Dismantling the Welfare Wall for Persons with Disabilities
Published on 15/05/2017
This paper describes the concept of the ‘welfare wall’ and explores its application to persons with disabilities. There would be less need to rely on Canada’s programs of income support and less concern about the welfare wall if individuals who wanted to work had better access to employment opportunities and associated independence.
For most Canadians with disabilities, the promise of the social security system far exceeds its performance, especially for persons with severe impairment. Many cannot qualify for public or private insurance because the eligibility criteria require employment or the programs are delivered as a workplace benefit. Thousands of individuals with serious disabilities end up on social assistance or welfare – the leanest of Canada’s social programs.
The expression ‘welfare wall’ derives from a Caledon study, which found that most recipients end up worse off if they leave that program for the paid workforce. Welfare recipients pay back to government most of their employable earnings through a mechanism known as the ‘welfare taxback.’ Household income also declined as a result of income taxes and payroll taxes in the form of Employment Insurance premiums and Canada Pension Plan contributions. Moreover, because of their higher income, these households faced a reduction in government payments for certain tax credits, such as the GST credit, and the Ontario sales and property tax credits.
The welfare system’s provision of labour market supports, such as affordable child care, assistance with the cost of employment-related expenses, and educational and training opportunities, adds to the height of the welfare wall and makes it difficult for many recipients to leave or stay off welfare. Another disincentive to work is the potential loss of ‘income-in-kind,’ such as supplementary health and dental benefits. For most welfare recipients entering or re-entering the labour market, these multiple factors mean that the cost of working is very high.
The welfare wall can be dismantled through a combination of measures. Enhanced wage supplementation would ensure that paid work is always a more attractive option than welfare. Another measure involves the extension of income-in-kind, such as assistance with the cost of prescription drugs, to working poor households as well as households on welfare. A more robust reform involves dismantling welfare and replacing it by a new disability income program in which the federal government assumes financial and administrative responsibility for the income security of persons with disabilities currently on welfare. Under a negotiated agreement, provinces and territories would invest the resulting savings in the supply of disability supports.
This research was carried out on behalf of the Centre for Research on Work Disability Policy (CRWDP).
ISBN – 1-55382-685-X