Too many income supports still aren’t indexed

That welfare incomes in Canada are inadequate is not news. Decades of data show that the combination of social assistance benefits plus tax credits and benefits from governments at all levels keep over 1.8 million people in poverty across the country.  

What is less known, however, is that the value of many income supports has been going down. Not because of cuts, but because, in most cases, any increases have not kept up with inflation. Too many governments choose not to index their income supports, which means that recipients of these supports can’t even maintain their current standard of living. This needs to change.  

When governments choose to index an income support, the benefit amount increases automatically with the rate of inflation, typically on an annual basis. While indexing does not improve the adequacy of supports, it at least halts the erosion of their value over time.  

The Ontario Works (OW) program is an infamous cautionary tale of what happens when benefits aren’t indexed. The last time basic OW benefits – those provided for costs like food, clothing, and shelter – were increased was October 1, 2018, nearly six years ago. The rates haven’t changed since then.  

For single adults, that increase brought benefit rates to $733 per month. However, $733 in 2018 is not the same as $733 in 2024. Over that six-year period, the rate of inflation was about 21 per cent. If OW were indexed, monthly rates for single adults would now be $884. Instead, single adults lost real purchasing power equivalent to $151 every month. When benefit rates are so low and prices so high, a loss of 20 per cent means a significant worsening in a person’s standard of living.  

OW is not an outlier. The benefits offered by most social assistance programs in Canada aren’t indexed. Of thirteen jurisdictions, only four – Alberta, Quebec, New Brunswick, and the Yukon – index basic social assistance benefits. Ontario and Manitoba only index benefits provided to people with disabilities through the Ontario Disability Support Program and Manitoba Supports, respectively. Alberta is the only jurisdiction that also indexes additional social assistance benefits like back-to-school allowances.  

Looking at other income supports, only five of the ten jurisdictions that have child benefits index them, and only three of the 11 jurisdictions that have refundable tax credits index them.  

Allowing the value of income supports to erode over time is also counter to international human rights law. Canada, with the support of all provinces, committed to the progressive realization of the right to an adequate standard of living under the International Covenant on Economic, Social and Cultural Rights. Progressive realization requires governments to take continual, active steps towards fulfilling this right, using maximum available resources. Failing to index benefits when governments clearly have the resources to do so is a contravention of Canada’s human rights obligations.  

A common argument made by those who resist indexation is that, since inflation can be volatile, indexing income supports would lead to fiscal uncertainty for governments. Recent years of high inflation, they say, are a case in point. In the face of such volatility, they suggest that governments can better control their finances by making specific choices to increase income support amounts. However, as the case of OW demonstrates, many governments fail to make this choice. Rather than assuming the risk of uncertainty, they offload that uncertainty to some of the most vulnerable people in the country.  

In fact, the social safety net as a whole is prone to fluctuation, with moments of shock that lead to added budgetary strain, as recently seen during the COVID-19 pandemic lockdowns. In contrast, the relatively small percentage increase that would come with indexation can generally be accounted for through economic projections. Indexation has been effectively managed by governments with populations of varying sizes, as exemplified by Quebec and the Yukon.  

Inequity in who is deemed worthy of indexation is also a problem. For example, Manitoba and Ontario made the choice to only index benefits provided through their social assistance programs for people with disabilities. In an even more stark example of inequity, while most provinces and territories do not index income supports for people receiving social assistance, 11 of the 13 do index income tax brackets. They do this to avoid “tax creep,” which would decrease the purchasing power of all tax filers as their income increases. Why this principle does not extend to benefits provided to those living in poverty remains unclear. 

Significant increases to social assistance benefits and other income supports are necessary to reach adequacy, but indexation is important to maintain it. While meaningful increases to all income supports should be an urgent priority, governments must at the very least make a conscious decision to index their programs. The failure to do so simply means that governments are choosing to allow the standard of living of some of the most vulnerable people in Canada to worsen over time.