A.  Background

1.   Main federal programs

The federal government spends significant sums of money on a variety of income support programs, listed in Table 3, for both the working age population and for seniors.[25] This income support is in addition to the Canada Social Transfer (CST), a block fund transfer to the provinces and territories intended to support social assistance and social services, post-secondary education, early childhood development, and early learning and child care ($13.75 billion, 2017-2018 estimate).

Table 3: Main Federal Income Support Programs 2017-2018 and Expenditure Estimates

Working Age Population	Cost Estimate	Seniors	Cost Estimate
Employment Insurance, EI Sickness, EI Part II	$22B	Old Age Security	$38.8B
Canada Child Benefit	$22.6B**	Guaranteed Income Supplement	$11.8B
Canada Pension Plan Disability	$4.1B*	Canada Pension Plan	$34.9B*
Disability Tax Credit	$995M**
Disability Savings Program	$627M***	Registered Retirement Savings Plans	$16.3B
Working Income Tax Benefit Working Income Tax Benefit - Disability Supplement	$1.2B**	Tax Free Savings Accounts	$1B**
On-Reserve Income assistance	$963M
Totals	$52.5 billion		$102.8 billion

Source: Table prepared by the authors using data obtained from Departmental Plans: Employment and Social Development Canada; Indigenous and Northern Affairs Canada; Actuarial Report on the Canada Pension Plan as of 31 December 2015; and Report on Federal Tax Expenditures: Concepts, Estimations and Evaluations, 2017.

Note: *estimates for the calendar year, **estimates for the calendar year, ***estimates for the Disability Savings Program include both the program and tax expenditures.

a.   Working age population

With respect to income support programs for the working age population, Employment Insurance[26] (EI) and children’s benefits (explained below) comprise the largest portion of federal expenditures. EI is a social insurance program funded by employee and employer contributions on insurable earnings.[27] It provides temporary financial assistance to Canadians who have paid into the program and have lost their job. EI benefits are also available to Canadians who have paid into the program if they are sick, pregnant or caring for a new-born or adopted child, as well as to those who must care for a family member who is seriously ill with a significant risk of death, and to those who must provide care or support for a critically ill or injured child.

The Canada Pension Plan – Disability Benefit[28] (CPP-D) is a federal income support program for people who have been in the labour force but have had to stop working because of a disability. It provides workers who contribute to the Canada Pension Plan (CPP) with access to benefits should they have a severe and prolonged disability that prevents them from working. The benefit is intended as a complement to other forms of financial support that individuals with disabilities may already have, such as private insurance, personal savings and private long-term disability insurance.

The Disability Tax Credit[29] (DTC) is a federal non-refundable tax measure that aims to reduce the extra costs incurred by people with functional limitation as a result of their illness or condition. In order to receive the credit, an authorized medical practitioner must certify that the person meets one of the following criteria: is blind, is markedly restricted in at least one of the basic activities of daily living, is significantly restricted in two or more basic activities of daily living (this can include vision impairment), or needs life-sustaining therapy. In addition the person’s impairment must be prolonged, has lasted or is expected to last for a continuous period of at least 12 months and is present at least 90% of the time. In 2017, persons with severe and prolonged disabilities could realize up to $1,217 in federal tax savings. Because the DTC is a non-refundable tax credit, it benefits only individuals and family members with taxable income.

Since 2008, the government has offered persons with a disability the opportunity to open a Registered Disability Savings Plan[30] (RDSP) in order to help individuals and their families save for their long-term financial security. To encourage this type of savings, the government pays the Canada Disability Savings Grant and the Canada Disability Savings Bond.[31] The Canada Disability Savings Bond is money the government contributes to RDSPs of low- and modest-income Canadians. The program enables recipients to receive up to $20,000 over a lifetime. The Canada Disability Savings Grant is a matching grant program. The government gives matching grants of up to $3,500 per year, depending on the beneficiary's family income and contribution. The limit of matching grants is $70,000 over a lifetime. The RDSP is a long-term savings plan. As such, whenever money is withdrawn from an RDSP, all or part of the grants and the bonds that have been in the RDSP for fewer than 10 years need to be repaid.

The Working Income Tax Benefit[32] (WITB) is a refundable tax credit intended to help eligible low-income workers over the “welfare wall”[33] and strengthen incentives to work by providing additional income. There is also an additional disability supplement for those who qualify.

The on-reserve Income Assistance Program is administered by Indigenous and Northern Affairs Canada (INAC). It provides funds to individuals and families who are ordinarily resident on reserve. It is a last resort when all other means of generating income to cover basic needs have been exhausted.

b.   Seniors

Old Age Security[34] (OAS) provides a monthly payment available to most Canadians who request it and who are 65 years of age and older and meet the Canadian legal status and residency requirements. The Guaranteed Income Supplement[35] (GIS) is a monthly non-taxable benefit to OAS pension recipients who have a low income and are living in Canada. The Canada Pension Plan[36] (CPP) is a mandatory public pension plan funded through contributions by employers and employees.

Private retirement savings incentives are also offered to encourage Canadians to save for retirement. These include the Registered Retirement Savings Plan[37] (RRSP) – contributions to which can be used to reduce income tax – and the Tax-Free Savings Account[38] (TFSA). Contributions to a TFSA are not deductible for income tax purposes; however, interest earned in the account is generally tax-free. Because RRSPs and TFSAs provide preferential tax treatment, there is a loss of revenue to the government associated with them.[39]

2.   Budget 2016 measures

In addition to the government’s recent commitment to developing a Canadian poverty reduction strategy, Budget 2016 announced measures aimed at poverty reduction through income support. Budget 2016 announcements included: the introduction of the Canada Child Benefit[40] (CCB), changes to EI and a top up to the GIS for unattached seniors. It also reduced the age of eligibility for the OAS benefit from 67 to 65 years of age[41] (see Appendix A).

The most significant changes with respect to federal expenditures are related to children’s benefits. In summer 2016, the CCB replaced the previous children’s benefit system that consisted of the Canada Child Tax Benefit, non-taxable monthly payments targeted to low- and middle-income families, and the Universal Child Care Benefit, a taxable monthly payment available to all families with children.

Table 4 – Average Family Children’s Benefits, Comparison of Previous System with Canada Child Benefits

Source: Office of the Parliamentary Budget Officer, Fiscal Analysis of Federal Children’s Benefits, 1 September 2016, Summary Table 2, p. 3.

Note: may not sum due to rounding. The UCCB is net of taxes.

Amounts provided under the CCB are based on adjusted net family income and the number and age of children. The new CCB is intended to direct the greatest benefits to lower income families. Families with the highest incomes (generally over $150,000) receive less than under the previous system. However, the new CCB is not indexed, with the result that the real value of CCB payments and the number of eligible families will decline over time. On 1 July 2016, the changes went into effect.

B.  What the Committee Heard

We believe that poverty is always about income, but it isn't only about income.[42]

The Committee heard testimony and received written submissions from numerous governmental and non-governmental organizations as well as from individuals with lived experience of poverty, with experience providing services to people living in poverty, or with experience researching the issue. These witnesses explained that the main reason people live in poverty is inadequate income.[43]

Witnesses called upon the federal government to take bold, broad-based initiatives that would put into place an income security architecture that ensured a guaranteed minimum income. Other witnesses argued that targeted measures would be more effective and should target groups including: single-parent families, people with disabilities, unattached individuals, Indigenous peoples (especially those living on reserve), and recent immigrants.[44] All of the witnesses stressed to the Committee that more needs to be done.[45]

1.   Income security architecture for the working age population

a.   Guaranteed minimum income or basic income

Several witnesses identified the need to create an income security architecture (or a system of programs) that establishes a guaranteed minimum income for all working age Canadians. Generally speaking, a guaranteed minimum income (often referred to as a basic income) is a system of cash transfers from government to individuals or families to provide an income floor below which no individual or family can fall. The income security architecture could be modelled on the existing system of programs for seniors which contains three main components: a universal basic income benefit (similar to OAS), a targeted negative income tax (similar to the GIS),[46] and a contributory insurance/pension scheme (CPP).[47]

The Committee heard testimony from witnesses who were hopeful that their communities would be part of a basic income pilot project.[48] Sandra Datars Bere, Managing Director, Housing, Social Services, and Dearness Home, City of London, proposed that becoming part of the Government of Ontario’s planned basic income pilot would help the community address the issues around insufficient income supports from Ontario social assistance programs.[49] It would also make it easier for low-income people who are having difficulty navigating complicated systems.

We try to do that within our system, but I will tell you that our systems are bureaucratic. I probably shouldn't say that out loud, but they are. They are bureaucratic and rules-based and driven by guidelines and the realities. A basic income allows people to take the money that they receive and use it to be supported in ways that they want to use it.[50]

Yet, Ms. Datars Bere was also careful to point out that having more income, while very important, would not address the range of additional supports (e.g. workplace accommodations for people with disabilities, career coaching, skills training) that would continue to be needed to help people move forward in their lives. This insight was echoed, by Deirdre Pike, Senior Social Planner, Social Planning and Research Council of Hamilton who also noted the importance of being able to scale up basic income pilot projects.[51]

Many witnesses in favour of a guaranteed minimum income suggested it could be a possible mechanism to end poverty. Further, supporters argued that ending poverty through a guaranteed minimum income could eliminate other negative consequences of poverty, such as poorer health, lower success rates in school, and higher crime rates. Proponents also told the Committee that a well-designed income security architecture would remove stigma and work disincentives associated with the current social safety net and potentially result in administrative savings related to the delivery and monitoring of existing programs.[52]

Diane was talking about it … taking all day to be poor. If you're having to go to the welfare office to knock on six different doors, it's not only inefficient, it's degrading. It reduces your ability and your capacity to enter employment and to develop your training and skills. If we could just get, across the board, basic income programs that deal with all of those elements, then people can have firm ground to stand on to get to the next level of their development.[53]

b.   Targeted guaranteed minimum income programs

Low income in our society is no longer so prevalent that society-wide measures are needed. Chronic low income is concentrated in specific groups, such as elderly women who never worked, single mothers with children, the disabled, and recent immigrants who lack language skills. These can be targeted by government programs.[54]

The Committee heard from some witnesses that the government should develop a guaranteed minimum income program for specific sub-populations. One such sub-population is Canadians with severe disabilities and mental health conditions. The Committee heard evidence that despite the fact that people with disabilities can and want to work, many, especially those with severe disabilities, experience significant challenges earning sufficient and regular income.[55] It was also suggested that the federal government develop a stronger income security system for First Nations people living on reserve, one that takes into account the high costs and often limited employment opportunities in isolated northern communities. The Committee also heard that the new CCB would likely have a significant impact on low-income families,[56] but that it should be indexed to inflation.[57] A guaranteed minimum income for families with children could ensure that benefits are not clawed back by other levels of government and that childcare and other educational opportunities are affordable.[58]

c.   Strengthening existing federal programs

Eligibility and benefits under existing income security programs, such as employment insurance, social assistance, and seniors income supports need to be revised to ensure that benefits are sufficient to provide an adequate income.[59]

The Committee heard extensive testimony related to existing federal programs and how to strengthen the social safety net to prevent people from falling through the cracks. Testimony focused on how existing programs could be more flexible and generous. In addition, the Committee heard that better coordination of existing programs, including provincial programs, was needed. Finally, witnesses suggested that application and reporting processes be simplified and more client-centred.[60]

i.    Employment Insurance

The Committee heard that changes to EI are necessary in order to address the changing nature of work and employment. There are growing numbers of workers who do not qualify for EI due to the part-time or precarious nature of their jobs. These workers are not able to accumulate the required number of insurable hours to access benefits between periods of work. Others spoke of the inadequacy of the 55% average wage replacement rate, which does not provide enough income for low-wage workers receiving benefits. Other important issues raised were restrictions related to working while on claim or going back to school while on claim. A more flexible system could support unemployed workers as they transition into higher quality better paying jobs.[61]

The Committee also heard that EI sickness benefits were too short in duration for some vulnerable individuals and should be more flexible, allowing people with episodic health conditions to more easily stay attached to the workforce. EI maternity, parental, and compassionate care benefits could also be more generous and flexible. It was also suggested that changes be made to ensure that temporary foreign workers are given equal access to EI benefits.[62]

Finally, several witnesses recommended that the federal government use poverty reduction and gender equity lenses when it comes to measuring and reviewing EI program components and addressing problems with the system.[63]

ii.   Working Income Tax Benefit

The Committee heard that at present WITB top-ups are modest.[64] Enriching the WITB benefit could be one way to lift low-wage workers with precarious employment, and workers who work fewer hours because of a disability or caregiving responsibilities, out of poverty.[65]

iii.  Canada Pension Plan Disability

The Committee heard from several witnesses that many people on CPP-D rely on it as their primary source of income and as such it is inadequate. Witnesses stated that the eligibility and benefit calculations should be reviewed with a view to ensuring that CPP-D beneficiaries are not living in poverty.[66]

More generous cash transfers are part of the answer for some, especially for persons with severe disabilities whose employment levels are one-third of the non-disabled population.[67]

iv.  Disability Tax Credit

Over the course of the study, witnesses told the Committee that many low-income people with disabilities face additional expenditures related to their disability but do not benefit from the DTC because they do not have sufficient income to have tax payable. Making the DTC fully refundable would address this issue.[68]

v.   Canada Disability Savings Program

With respect to the RDSP, Brad Brain, Registered Financial Planner with Brad Brain Financial Planning, told the Committee that the program’s rules are both complicated and restrictive. For instance, the requirement that money be left in the account for 10 years does not help people with disabilities who need money today, in order to cover their expenses. He suggested that the TFSA may be a more appropriate savings tool:

I believe the TFSA annual contribution room should be returned to $10,000 per year, and I think that registered disability savings plans need a major overhaul to make them more transparent and more accessible.[69]

vi.  Income supports for First Nations People on reserve

... any federal poverty reduction strategy that doesn't place [I]ndigenous people near the centre is lacking, for two reasons: principally, because of the disproportionate levels of low income and poverty that this particular population group faces; and second, because it's one of the areas of federal responsibility.[70]

The Committee heard that the government should review its policies related to income support for people on reserve. Present federal income support policies for First Nations on reserve are based upon the provincial social assistance systems. Witnesses stated that not only are these rates generally inadequate, they do not account for the significantly higher costs associated with living on remote, northern reserves.[71] Shawn Pegg, Director Policy and Research, Food Banks Canada noted that in isolated Northern communities the cost of food, housing, and energy can be anywhere from 2 to 10 times more expensive.[72]

vii. Canada Child Benefit

The Committee heard that the CCB is making a significant impact in communities for low-income families with children. There was concern, however, that the CCB was not indexed to inflation and would therefore be eroded over time. The Committee heard concerns that the benefit might be “clawed-back” by other levels of government, especially by provincial social assistance programs. The Committee also heard concerns about the low take-up rate of the CCB on First Nations’ reserves and that families without regular immigration status should be eligible.[73] Finally, the Committee heard that the CCB should be evaluated by its ability to reduce the child poverty rate. It was suggested that the federal government set a target of a 50% reduction in child poverty by 2020.[74]

2.   Income security for seniors

Before the system of OAS, GIS, and CPP was put into place in the mid-1960s,[75] the percentage of the population aged 65 and over living in low income exceeded 40%. In 2014, the percentage of the population aged 65 and over with low income was less than 10%.[76] Witnesses generally agreed that the system of income security programs for seniors was essential in ensuring that Canadian seniors do not live in poverty. Yet the Committee also heard that it was important not to be complacent. Canada’s income security system for seniors needs to be continually reviewed and adjusted so that vulnerable low-income seniors do not fall through the cracks. This is especially true of immigrant seniors who have been sponsored by their children or grandchildren. It was also suggested that OAS and GIS be indexed to wages rather than prices.[77]

Several witnesses questioned whether an expanded CPP program would address low income. There were concerns that the additional tax burden would outweigh potential benefits down the road.[78]

Witnesses also addressed federal programs that support Canadians to save for retirement. The Committee was advised that for low-income seniors, TFSAs are the best vehicle. While TFSAs benefit seniors of all income levels, withdrawals from TFSAs are not considered for the purpose of calculating GIS benefits and social housing eligibility.[79]

3.   General insights on federal income security programs

One of the principles of low-income policy is that complexity is inherently regressive, complexity in the tax system, complexity in the eligibility rules for OAS, GIS, and CPP, all of it. It's inherently regressive because low-income people are not going to get professional advice; they can't afford it. So if you want to help low-income people, make it simple.[80]

The Committee heard from witnesses, including federal officials, that there was work to be done related to outreach and ensuring that vulnerable Canadians understand and are able to access the full range of supports that are available.[81]

We assume that everyone in Canada is getting all the child benefits, the working income tax benefit, the OAS, for example. We are finding that this is not true, that there are people who are falling through the cracks.[82]

Finally the Committee heard that more attention needs to be paid to how income support programs work or do not work together. Witnesses described how complicated and cumbersome applications and reporting rules could be. It was also noted that certain benefits are deducted from others, adding another level of complexity and that the rules around earning income from employment were both difficult to understand and discouraging.[83]

We have to figure out a way for the very poorest of people with disabilities to be able to have programs work together in a seamless way so that we have a system where people can move into work and be able to meet their own needs.[84]

4.   Making life better for the working poor

a.   Marginal effective rates

The Committee heard that people on income supports may be reluctant to increase their paid employment if the marginal effective tax rate[85] of the additional work is too high. This is especially true of people with disabilities who may not be confident that their disability or health condition will allow them to work full-time for a sustained period of time. The Committee also heard that for some individuals, the loss of a key benefit such as social housing or prescription drugs make the costs prohibitive.[86]

... in contemplating new, targeted income support programs, federal and provincial policy-makers should pay special attention to work disincentives stemming from high effective tax rates. They should ensure that any new financial assistance programs do not contribute to increasing already high effective tax rates by adding another layer of geared-to-income benefit phase-out rates at lower income levels.[87]

b.   Lower taxes

From Monique Moreau, Director of National Affairs, Canadian Federation of Independent Business, the Committee also heard that an effective way to make life better for low-income workers is to reduce their tax burden.

Our members feel strongly that decreasing personal income tax and increasing the basic personal exemption are better solutions than introducing minimum wage increases.[88]

c.   Raising minimum wages

The Committee heard a wide range of opinions regarding minimum wages in Canada. The Committee was reminded that the federal minimum wage applies to less than 10% of the Canadian workforce that falls under federal jurisdiction. The Committee heard numerous witnesses, often from community-based organizations or people with lived experience of poverty, say that raising the minimum wage would help to reduce poverty. In addition, the Canada Union of Public Employees proposed that the federal government introduce a uniform federal minimum wage and set it at $15 an hour.[89] This would signal federal support for increasing wages and incomes for workers more broadly.[90]

The Committee also heard from other witnesses including some from the private sector, the Canadian Federation of Independent Business as well as economists who argued that minimum wage increases could have unintended consequences such as incentivizing automation, or making it more difficult for youth and low-skilled workers to find jobs. It was also suggested that increasing the minimum wage might lead to slower economic growth, as some businesses might scale back expansion plans.[91]

5.   Ensuring basic necessities are affordable

a.   Food

During the course of the study, the Committee learned about food insecurity[92] and about the problem of expensive nutritious food, particularly in the North.[93]

I think the main problem we see in northern economies is that people are often living on extraordinarily low incomes, and the cost of living is extremely high.[94]

From Stephen Van Dine, Assistant Deputy Minister, Northern Affairs Organization, INAC, the Committee learned about Nutrition North Canada. The program began in 2011, with the objective of making perishable, nutritious food more accessible and more affordable for residents of eligible isolated northern communities without year round surface transportation (road, rail, or marine) access.[95]

The Committee heard that the program has made a positive difference for these communities. However, witnesses testified that the scope and scale of Nutrition North is small, as the program was not designed to comprehensively address food insecurity in the North. The Committee heard that more policy tools and initiatives are needed. As mentioned in the section related to income supports, higher levels of support are needed that take into account the higher price of nutritious food. The Committee also heard that more should be done to ensure that food programs are culturally relevant and support harvesters of traditional “country foods.”[96]

b.   Health care services not covered under public systems

Numerous witnesses drew the Committee’s attention to the difficulty many people in low income have in accessing health services that are not covered under provincial health insurance schemes. These essential services can include: prescription medications, and medical devices, as well as dental, vision, and mental health care coverage.[97]

The Committee heard that the government needs to ensure that people have access to prescription medications. Some proposed that the federal government implement a national pharmacare program. They pointed out that a pharmacare program could have an additional benefit for some who require pharmaceutical treatments, possibly enabling them to return to work.[98] It might also have the added benefit of lowering payroll costs and providing more flexibility to employers.[99]

However, other witnesses noted that those with severe mental illness, who are often among the homeless, would not benefit from a pharmacare program and told the Committee that the federal government should focus on other priorities. They also noted that there are often non-medical treatments and therapies for mental illness and addiction that are underfunded that should be financially supported.[100] The Committee also heard that the federal government should provide further leadership in supporting safe injection sites in urban and rural communities.[101]

Stella Lord, Voluntary Coordinator for the Community Society to End Poverty in Nova Scotia, told the Committee how important it was for low-income families to have dental and vision care coverage. The cost of these services can be significant. It was also noted that people in low income should have support acquiring necessary medical devices.[102]

c.   Transit

The Committee understood the importance of public transit for low-income individuals and families, to enable them to meet basic needs and to access education, employment and activities in the community. Several witnesses drew the Committee’s attention to recent measures in several municipalities to increase access to public transit for those in poverty. Several witnesses told the Committee about municipalities, such as Toronto, that had provided reduced transit fares for low-income individuals and families.[103] The City of Calgary announced plans to initiate “sliding scale” fees for Calgary Transit by March 2017, with monthly transit passes costing as little as $5.15 for low-income residents.[104] The Committee heard that one of London’s poverty reduction measures was to allow children under 12 to ride public transit free of charge and that it planned to reduce transit costs for low-income residents in January 2018.[105]