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The major disadvantage of income-tested programs is that they donot take into account any special needs or circumstances that may give rise toadditional expenses. Households with high incomes may receive no benefit(e.g., the Canada Child Tax Benefit) even though they may incur high costsrelated to the special health or educational needs of a given child.Canada’sincome-tested programs adjust only after the fact  as long as 18 months to a change infamily income.

This very weakness of income-tested programs is the key strengthof needs-tested benefits. The latter take into account not only incomelevels but also special circumstances that may give rise to exceptionalcosts.

The primary disadvantage is that needs-tested programs areconsidered ‘intrusive.’ They require extensive information to determine eligibilityfor income benefits. They employ administrative discretion in whichpersonal judgment is applied to assess the circumstances of households andtheir extent of need. Applicants in one region or jurisdiction mayqualify for benefits while those in similar circumstances in a differentprovince may not.

Income Security Reformin Canada

The breadth and pace of change to social programs in Canada arequite out of keeping with the country’s traditionally modest nationalcharacter. Its social security system has been undergoing nothing lessthan a transformation that began in the late 1970s, gathered steam in the1980s, accelerated in the 1990s and continues in this first decade of the newcentury.

This paper emphasizes the development of the technology ofincome-tested targeting and its displacement of traditional universal andneeds-tested techniques. But this innovation must be understood in thebroader context of major changes in other social programs, including socialinsurances as well as social, employment and health services.

This paper first describes the ‘universalist’ model that inspired thedevelopment of the post-World War Two system of social programs inCanada. We contrast the universalist model to the ‘residualist’ model that predated it but hasnever completely disappeared even to this day.

The reality of Canadian social security provision never fullyrealized the universalist vision. Yet this model continues to dominatethe thinking and rhetoric of trade unions, social advocacy groups, the left ofthe ruling Liberal Party, Canada’s New Democratic Party and academics who teach social work andsocial policy.

We refer to the new model that is emerging in Canada and countriessuch as the UK as the ‘post-welfare state.’ It continues to pursue the same fundamental objectives ofsocial policy set out in the universalist model more than half a centuryago. But the post-welfare model seeks more effective mechanisms bettersuited to the changing economic, social and political realities of the newcentury.

The emerging post-welfare model recognizes that governments cannotdo it all on their own. The model emphasizes the need to helpnongovernmental actors  e.g., employers, unions, communities and social groups play a more activerole in the design and delivery of social programs.

The post-welfare model draws upon the residualist philosophy ofvoluntary action or ‘civilsociety.’ Thusthe new social policy in Canada is about better achieving the goal of‘civilizingcapitalism.’And the purpose of social policy remains as highly relevant in thepost-industrial era as in the industrial age that both demanded and enabled therise of collective social provision.

The Canadian version of the post-welfare state is very much anemerging work in progress. Our system still contains elements of both theuniversalist and residualist approaches. However, we can identify severalkey concepts of the post-welfare approach as it is being developed inCanada:

 broad based and progressiveincome-testing replaces universality in income security policy (butnot services)

 attention to unintended workdisincentive effects (both real and imagined) of social programs  e.g., marginal tax rate issueregarding income-tested social benefits

 attention to interactions andlinks between social programs and the tax system

 desire to balance ‘active’ and ‘passive’ social programs; betweenreactive and preventive approaches

 concern to harmonize federal andprovincial social programs, reduce duplication and overlap, work together (asexplained below, by means of partnership federalism through theSocial Union process)

 concern about the financialsustainability of social programs

 recognition that there areseveral players (public, private sector and voluntary) in social policy, andthe need to better utilize and combine their resources through partnership

 increasing recognition thatcommunities have a major role to play in social policy design as well asdelivery

 emphasis on the economicfunctions of social policy, especially in education and training to ensure acompetitive workforce, and in supplying the social infrastructure (e.g.,universal health care; education) that supports economic growth and attracts atalented workforce

 emphasis on the need to measurethe outcomes of social policy and on social reporting made available to thepublic and social advocacy groups.

The emerging post-welfare state in Canada is by no means free ofcontroversy. Despite the renewed emphasis on the role of civil society,nongovernmental social groups generally have opposed the new approach and itsthrust to replace the old universal and needs-tested income assistance with thenew methodology of income-tested systems.

The Universalist Modelof Social Policy

Canada’ssocial safety net was created largely in the second half of the 20thcentury. But it was inspired by the work of social reformers in the1920s, 1930s and 1940s. They provided the philosophical and programmaticfoundation for the ‘universalist’ model of social policy. That model strongly influenced thepoliticians and civil servants who created most of Canada’s social programs in the 1950s,1960s and early 1970s. It still inspires and shapes the thinking ofsocial groups in particular and the ‘left’ generally in Canada.

The universalist model of social security developed out ofopposition to the ‘residual’ philosophy of social policy that predominated until the GreatDepression of the 1930s. The residual approach is based on a laissez-faire view of society that seesthe private market as dominant. The approach believes that governmentshould play a limited role in altering the production and distribution ofincome, goods and services. People should obtain their income from workin the paid labour force or from capital.

If, for whatever reason, that normal source of income disappears(e.g., because workers lose their job or retire) or is inadequate (e.g.,because of low wages), then they should look for another job or rely on theirsavings. Failing these options, they must appeal to family, friends orcharity. At most, government should serve only as a last resort fortemporary and emergency assistance, and only for the poor and destitute.

The universalist welfare state is founded on the conviction thatgovernment has a legitimate and major role to play in altering the marketeconomy’s unequaldistribution of income, wealth and opportunity. Industrialization bringsincreased prosperity and a better standard of living for most. But theprivate market cannot on its own eliminate risks to economic security fromunemployment, low wages, illness, disability and old age.

Nor can the traditional private institutions of the family, churchor charities adequately support families and individuals in need. Therisks and insecurities of a modern economy and society cannot be borne solelyby individuals on their own, their families or private institutions. Thestate has a responsibility to protect and compensate citizens from income lossor inadequacy, and to ensure universal access to essential education and healthcare. These two items have been judged too important to leave to theprivate market.

The state discharges these responsibilities mainly through socialprograms  incomesupports, social services, employment programs and health care. However,economic policy and the educational system also play an essential preventiverole by reducing unemployment, encouraging economic growth and investing inhuman capital. Social programs should be the first line of defenceagainst economic insecurity, not the last resort.

The universalist model regards social benefits as rights to begranted to citizens according to objective criteria of need. Thesebenefits are not privileges to be handed out at the discretion of welfareadministrators after an exhaustive investigation of applicants’ needs. The model envisagesa much broader set of social programs than does the residualist approach,pursuing several objectives and directed to large segments of the population,not only to the poor.

The prevention and alleviation of poverty remain fundamental goalsof universalist social policy. But social programs are also intended tohelp maintain living standards for non-poor citizens experiencing incomeinterruptions. They help compensate for the extra expenses incurred byfamilies raising children and by persons with disabilities. Social andemployment services ensure that citizens can participate more effectively inmodern society and cope with economic disruptions and changes. Socialprograms provide universal access to essential health care.

As its name suggests, the universalist model is based on afoundation of universal social programs such as public pensions, child benefitsand health care. These should be available to Canadians in all incomegroups. Eligibility should not be affected by the receipt of assistancefrom other income programs. By delivering benefits to all, universalsocial programs are said to foster widespread public support for the socialsecurity system including programs that are not universal but rather are targeted to poor andmodest-income Canadians.

Strictly speaking, universality refers to social programs that areavailable to all recipients regardless of income. However, universalincome programs do not have to provide the same level of benefit to all.In Canada, universal income payments (e.g., old age pensions, Family Allowancesand contributory public pensions) have been counted as taxable income.This means that the amount of benefit decreases as taxable incomeincreases.

Universal programs can employ qualifying criteria than otherincome, such as age in the case of public pensions and dependent children inthe case of child benefits. Universal programs can be funded either outof general revenues or through payroll taxes levied on employees and/oremployers. (General revenues refer to the money governments collectthrough income, consumption and property taxes, and other levies.)

Though universal social programs naturally loom large in theuniversalist model of social policy, there also is an important role forprograms that do take applicants’ level of financial need into account. Social programs thatare not universal sometimes called ‘targeted’ programs  are intended to serve people in specified income ranges.Usually, the programs target low-income or low- and middle-incomegroups. But there are some benefits (e.g., income tax deductions forcontributions to occupational pension plans and individual retirement savingsplans) that exclude the poor and deliver their largest payment to upper-incometaxpayers.

There are two very different types of targeted socialprograms: ‘Needs-tested’ social programs, notably social assistance, impose a detailed andintrusive test of applicants’ resources including earnings, assets and needs.‘Income-tested’ programs, such as the Canada Child Tax Benefit, require only asimple and non-intrusive test of applicants’ income based on their annualincome tax return. We will explore this crucial distinction later in thesection on social assistance and child benefits.

Growth of the Universalist WelfareState

Building the Welfare State

The universalist model gained ground in the 1930s and 1940s.But it took two cataclysmic events  the Great Depression of the1930s and the Second World War  to move Canadian social policy from theory toreality.

The first major income security program was introduced in1914. The province of Ontario brought in a workers’ compensation system to deal withproblems faced by employees, employers and the legal system in cases ofon-the-job injury. This program was established as a social insurancepaid for by employers. They could claim compensation in the event thatthe risk  in thiscase work-related accident or injury  actually occurred. Otherprovinces soon followed suit.

The federal government entered the social policy field in 1918when it introduced the children’s tax exemption one year after the wartime creation of the incometax system. (This exemption subsequently was converted in 1988 to anonrefundable child tax credit.) The original tax exemption allowedmodest tax relief in recognition of the additional costs of raisingchildren. Because this tax break was targeted at parents who owed incometaxes, most families did not qualify for this assistance. Most familiesat that time had low or modest incomes and so did not owe income taxes.

The provision of benefits for the elderly was another early andvital building block of Canada’s income security system. Various provinces had been payingbenefits to poor seniors over age 65. In order to increase these paymentsand to reduce disparities in rates across the country, the federal governmentbegan to share the cost of these pensions under the Old Age Assistance Act of1927.

In addition to workers’ compensation and elderlybenefits, some local governments throughout the country provided financial aidfor emergency purposes. This was the earliest form of public socialassistance provision in that it made available financial aid as a last resortin the absence of other resources. The amount of assistance varied widelybecause local governments were responsible for determining both the eligibilitycriteria and level of benefits.

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