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Time for a Fair Deal for Low-income Canadians

David Pecaut and Susan Pigott

Globe & Mail

1 June 2006

Last week, the United Nations Committee on Economic, Social and Cultural Rights reported that Canada's minimum wages are inadequate for workers and their families to enjoy a decent standard of living.

We couldn't agree more.

Anyone working full-time should be able to keep themselves and their families out of poverty -- and yet nearly a third of Canada's low-wage workers can't make ends meet. This is not because they do not work hard, but because they can't earn enough to cover what it costs to live and work in this country, especially in our larger cities.

When these same low-income workers lose their jobs, they face even bleaker prospects. Our famed social safety net is in tatters: Only 27 per cent of those who lose their jobs in Ontario, for example, benefit from employment insurance. Most unemployed workers fall through the EI net, and the only government help available to them is welfare. To receive welfare, meanwhile, they must dispose of all but a few hundred dollars of their assets, eliminating any cushion that might help them finance the costs of securing and maintaining employment.

Once in the welfare system, many find it difficult to climb back into the work force. Given employment expenses, taxes and the value of lost benefits (such as drug and dental coverage), the costs of going back to a low-paid job can, perversely, leave someone worse off than staying at home on welfare.

Canada's future prosperity depends on having a labour force operating at full capacity. Particularly as our society ages, we must ensure all working-age adults are contributing to our economy. Immigration partly answers our labour market needs, but getting the full participation in the work force of everyone already in Canada is critical, too.

For all these reasons, the Ontario-based Task Force on Modernizing Income Security for Working-Age Adults came up with a road map to reform. It starts with the federal government.

1. Employment insurance needs to be revamped to broaden coverage and return the system to a true insurance program for the unemployed. For example, excessive qualification requirements for new entrants and re-entrants need to be reduced.

2. Ottawa should introduce a new national refundable tax credit and working income supplement to support low-income Canadians. The benefits would be structured to dramatically reduce the hurdles to welfare and support people as they move into the work force.

3. The federal government should provide a national disability support program for Canadians whose disabilities are so substantial they cannot work. Ottawa already has experience in this area through CPP and the federal disability tax credit. Provinces such as Ontario should complement these changes by reforming their own support programs to improve the ability of people with disabilities who can work to do so.

4. Minimum wages, a provincial matter, need to be part of a comprehensive approach to boosting incomes. The task force recommended that provinces establish an independent body, with representatives from employers and labour, to periodically review and recommend changes to the minimum wage. Britain has found such independent advisers a valuable way of depoliticizing minimum-wage discussions and ensuring regular reviews.

5. With the increase in the number of workers in temporary jobs, provinces need to strengthen the enforcement of employment standards and ensure that legal protections currently in place for full-time employees cover new forms of work.

6. Provinces should have a child benefit platform for all low-income families that will integrate seamlessly with the National Child Benefit. This will have the effect of taking children out of the welfare system and enabling parents receiving social assistance to re-enter the work force without seeing support for their children cut back as they start working.7. Social assistance recipients should be permitted to keep more liquid assets, helping them weather difficulties as they get back to work.

8. Provinces should bear most of the social assistance costs, not municipalities. Ontario is one of the few jurisdictions in North America that requires significant municipal cost-sharing of social assistance. When the next recession hits, the province's cities will bear the brunt of increased homelessness, use of food banks, and other signs of declining circumstances. Dependent on property taxes and no-deficit financing, the cities are not financially prepared to handle such demands.

Implementation of these recommendations will ensure that all working-age adults have the supports they require to participate fully in their communities and to contribute to keeping Canada's economy healthy and growing.

David Pecaut, partner of the Boston Consulting Group, and Susan Pigott, CEO of St. Christopher House in Toronto, are co-chairs of the MISWAA task force.

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