much more poverty prevention with much more investment in these programs. Then, we would not be accruing some of the costs that result when children in particular live in poverty. Not only is their immediate experience impaired, but there is evidence also that their long-term development and health are impaired.
In a way, we have much of the right architecture in place and if we were to invest more, we would have much greater prevention of poverty.
I will speak briefly to the question of incrementalism versus a comprehensive design. It would not be useful to come down on either side or to see it as an either/or question. I agree with Mr. Prince that we need to try to bring the federal government, the provinces and the territories together to initiate work on a more comprehensive system that is simplified and rationalized. We cannot wait until the Messiah returns, depending on your views. We need to work on improvements to the system as we go along. For example, there are terribly perverse effects in every province of working more and having less disposable income. That has gone on for years and years. Those should not wait for the comprehensive redesign.
Ms. Monsebraaten: Are you suggesting that might be the place to begin — a federal-provincial-territorial system — if we are to keep the programs we have?
Mr. Frankel: The place to start is both at the macro level to look at whether some redesign can stop program A from gutting the benefits of program B for some people, and at the micro level to put in a mechanism. In that way, as individual cases or groups of cases occur, there will be some recourse or mechanism in place to try to sort things out.
Mr. Mendelson: It is useful to try to define what we mean by prevention. We may define prevention as reducing the likelihood of households not currently at a very low income from falling into low income or spending long periods of time in persistent very low income. You would have to work on the definition. However, I think it might help to define more precisely what we mean.
I want to echo what both Mr. Prince and Mr. Frankel have said. I said many programs for many purposes. Our social insurance programs are basically programs for the middle class to prevent them from becoming poor. One of the problems with EI currently is that it is missing a lot of people. We are worried that they will be forced onto welfare. Once you are in the welfare trap, it is hard to extricate yourself, for some of the reasons Mr. Frankel mentioned and also because of what it does to human dignity.
That is one of the main reasons we are advocating for something like a temporary income program, TIP, that is non- stigmatizing, simple, flat-rate income. It offers an alternative to welfare for those who will not be covered under a traditional social insurance program.
Our labour market in a modern economy is becoming non-standard, particularly in cities like Toronto where we have so much immigration. We have so much non-standard work that it is hard to see how you could adapt the social insurance model to it. However, if you can, you can. I would be willing to look at any other mechanism for doing that.
We know some things regarding prevention. We strip people of assets when they go on social assistance. Once you get into the hole, how will you get out of it? Some provinces allow only $600 in assets. That does not include your house or your beat up car, but if it is a car over a certain level —
Senator Segal: In some provinces, a high school student's savings for college are an asset that must be done away with before you are eligible.
Mr. Mendelson: And your registered savings plans as well. You can count on being well and truly impoverished if you have to go to welfare.
We need some intermediary alternatives. Unfortunately, during the recession is the time we need it. It is not here and it will not be here.
I want to turn to relentless incrementalism. We are mixing up methods and goals. To me incrementalism is a mechanism to get somewhere. The guaranteed annual income or another vision of our architecture is where we want to be. Our new architecture can be approached incrementally, and I can talk about how to get there. In fact, incrementally is the only way to get there because you will not do things all at once. I do not think they are counter-posed. They go side-by-side. Realistically, you want an incremental process, but you want a vision of where you want to be.
A good example is the Canada Child Tax Benefit. We and others have said that we would like to be at a benefit level for children equal to the incremental cost of raising a child for a moderate-income household. That is our goal. We are not sure how much it is exactly, but we suspect it is approximately $5,500 currently. Unfortunately, there has never been a good scientific study to find out how much it is. I wish there were.
Where can we start? For example, we have been advocating a basic income for persons with disabilities. We have a detailed plan. The federal government can put that plan into place. They do not have to do the whole thing. How about starting with people aged 55 to 65 for a basic income for persons with disabilities? If you are getting or are eligible for the Disability Tax Credit and you are 55 years old, you are not very likely to find employment. That is a reality.
We have a mechanism set up, an administrative apparatus. It could be built on incrementally. We can have a basic income for persons with disability. We could eliminate a substantial portion of poverty among the adult population by that one step.
Yes, it does cost money. That is an issue. However, my experience is that good policy that is attractive politically does manage to find the money eventually.
Mr. Corak: I want to clarify some comments I made earlier about the role of money. I think Mr. Mendelson's distinction is important to keep in mind. Circumstances of people in the here and now must be considered and money plays an important role in that. However, I was trying to say that we should not necessarily transpose that into longer- term solutions. We have to think about it within a larger picture.
On poverty reduction versus poverty prevention, I echo the comments made here. It is important for the committee to distinguish what it is trying to accomplish. Approximately one fifth to one quarter of the population falls below 50 per cent of the median income at any point in time in a particular year. That is having less than half of what the person at the middle of the income distribution has. The system of transfers now in place reduces that by one half to about 12 per cent or 13 per cent.
Over a six-year period, 40 per cent of the population experiences poverty at some point. Therefore, it is a very dynamic state that some fraction of the population is in. They are hovering below or slightly above any particular line.
Over that same six-year period, about 12 per cent to 13 per cent are in poverty for each of those six years. Those are very important distinctions — the long term versus the short term. In the short term, people dip into poverty and they are capable of getting out. You will want to design different programs for these different needs, either to prevent or reduce them.
I want to use relentless incrementalism as a segue to talk about what you might do or what you might consider doing with Employment Insurance or unemployment insurance. You are better positioned as politicians to appreciate whether you should go for a big bang approach or incrementalism. In the early 1990s, Minister Axworthy had a big bang approach. The social security reform, at least the early discussion papers, was writ large. Eventually that evolved into an EI reform coming from the Department of Finance.
Perhaps the big bang is appropriate if it is a program in which you have jurisdiction and control. Otherwise, in the more complicated world of a federation where we are interested in issues of prevention, perhaps incrementalism is the way to go.
Eventually the discussion will come down to programs you control. EI is one of them. Perhaps I could outline two visions of EI reform for your benefit. The clerk sent me your discussion paper that was released last June. I had the benefit of reading that and getting a sense of the discussions to date.
Poverty prevention, at least from the economics perspective, is very much wrapped up with human capital development, basically health and education. People fit into a better slot in the labour market by changing their skill set, if you will.
This is what the ``active'' versus ``passive'' discussion is about. These are words that come from the OECD. Canada has changed the name of this program to Employment Insurance. I believe that change came following an Economic Council of Canada report that Judy Maxwell had put forward. However, it was substantively reflected in the increased transfers to the provinces through the EI system for active measures, presumably for more training or education.
Ms. Forget talked about EI having the two goals of insurance versus income support, but there is actually a third now: human capital development. Considerable funds are transferred to the provinces. Do you know what the outcomes are? What impact do those active investments actually have on the development of the skills and labour market engagement of the people receiving them? I do not have answers to that, and I have read all of the UI literature that has been produced in Canada in the last 30-odd years.
It would seem to me that considerable monies are going to a purpose for which we do not know the outcomes. There is a need to evaluate those programs and what the provinces are doing with those funds. It is very much wrapped up with poverty prevention and activism.
Also, the other unfortunate thing is that to get access to those funds you have to be eligible for Employment Insurance. In your document you quite rightly pointed out that certain groups are affected by poverty more than others, particularly recent immigrants. Those substantial funds are not accessible by those groups that really need them.
That is one of the problems with EI and why all of these other parts of the program have evolved. We now have maternity and paternity benefits, and this is great for the mothers and fathers who qualify for the program. Therefore, in the first instance, I would ask you to consider what we are doing with all those active measures and what the return is to that investment. I certainly do not know.
Then, if you want to reform EI in this big bang approach, here are two models that you might consider. One is wrapped up with the guaranteed annual income. In some sense I believe we already have a guaranteed annual income in Canada. You can collect EI benefits if you do not work, but you can collect EI benefits also if you do work. There is a certain amount of hours you are permitted to work while collecting benefits, whatever it is.
Let us adopt the view of Employment Insurance or unemployment insurance as an insurance scheme. How would you go about putting that into place?
You would link it up with the other great innovation in policy, which is the WITB, the Working Income Tax Benefit. This would in some sense speak to the welfare wall or the welfare cliff to which Mr. Frankel and others have referred. Integrating an EI system with a much more generous WITB would induce engagement in the labour market and try to eliminate some of those incentives. In that manner, EI would be pared down to a strictly insurance program.
One thing that is not talked about enough in EI reform is the finance side. I believe Mr. Prince briefly mentioned that. Some of the discussions that were summarized in your discussion paper released last June, I believe, talk about taking the EI program back to where it was in 1995. Why not do something even more radical and take it back to where it was in 1970? When Bryce Mackasey guided this legislation through Parliament, it was a very generous program.
One innovation was structured financially to be sustainable by, if you will, experience rating the tax side. That meant differential premiums according to the number of layoffs that firms had. That is where the financial discipline came in that original proposal in 1970. That experience rating of premiums was immediately taken off the table. When the legislation came through, it went through without that experience rating.
A very important innovation is to give the program discipline by reforming not just the benefits side but also the tax side, integrating it fully with a much more generous WITB. It would be an insurance program, and the incentives would be right. For example, workmen's compensation at the provincial level is experience rated so that different industries pay different premiums according to the number of accidents in that industry relative to an industry norm. EI policy is always regional policy, so there are issues and discussions you would have to have around the impact across different regions.
The other model to go is let everyone in. I noticed this in your discussion paper: Let us have unemployment insurance for the self-employed. If you had an insurance perspective on this program you would never, ever do that, because the self-employed have been excluded from the program because they control the probability of the event occurring and they control the extent of the loss. From an insurance point of view, it does not make sense. You could adopt another view in which we let everyone in, but you would tailor the program so that they each have their own individual account, so that premiums would also vary. If the self-employed want to come in, it is under a particular premium structure that would make that sustainable. You could package up all of the programs that you have now in that according to a different premium structure.
Much of the discussion we are having currently on EI falls short of real thinking of the program, and I would hope the committee would go much further than the discussions that I am seeing reported presently. This idea of an entry requirement that is universal speaks to a couple of concerns in the program that need to be addressed politically. The backdrop for this proposal is two concerns, one a short-term concern and the other a long-term concern.
The short-term concern is this: We all at some point saw this recession coming and saw that more benefits would be needed and that people in what was a low-unemployment-rate province, Ontario, would need these benefits. However, the eligibility rules in the program are tied to the recent past of the unemployment industry, so in that particular case we knew the future would change rapidly and we needed to get those people in, yet the program was backward looking by a moving average of three or four months. That gave impetus to this kind of discussion in the short term.
In the long term, though, what was behind this was the regional dimension. Year in, year out, Ontario transfers significant funds to the provinces east of it. I remember doing a report that resonated around the time of the Axworthy discussions. Over a 10-year period, if I remember correctly, almost $2 billion a year went from Ontario to the provinces east through the EI system. Since that time, Ontario has felt uncomfortable with this.
That is also part of the backdrop for this current discussion, to rethink regionally how this program works. If it is meant to be an automatic stabilizer and an insurance program, we do have to recognize that it has also played a structural role in some regions, perhaps helping them in a structural way but also over the long term creating a set of disincentives that most economists would question. In any reform, that regional discussion has to be part of it, and that is a bigger set of topics than the kinds of debates we are currently having.
In this particular program, I would encourage you to go big, because it is in your purview and in your jurisdiction to do so.
Ms. Monsebraaten: We are rapidly running out of time. I know we are bouncing around the themes, so for the last 40 minutes of our time here I would ask our witnesses to focus on particular government mechanisms — and Mr. Corak was looking at EI just now — that they would recommend or caution against.
Senator Segal: This is a specific mechanism question based on what Dr. Corak said. I want to understand the linkage that you propose with respect to WITB and EI. I think it was you who made that proposition. I want to ensure I get the dynamics of that in the perfect world you see that might help us achieve.
My question for Mr. Mendelson is, as I understand the notion of the TIP — I will only use the Milton Friedman word to get people's blood pressure up — but as I understand the notion of the TIP, it is temporary because your income has collapsed. It has collapsed for reasons that are clear; it is not forever; and it does not encourage anything other than helping you through.
I think it is fair to say that the Friedman negative income tax proposition was that if your tax filing had you beneath a certain level, you got topped up, until such time — to go to Dr. Corak's proposition — as you happen to get out from beneath that level. We do not have a definition as to what that level should be, for reasons that are problematic and we need to work on, but I want to make sure that I understand TIP properly as a specific mechanism, and I wanted to Dr. Corak to help ensure we do not walk away from this meeting without understanding the precision of what he meant with respect to the WITB-EI connection.
Mr. Corak: I was trying to suggest that within the EI system, we already have a mini WITB, simply to recognize that as a model that could be something bigger.
Senator Segal: The notion that you could work so many hours a week and still get an EI top-up is a mini WITB system. Is that what you are saying?
Mr. Corak: That is right.
Senator Segal: You are saying that if that were a more robust financial proposition, we could make more progress?
Mr. Corak: That is what I am saying.
Mr. Mendelson: The concept of TIP is to do some of what I thought Mr. Corak was suggesting with respect to EI. If EI is made into more of an insurance-like program, when and if that is done, it could only be done if there were an accompanying program to go along with it that would provide temporary assistance to persons in financial need who are significantly connected to the labour market and who do not really need anything other than some financial assistance to get them over a period of time, but who are not entitled to Employment Insurance for whatever reason.
We see TIP as that accompanying program, not analogously dissimilar — maybe the analogy is not quite perfect — to the Canada Pension Plan, which is the social insurance, and the Old Age Security Guaranteed Income Supplement, which is a program funded out of general revenue that is simply tied to income. There is some social insurance plus an income-related program.
We see TIP as being temporary in that it is available only for six months every five years or something. In other words, it is not something that someone can go on and stay on for the rest of their lives. It is to get them over a temporary period, and that is all it is. Therefore, it should not be available for more than that amount of time, and it should be some relatively simple benefit scale so that you do not have to start doing things like getting landlords' receipts, which is an invidious process, by the way, in social assistance.
Having said that, I want to say we have not yet worked out the details for a fleshed out TIP program. We have worked something out for the basic income for persons with disability. We have it detailed with amounts and precisely how it would work.
How it differs from a negative income tax or WITB is that people in need of financial assistance need their money now; they do not need it based on what their last year's income was, which is how a tax system works. You report in March or April.
Senator Segal: The GST tax credit did not require people to wait a year before they applied; they could apply right away.
Mr. Mendelson: They could apply, but the amount of the GST tax credit is based on the amount of taxable income in the previous year.
Senator Segal: That is right. They did not have to wait until the end of the year to apply.
Mr. Mendelson: No, but it is retrospective. Basic income is designed for people who are not expected to earn a major income through employment, so we expect their incomes to be more or less stable. You can use a retrospective tax system in that regard. However, for people whose income is in significant fluctuation during the year, it is just not an instrument that they could use, unfortunately. I wish it were. In fact, John Stapleton and I have been working on ornate designs to try to make it work.
I do not want to get onto too much of a tangent, but in my experience in the U.K., we were involved with the U.K.'s child benefits design, and they have a different type of taxation system. It is a pay-go system. At the end of the day, I strongly urged them to go retrospectively. They did not, and they have had incredible trouble even using their tax system, which is way more up to date than ours.
If I were a public servant giving recommendations to a government, I would recommend the government not do the same thing or else they will get into trouble. The tax system cannot be used for that purpose. That is the difference. It is one of mechanism, and it is an administrative issue; it is not an ideological issue or anything else. It is just an administrative issue, but a very practical one.
Ms. Monsebraaten: Are there any things you would caution against? I think we touched on ``do not blow it up.''
Mr. Mendelson: Do not use the tax system. Here is a very practical recommendation to the government: Do not put in place a system of tax credits or any other payments where people must pay back large amounts of money at the end of the year, because it will not produce happiness in the population. There is a recommendation of mechanisms to avoid. Believe it or not, many governments have not avoided that mechanism.
I would also say that social insurance probably must be compulsory. It is very difficult to deal with the issues of moral hazard and of people taking advantage of and having knowledge of where they will be.
Although, I have to mention, Sweden has a voluntary unemployment insurance scheme. I do not know whether people know that. I would think that social insurance by its nature is essentially an insurance in which, as a society, we decide ahead of time that everyone will be enrolled. It is sort of the biggest group insurance going. If you are part of that group — i.e., you are resident in the country — then you are enrolled, in the same way you are enrolled in a group insurance plan if you are with a specific employer.
I also think we will be in a world where we will have to look at expanding a CPP-like program for pensions. It is not working. The bottom line is that, with respect to the contributory, the defined benefit and the defined contribution schemes, we have shown they will not carry people through a period of deep change in the economy, and we need to look at alternatives. There are various alternatives, some in the private sector and some more or less in the private sector. I am not stuck on that. I recommend whatever would work. Those are just a few thoughts.
Mr. Prince: I will follow on Mr. Mendelson's comments. I think we will have the pension debate eventually in this country. I worry, and the caution would be that we rehash the old rhetoric of the 1980s and 1970s about compulsory versus voluntary. There are notions with language we will hear more about with respect to automatic enrolment with the right to opt out, which is what we are seeing in Australia, the United States and the U.K. It is trying to finesse the social insurance model with the neo-liberal world we live in where people feel it is the state telling them what to do. We have to get to a place where we need full or wide coverage, and it will not happen through volunteerism or goodwill. We have tried that experiment for 60 years, and the results are pretty clear.
Canada already internationally is at the upper level for voluntary coverage, which is at about 39 per cent or 40 per cent. Worldwide, it does not seem to go any higher than that, unless you start throwing so many tax incentives that you have perverse incentives everywhere.
I would caution about the rhetoric around EI. I do not think it is fundamentally broken. I think we need to strengthen our social insurance programs.
I would caution against the big bang theory of dismantling a system in favour of one overall program, but I do not think anyone is really calling for that. On the tax side, we have already proliferated in the last five or seven years at least three dozen new tax measures or tax credits, most of them non-refundable. We have made that system far more complicated than before. Most were the little boutique tax credits. It is time to review the tax system and the interface between tax and transfers. Again, talk about relentless or rabid incrementalism that is out of control.
I also caution against unilateralism, not that I think that needs to be said here. That is more a message to Canadians. When I talk to my friends and neighbours, they say the Government of Canada ought to do this or Parliament ought to do that, or we ought to have national standards on this.
This is an area where, yes, you can have some national standards in some things, but to expect the Government of Canada on its own to adopt an official poverty line or poverty measure on its own will not will fly. Intergovernmental discussions will be required, and the public needs to be brought along, because the public is not anywhere near where the senators are, and perhaps some policy wonks.
On the disability side, the Government of Canada has a disability agenda or vision from 1999. That is the last time we actually bothered, as a government of this country, to articulate a vision around some of the most vulnerable people in this country. There are 600,000 Canadians of adult age with disabilities who want to work. Unfortunately, we did not pay much attention to them during the good years. It will be even harder over the next two, three or four years. There is a huge loss of human capital and dignity there.
We need a new federal vision on disability. We need to make the Disability Tax Credit refundable in some way. We need to review all the other little tax credits for the infirm, dependent or attendant care, et cetera. We have a dozen of them now, and we need to rationalize that sector.
We need to work towards a basic income for Canadians with disabilities along the Caledon line or others, or, in the words of Senator Segal, a guaranteed income, as we do for seniors. I agree with Caledon: the definitions are tricky. To be honest, the expectation of any real attachment to the labour force is very minimal. We do not have to worry about work disincentives.
That will take about a half a million Canadians with disabilities off social assistance rolls. That will be a huge windfall to provinces. There would need to be a federal-provincial-territorial discussion on a reinvestment strategy on that. That would mean a major injection of reallocated dollars into personal supports, education, inclusive schools, inclusive parks and recreation, family supports and public transit so that people can move around in their communities, and full citizenship for Canadians who face tremendous barriers and obstacles.
The provinces will never invest in those inadequate, inappropriate, unaffordable supports without federal leadership on the income side. That is where there clearly is a federal role. There is a provincial role, but there has to be a tremendous partnership, otherwise Canadians, in 10 or 20 years, will have another Senate committee looking at how to help these same people who have been forgotten and abandoned by their country.
There is a vision towards what the federal government can do on its own, but clearly in partnership.
The Chair: Can I get a question in here? It picks up both Mr. Prince's and Mr. Mendelson's comments about not going the big route and what you have said about income tax in terms of a negative income tax provision as a guaranteed annual income.
You are saying the biggest flaw with that is that it does not relate to the current reality. When people are in poverty or close to poverty, their circumstances change so frequently that last year's income level is perhaps not of much relevance to them.
Mr. Mendelson: There are many thoughts, but one of them is that you cannot use a system that reports up to 18 months in arrears to give income to people who need it right now. It just will not work.
Senator Segal: With the GST system, people file on a quarterly basis. Small businesses and contractors file on a quarterly basis, so we have a system that can accommodate something more than an annual filing.
Mr. Mendelson: This is exactly what the U.K. tried. Really, go talk to some of their ministers who have done it, because they have been in deep trouble about it ever since. I can pull out the headlines.
You can try to move your tax system to quarterly reporting. There are things you can do. In the U.K. they have monthly reporting; it is a pay-go system. There is an annual reconciliation, but for most people they never see it.
Senator Segal: At universities we tell all our students to file their taxes even if they do not have any income, because if their income is less than 30,000 they will get the GST tax credit. We tell them to file early, and they all do.
Mr. Mendelson: Outside of this room we can have a longer conversation about this.
In my view, going from the mainstream tax system we have to a pay-go tax system would be a huge change.
Senator Segal: I am not suggesting it.
Mr. Mendelson: We are in a world of retrospective reporting of income for most people. If last year's income is not this year's income, it is now that you need your income. Yes, you could have a system where people can collect and then at the end of the year there is reconciliation against what they would have paid, but it is that end-year reconciliation, which is precisely what the U.K. tried, and it results in huge repayments to governments.
Senator Segal: How come the GAINS program for our seniors works so well?
Mr. Mendelson: Because those are people with stable incomes. That is why we have advocated for a basic income for persons with severe disability that can be based on the income tax system. You have to have some capacity to make updated payments, too, but that is a minor issue. We have advocated for that because those are people of stable income.
If you are dealing with incremental income like the child benefit, even though that is somewhat imperfect, we would say it would be nice if the child benefit could be right up to date for income, but the trade-off is not worth it.
I am saying that unfortunately there is a limit to what you can use tax credits for.
The Chair: You said there are some other things. What are those?
Mr. Mendelson: That is one aspect. The other one is more controversial. I have had many colleagues in the advocacy community throw things at me, but I do not believe you can have an unconditional payment of money to people of working age whom society expects to be employed. I am not even sure it is good for them.
I do not believe in an unconditional payment of income. I think that we, as a society, expect people to be engaged in our communities, to be engaged in the labour market, and it is good for people to have a life where they are engaged as productive citizens. That is the way it is.
I am not trying to glorify labour or something, but I think that the reality is that labour markets and participation in society and earning your income are part of having your dignity and fulfilling your human potential.
The opposite of it, paying income to people without conditionality, which is the GAI concept, will prove unworkable. I can go through the history — because there is a long history here — and it shows again and again that that is an unworkable idea.
In fact, one of the major failings of the original conception of the Canada Assistance Plan was its concept of non- categorical need, which has proven to be totally unworkable in the real world. Provinces actually did not do that and have never been able to sustain that.
I think you need to think about the relationship to the labour market. It is the old problem of the poverty laws and the Speenhamland system. Mr. Frankel can give you a detailed chapter and verse on the history.
Ken Battle did a paper on the concept of the guaranteed annual income, the GAI. It is a great idea and idealistic concept. There are possibilities. People like to talk about GAI for child benefits. If you want to talk about that as a GAI, fine.
However, the concept of a guaranteed annual income where everyone over age 18 or 21 or whatever you want is entitled to a certain amount of income regardless of what they do or not do, and regardless of what their employability is, and everything else, that concept where it is simply a matter of what your income is and you get an automatic payment, I do not think that is feasible or workable or politically acceptable.
It is this ghost, this chimera that people in the social policy world — particularly third-year social policy students — are constantly chasing after. No insult meant, senator.
Senator Segal: I take it personally, but I do not hold you responsible.
Mr. Mendelson: It never goes anywhere. It is the kind of false pursuit that leads to an absence of social policy reform.
Mr. Frankel: I agree about the political feasibility, but when we look at evidence from the guaranteed annual income experiments, we do not find much of that effect. We do not find many people not working, and we have had experiments that we could not put into place in Canada because people will not agree to stay on the benefit for two years. There are limits to classical economics, and it is appropriate that economists, the great empiricists, look at the empirical evidence.
Mr. Mendelson: There are limitations on young people joining, and I think of the U.S. experience, although I am not that familiar with it. It is one thing when a program is in place for a couple of years, but it is another thing when a program has been around for 10 or 15 years.
I am concerned about an accumulation of 21-year-olds or 23-year-olds on this kind of program. I do not think it is doing them a favour. Maybe I sound reactionary, but I do not think it is doing people a favour to take them out of the labour market. They can make very poor decisions based on an unreal concept of how much money is possible.
Ms. Forget: There is good reason to limit this kind of a program to people above age 25 or whatever, but when we look at the evidence from all of the negative income tax experiments, whether in the U.S. or in Canada, we get the same results. We get a 10 per cent reduction in work hours almost equally divided between three categories: primary earners, secondary earners and tertiary earners.
Primary earners generally work many more hours than the other two groups, so if you do it on a percentage basis, there is a tiny reaction from primary earners.
Secondary earners in the 1960s and 1970s were married women. There is a big difference between the way married women are attached to the workforce today than in the 1970s.
However, the tertiary earners are the ones I talked about, the adolescents who are entering the workforce later. It is hard to see that as a negative outcome. There is a huge reduction in the number of hours provided by adolescents, but if what they are doing instead is going to school, it is hard to see that as a negative outcome.
Mr. Mendelson: If the kids are going to school, that would be great, but do you remember the skiing in Banff on unemployment insurance?
Ms. Forget: The evidence is that is what they are doing. There is evidence of human capital accumulation.
The point is that you need to distinguish between what actually happens and what the political response is. I do accept that it is a difficult sell politically, but, in fact, the evidence is very clear.
Senator Martin: I wish we had a lot more time, because we have such a great panel today. I was asking Mr. Prince whether you have met one another before and you said no.
Mr. Prince: We have not as a group like this one.
Senator Martin: It is worthwhile. We have covered quite a spectrum from looking at preventive measures to what we need to do as a society as well as looking at wealth control. We have covered quite a lot.
This committee will table a report in the fall, but we do not know what the economic climate will be at that time. We hope that it will be a bit better.
Keeping that in mind, and because we will not have time today to draw from the wisdom of this panel, what are some of the immediate things we can do and what are the immediate recommendations? Looking at the current system and the current programs, how do we make them more efficient and politically feasible? What are short-term recommendations for changes that could be more easily achieved, and, for the long term, what are some new programs, including some of the ideas that you presented today? What are some of the lofty goals with respect to what we want our Canada to be?
That discussion cannot happen today, but can some of that be sent in, if we compartmentalize? We can look at lists of recommendations, but they become words on a page after a while. I see such value in what you are all bringing here. It would be interesting to organize that information. I am sure we have a great team that will help us do that, but there is so much information that we want to draw from today.
I go back to the political feasibility, expediency and what we can realistically achieve as well as what we hope to achieve.
Ms. Monsebraaten: Given the time constraints, I will go around the table and ask everyone what we need to do now and what is politically feasible.
Mr. Prince: I started my morning remarks by describing the struggle we have between living in the here and now, the immediate economic recession and the challenges in a $50 billion or higher federal deficit. To put that in context, it is only about 3 per cent of GDP. We have been in worse boxes. Let us caution the fiscal hysteria that we seem to whip up. Some will also want to fan those flames for political reasons, partisan or otherwise.
Given that and where the public is, part of my diagnosis is that the public is not yet anywhere near Senator Segal's discussion. I do not think they are there yet even to think about it. Mr. Mendelson is about deep, profound values in people's DNA about the value of work and earning benefits and not handouts. In the short term, there is some need.
We heard about knowledge brokering and research and discussion about some of the early experiments and the evidence we have. Get that out to wider circles in committee hearings like this one — fora, workshops, regional meetings and consultations.
Perhaps there could be a federal-provincial-territorial process of dialogue around poverty reduction. Now that five or six provinces will be launching anti-poverty reduction strategies, it begs questions about where the other three or four provinces are. What are we learning from the Newfoundland and Labrador experiment or innovation?
The Quebec one has more data. I believe you have talked with Alain Noël from the University of Montreal. Interesting data is rolling out about the early results from the Quebec poverty strategy.
I would like to see my own province, as a wealthy province, show some leadership on poverty reduction, but not yet. I would like to see some kind of intergovernmental process on that.
There is some room for demonstration projects so that we do some trials. I am delighted to see that the finance ministers have agreed to some modest reforms around the Canada Pension Plan, which did not get much press in the last week. We are finally moving off an important hang-up about having to cease work totally to receive benefits. The CPP disability benefit is even more doctrinaire about that, as are some of our other benefits. You are either in or out, either employable or unemployable. We know from our own lives that many of our family members work in that zone of some work, some not, episodic, recurrent, cyclical, illnesses, impairments, abilities to go in and out. We need to respond to that. That is part of what I call ``modernization.'' Some demonstration projects could look at CPP disability partial benefits, because we are moving that way on CPP retirement for partial benefit. An EI sickness benefit ramped out to 50 weeks to cover the huge gap could be a pilot.
There is time to do some more thoughtful analysis and research and time to do dialogue.
For action federally, look at making the Disability Tax Credit refundable. Minister Flaherty is not too far off doing that. He is preoccupied today, but that is a doable reform.
Another one would be reviewing and rationalizing this plethora of tax credits and measures that have been spawned in the last eight to ten years, and that is, again, within the federal jurisdiction. That could be done. It would take some thoughtful analysis because there are many interactions we need to better understand. Signal to Canadians that governments are not idle, that everything is on the back burner or forgotten off the stove because there is no money, that there is time to do thoughtful dialogue and analysis and social experiments on modest scales that could then position us for more medium-term to longer-term bolder visions.
Signal to Canadians what your vision is. The Senate committee could serve a powerful role this fall to remind Canadians that we have not forgotten the bigger prize of a fair country, human dignity, equality and opportunity. We are not hearing it very much right now. The Senate could play an important role in that.
Ms. Forget: I would like to remind everyone that the welfare system we have, the architecture we have, did come out of the Great Depression, so this might not be an inopportune time to think about how to restructure things.
I would like to reiterate what I said at the outset. It seems to me that the federal government has an architecture in place in the form of refundable tax credits, which could be expanded and which could allow the federal government to do what the federal government does very well, which is to provide direct income support.
We need to keep reminding ourselves that intergovernmental transfers are meant to facilitate program decisions. They should not be driving them. First, we ought to decide who should be doing what, and then we ought to figure out how to get the money to the right place to pay for those programs. We do not need to constrain what the provinces ought to be doing on the basis of what the provinces can afford to do, or assume that the federal government ought to do certain things because it has the fiscal capacity to do so. We all know that, but we need to keep reminding ourselves about it.
My inherent bias is towards a rationalization of the system, towards allowing the provinces to focus on the direct delivery of services, the kinds of things that require discretion and deep knowledge of what is going on in the community, and to let the federal government develop and expand, to build on the strengths already in place, such as the Canada Child Tax Benefit, OAS and GIS.
Mr. Mendelson: I think the federal government should call for a real federal-provincial exercise, but they should open it with an offer, which is essentially not unlike how the Lalonde review opened with the increase in the family allowance to $20, although that was done unilaterally. The offer should be a refundable disability tax credit, which is already in the federal government's headlights. This credit only goes to people with serious disability, by the way, and right now it is not refundable, which means that most people with serious disability do not benefit from it because they have no income.
Another offer that should be put on the table is some beginning of the basic income for people with disabilities who are eligible for the Disability Tax Credit, which might be, as I said, from age 55 to 65. I think that is feasible, but I am not sure how much it would cost. There would be a bill attached to that, but it would not be a huge amount. We are talking about $1 billion, ballpark, not $10 billion.
The third item would be a further increase in the Canada Child Tax Benefit, the National Child Benefit Supplement, which I would advocate to be a consolidation of existing programs. However, since they were this government's programs, they might not be amenable to that.
I will raise another contentious point. I would not just do those things as the federal government. I would say to the provinces, ``Look, provinces, we want to sit down with you and have a serious review. We are open to discussing everything, including EI, because we have had a lot of calls from the provinces. We are open to discussing the pension plans, because there are obvious issues. Here are three specific initiatives we are willing to put on the table right now that will save you a substantial amount of money, to show that we are seriously engaged and we are willing to take on this process.''
It is returning to a concept of cooperative federalism that we have not really been engaged in for the last while, but it might be possible. That is what I would argue for.
I want to add something else, senators. After you finish doing this study and solving the problem of poverty and low income in Canada, there is a social disaster looming that it is bigger than this, and it is on reserves. That ball has to be moved, and it has not been moved. Someone needs to pick it up and give it a kick or blow a bomb or something. Someone has to do something about it. There are half a million people or so, particularly in Western Canada, who are doomed. There are kids right now who are walking to schools that are only open 50 or 60 days a year, and they are chaotic. These children do not have a chance. A few will survive and go on, rather miraculously, but very few.
After you complete this task, there is another task, maybe at the level of the Senate, where a report can start to move this ball, because nothing else seems to be doing it.
Mr. Frankel: I agree with all of the comments about the federal government needing to fix its own programs, mostly through larger investment, with EI probably through enhanced eligibility. I think it is an interesting idea to try to use this as an incentive with the provinces, and there are certainly provinces that have signalled they will pick up on it.
Let me mention three items that I hope to see in your report. I hope that your report says something about the continuing cost of doing nothing, that we are paying at the other end in health care costs and in some criminal justice costs, and there is more and more evidence about that.
Second, I hope your report says something about stigmatization of the poor and the damage caused by that. We have evidence about that. I think that if senators speak about that, it will mean something.
Third, on Mr. Mendelson's theme, the report has to say something about high-risk groups, certainly Aboriginal and First Nations children, right in the policy portfolio, the jurisdictional portfolio of the federal government.
I am thinking also about recent immigrant children. We are now recruiting immigrants in many provinces, in cooperation with the federal government, because of the economic advantages they bring. I have just seen data from Manitoba. We find poverty rates among those children of around 40 per cent. It is one thing to say that problem will improve over time, and it does, but that can mean up to six years of damage. That has to be highlighted.
Mr. Corak: Perhaps my comments can be divided in two. I appreciate the need to speak to the current situation. The report will be released at a time of recession, so there is obviously a need to be seen as relevant to that.
One recommendation in that regard, a very short-term fix, revolves around the EI system. All this discussion around eligibility and ``getting in'' seems to me to be a bit of a red herring, because the people who are losing those jobs will qualify anyway. It is the question of what they get when they are in. You could see immediate increases in the benefit rate and the duration of benefits as being an important aspect of increasing the automatic stabilization role of the program and also benefiting individuals who need it in the here and now, as a way to speak to the recessionary issue. The other aspect that of could be to reduce the EI tax rate immediately. All of that could be done quickly. If you had something like that, which spoke to the current situation, you might allay the fear of being stillborn, if you will.
With regard to the longer term, the people who have talked before me have expressed matters eloquently, and I agree with them. However, I would underscore the message with respect to disabilities. Perhaps you can frame this in the way you did earlier, between prevention and reduction. Much of the discussion has been about reducing the poverty amongst this group.
We should not forget that the early detection of learning disabilities amongst children is an important part of poverty reduction over the long term. Again, I am not sure to what extent that falls in the federal scope of things, but supporting the provinces in the education system, which Senator Martin has underscored, is an important aspect and would be an important part of that proposal, and it could be framed in terms of reduction and prevention.
The Chair: That brings us to the end of the formal meeting. We will retire for some lunch and have an opportunity for more informal discussion. This has been very enlightening, a wealth of information and much food for thought. I would like to comment on some of what has been said, but you have been very clear about some areas that really cry out for attention, and that will form a big part of what we will do.
Thanks to all of you for being a part of this discussion on income security. We branched into some other areas as well, but it is all important information.
(The committee adjourned.)