Getting it right

A critical look at Alberta’s income support program

12 March 2021

Income Support is an Alberta based program with the potential to make a big impact on the health and wellbeing of people living on low incomes. However, as it currently stands today, income support provides only bare sustenance, perpetuating a cycle of crisis and halting progress on poverty reduction. This stems from the way eligibility is determined, the inadequacy of benefits, and the ways benefits are reduced when recipients earn income from employment (the claw back formula). The current economic recession, the federal government’s introduction of the Canadian Emergency Response Benefit (CERB), and ongoing talk of a basic income have brought income support reform to the forefront, but some are resistant to change. I would like to examine our current system and suggest some solutions for “getting it right.”

As an organization, Vibrant Communities Calgary has referenced these issues through numerous publications including Poverty Costs, the poverty snapshot reports, and policy proposals. Additionally, other pieces that discuss the issue include Nick Falvo’s top ten things to know about social assistance, the University of Calgary School of Public Policy trend report, and the report Canada’s Forgotten Poor? Putting Singles Living in Deep Poverty on the Policy Radar.

There are a variety of income support programs in Canada such as the Guaranteed Income Supplement, Old Age Security, and Employment Insurance. In Alberta, the primary benefits are Income Support (formerly known as Alberta Works or, more generally, welfare). Income support is intended to provide income for basic needs when someone is unemployed and has no other form of income. Despite modest reforms and improvements to income support over the past two decades, Alberta has failed to take a serious look at some glaring and longstanding issues.

Sources: National Council of Welfare for the years 2000-2009 using the Low Income Cut Off for the poverty line; Maytree Welfare in Canada report for the years 2012-2020 using the Market Basket Measure 2008 base for Calgary.

In the fall of 2018, the Government of Alberta passed Bill 26 An Act to Combat Poverty and Fight for Albertans with Disabilities. The bill addressed many concerns with income support and was a solid step in the right direction. Some of the changes included an increase to asset limits, modest increases to benefit levels, and most importantly, indexing benefits to inflation so benefit levels would keep pace with the cost of living (regrettably, the UCP Government repealed indexation last year). However, Bill 26 was just the tip of the iceberg. Several longstanding issues remain unaddressed such as the adequacy of benefits, the claw back formula, the burdensome eligibility process, and measures to report on the performance of the program to name a few.

Before exploring these issues, it is important to understand the purpose of income support as it is defined in the regulations. The program is intended to be used for household and personal needs, food, clothing, transportation, rent, insurance, and utilities. However, it is widely known that this program has never met its intended purpose. Singles make up the majority of Income Support caseloads, and Figure 1 shows, when comparing benefit levels for a single employable person over a 20-year period, that despite modest increases over time, benefit levels in Alberta have never come close to reaching the poverty line, and thus, have never come close to meeting basic needs. If you prefer to put poverty measures aside, the costs of these items for a single Albertan add up to just under $2,000 a month compared with income support payments of only $745 per month -- covering only 37 percent of essential needs, see appendix A of this policy proposal by the Social Policy Collaborative for the calculation. Numerous reports over the years have highlighted how the inadequacy of benefits lead to a host of social problems including homelessness, food insecurity, crime, and overall poor health.

Another issue is how eligibility is determined. When a person applies for income support, they must first meet a long list of eligibility criteria to prove to the government that they are in need. This includes the requirement to disclose all liquid assets, including money in the bank, in Registered Retirement Savings Plans and Tax-Free Savings Accounts. If the person is living with someone, the income of the spouse is also considered. This can create an additional barrier for women who want to apply but need financial autonomy from their partner for various reasons. The process is designed to catch the one percent of, so called, “cheaters” at the expense of everyone else. This is a belief that is not based on any logic (that I am aware of), but on prejudicial attitudes towards those who are poor that has influenced government policy for decades. On the contrary just the opposite is true, the Finland basic income experiment in 2018 found that less bureaucracy and more freedom for recipients actually encouraged work, and our own child benefit programs have also proven that you don’t need to place conditions on income support to get good outcomes.

While in the program, people who are labeled as able to work are expected to “participate, if required, in activities to maintain or re-establish maximum self-reliance and independence.” However, once a person does find a job and their employment income exceeds $230 per month, they are subjected to an earned-income exemption rate of just 25 percent. Under this formula a person’s benefit is reduced to zero before they can even earn enough to meet the poverty line, or their essential expenses depending on how you want to look at it.  It is safe to assume that the logic behind the claw-back formula comes from a desire to decrease dependance on the program and save on costs, but it achieves neither. By contrast, the formula prevents more people on income support from working, and an increase to both the threshold and the rate could solve this problem.   

The daily grind of not having enough to live on, combined with regular administrative hurdles to receive income support is taxing on a person’s mental and physical health, and arguably pushes them further from, not closer to employability.

It doesn’t have to be this way.  Income support reform should be the cornerstone of our plan for economic recovery, and is an investment that will accelerate us, both socially and economically. The Government of Alberta must set targets for increasing benefits to ensure people can meet their basic needs and indexing them to inflation. It should change the claw back formula to allow people to keep more of their income from employment while they work towards independence.  It also just makes sense that when people have predictability of income, are healthy and no longer in crisis, they will be in a better position to find and maintain employment. More importantly these changes consider the inherent worth and dignity of the people who need it.

I wish to thank the following individuals for support with this blog post: Kelly Dowdell, Nick Falvo, and Ron Kneebone.