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Ontario should reinvest its savings in social assistance — and raise benefits now

Published on 09/08/2022

Originally published on TVO.org.

Eight hundred and fourteen million dollars. That’s how much the Ontario government reduced spending on social assistance over the past two years.

On July 19, the Financial Accountability Office of Ontario released its last quarterly report on the government’s spending for the 2021-22 fiscal year. It shows that the Ontario government underspent $735 million in social assistance alone. And when we look at the difference over two years, the figures are even starker — the Ontario government went from spending about $8.5 billion on social assistance in 2019-20, to $7.7 billion in 2021-22.

So why did spending drop by 10 per cent, and why is that a problem?

Ontario Works and the Ontario Disability Support Program are social-assistance programs for people living in deep poverty. The maximum monthly benefit rates for a single adult are $733 for Ontario Works and $1,169 for ODSP. These rates prevent people who receive social assistance from living a life with dignity. The average rent for a bachelor unit in Toronto is 167 per cent more than the maximum benefit rate in Ontario Works. Food-bank usage is also increasing, and social-assistance recipients represent a significant proportion of people accessing these services.

Some may want to argue that the news is not all bad, given that the Ontario government announced, when it retabled its 2022 budget on August 9, that it will be increasing ODSP rates by 5 per cent this fall, to $1,227. Future increases will be pegged to inflation. But, while that increase will be helpful, the government should acknowledge that it is not possible to live a life with dignity with these rates. And there is no increase planned for Ontario Works.

Low social-assistance benefits reflect a prominent theory in social policy: low benefit rates will help incentivize labour-market attachment — or, more simply, encourage people to work. Such theory has enabled several Ontario governments to leave rates so low that single adults receiving Ontario Works have an income equal to about 40 per cent of the poverty line; for those receiving ODSP benefits, it’s 60 per cent.

Following the release of the FAO’s report, the Ontario government pointed out that these savings reflected the fact that fewer people than anticipated received social-assistance support. This decrease was confirmed by Maytree’s “Social Assistance Summaries” report.

However, it is important to ask why caseloads dropped significantly in Ontario Works. Partly, it may be because people who received pandemic supports (e.g., the Canada Emergency Response Benefit) were no longer eligible for income support from Ontario Works. But another increasingly likely, and often underdiscussed, reason may be that we are in an era of largely full employment.

Even though structural labour-market changes have challenged the idea that low benefit rates encourage work (the proportion of people receiving Ontario Works has stayed relatively stagnant despite labour-market changes), we must ask whether this idea is helpful during a time of full employment. If those who can work are doing so, what is the value of keeping people who are still receiving social assistance in abject poverty?

Governments and some economists use a circular argument to justify low benefit rates:

  • During periods of higher levels of unemployment, governments reason that benefit rates should be kept low to incentivize work.
  • When the labour market is at full steam and unemployment is low, experts reason that government spending needs to decrease to reduce inflationary pressures.
  • Interest-rate increases meant to reduce inflationary pressures may be accompanied with increased unemployment.
  • But when we do have higher levels of unemployment, governments argue they can’t increase benefits, because they want to encourage labour-market attachment.

So the argument of keeping rates low continues to be rationalized, even though people living in deep poverty are falling further behind. Governments pull levers and adjust dials while rendering the people most affected by these decisions invisible. The burden is placed on people living in poverty, without consideration of policy options that help people live with dignity.

Do we ever intend to meaningfully support the 900,000 people in Ontario receiving social assistance?

The Ontario government should reinvest its savings in social assistance to increase benefits now. That would help people live a life with dignity — whether in an era of full employment or in a future recessionary period.

If it doesn’t, that would make it clear the Ontario government doesn’t see an economy within which it can increase benefits for people living in deep poverty. And that should be a concern for us all.

Topic(s)

Government spending and tax, Income security

Summary

Whether in an era of full employment or in a future recessionary period, people should be able to live with dignity.