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It was only when the country faced devastating economic and socialcircumstances in the 1930s that a national system of protections began toevolve. Close to one-quarter of Canada’s working-age population wasunemployed. Local governments were going bankrupt because they could notmeet the unprecedented demand for financial aid. Provincial governmentswere equally hard pressed.

One of the tough lessons of the Depression was that existingincome security provisions  rooted as they were in the residualist model  were inadequate to meet thechallenges posed by high unemployment. It generally was recognized that asenior level of government had to become involved in order to ensure thatbenefits were provided at a reasonably adequate level and in an equitablefashion. Only the federal government had the fiscal capacity to ensurebasic income security for such a large proportion of the population across thecountry.

The federal government took steps to tackle the widespread effectsof unemployment by introducing the Employment and Social Insurance Act of1935. Despite the need for a strong national program, provinceschallenged the authority of the federal government to introduce this piece oflegislation. The challenge resulted in an ultravires (outside the authority) judgment by the SupremeCourt.

Ottawa3persisted in this area, knowing full well it could not allow a repeat of theeconomic devastation the country had endured during the Depression. AConstitutional amendment adopted in 1940 permitted the federal government toprovide benefits for persons temporarily out of work under the newly introducedUnemployment Insurance Act. This program has evolved over the years,expanding until the early 1970s and since contracting. (Its currentdesign is described below under Employment Insurance.)

The onset of World War Two and its mobilization of thenation’s resources inthe war effort brought another important reason for the federal government tobecome involved in the income security system: to stimulate the economy andthus prevent a recession when wartime production ceased. Households hadto have sufficient purchasing power in order to help rebuild the postwareconomy.

In 1945, the federal government introduced Family Allowances whichpaid an equal monthly benefit to all families with children. Its purposewas to recognize the extra costs related to child rearing and to bolster thepostwar economy by regularly putting cash into the hands of consumers specificallymothers.

Ottawa added the income-tested refundable child tax credit in 1978to provide additional financial assistance to low- and middle-incomefamilies with children. In 1993, the income-tested Child Tax Benefitreplaced Family Allowances, the nonrefundable child tax credit and therefundable child tax credit. In 1997, the Canada Child Tax Benefitsimplified and increased payments under the federal-provincial National ChildBenefit reform, described below.

In the area of pensions, it was noted earlier that variousprovinces had paid benefits to persons over the age of 65. In order toraise these payments and reduce the disparity in rates across the country, thefederal government began to share their cost under the Old Age Assistance Actof 1927.

Old Age Assistance was a means-tested program that paid benefitsaccording to the income and assets of recipients. ‘Means-tested’ refers to the fact thatapplicants had to qualify not only on the basis of their age but also theirlevel of income and available liquid assets. (‘Liquid assets’ refer to cash orcash-convertible assets, such as bonds. The value of fixed assets, suchas a house, is not included.)

The program was replaced in 1952 by Old Age Security  a federally financed andoperated program that paid monthly benefits to all Canadians age 65 and over,regardless of income or work history. The expanded role of the federalgovernment in this area was not possible without a Constitutionalamendment. It allowed Ottawa to use its spending power to pay forpensions  formerlyseen as the primary domain of provincial governments.

A Constitutional amendment was not required for the earliercost-sharing arrangement under the Old Age Assistance Act of 1927 because theprovinces still maintained full control of their respective programs. Twoincome-tested programs  the Guaranteed Income Supplement for poor seniors and theSpouse’s Allowancefor poor near-aged spouses and widowed persons  were built on top of universalOld Age Security. About half the provinces added their own income-testedsupplementary programs for their aged poor.

In 1966, the federal government created the earnings-relatedCanada Pension Plan (Quebec built a parallel Quebec Pension Plan). TheCanada Pension Plan is financed and administered by Ottawa. But it is ajoint federal-provincial effort whose change requires agreement ofthree-quarters of the provinces with three-quarters of the population.Together, the Canada and Quebec Pension Plan cover virtually the entireworkforce including the self-employed, and provide a package of retirement,survivor, disability, children’s and death benefits.

That same year, the federal government stepped into another largearea of social policy  provincial welfare and social services  through the introduction of theCanada Assistance Plan (CAP). CAP was intended to achieve severalobjectives. It helped consolidate the existing patchwork of provincialprograms that provided benefits to various categories of recipients:single-parent mothers, persons with disabilities and blind persons.

The Canada Assistance Plan shifted theprovision of financial assistance from cause of need to presence of need, regardless ofcause. The injection of federal funds through CAP helped build aninfrastructure of welfare and social services throughout thecountry. UnlikeUnemployment Insurance, Old Age Security and child benefits, which Ottawaoperated directly, the Canada Assistance Plan allowed the federal government toshare the cost of welfare and social services designed and administered by theprovinces.

Reality Versus Theory

The rise of the universalist theory of the welfare state and theremarkable growth of social programming did not, however, produce afully-fledged universalist welfare state in Canada. The history of oursocial policy does not indicate a steady shift from the residual to theuniversalist approach.

Even before the spending cuts of recent years, Canada’s social security system fell agood distance short of a fully realized universalist model. The systemremains instead an uneasy compromise of elements from both the residual anduniversalist concepts whose influence has ebbed and flowed over theyears. The residual approach’s grudging attitude to social spending naturally gains strengthduring tough economic times, when social programs’ alleged high cost makes themvulnerable to attack.

Canada never pursued, let alone realized, the goal of fullemployment that plays a pivotal role in the universalist model. Thislimited employment objective was increasingly diluted over time.‘Acceptable’ levels of unemployment rose as governments after 1975 saw astheir priority fighting inflation over unemployment and pursued restrictivefiscal and, especially, monetary policies.

Granted, much of the universalist vision of social policywas put in place betweenthe 1940s and 1970s. Canada’s network of social programs grew enormously in content, coverageand cost. In addition to the numerous federal and provincial incomeprograms mentioned above, universal health care (‘medicare’) was built between the late1950s and early 1970s, under the jurisdiction of the provinces but with federalfinancial assistance tied to national conditions.

It was during that period that both the federal and provinciallevels of government became involved in social housing. Ottawacost-shared provincial social services and provided funds to the provinces forhealth and postsecondary education, as well as establishing the Canada StudentLoans Program for postsecondary students. The federal government createdthe Vocational Rehabilitation of Disabled Persons Act. Both federal andprovincial programs for training, counselling, direct job creation and otheremployment services were developed. The income tax system became afavourite vehicle for dispensing a variety of social and economic benefits,technically known as ‘tax expenditures.’

But Canada never achieved the universalists’ dream of a comprehensive set ofsocial and employment programs that would protect citizens against the variousrisks of contemporary life and provide a decent minimal income. With thenotable exception of income security programs for the aged, the objective ofensuring a ‘socialminimum’ (i.e., anadequate income floor) was neither attempted nor achieved.

Social assistance, in particular, is a major social program thatremains resolutely residualist. It has never been governed by substantivenational standards. It embodies meagre and widely varying benefits,poverty traps, punitive administration and social stigma. The wartimeproposal for a federal program for unemployed workers who do not qualify for orwho exhaust their Unemployment Insurance benefits never came to pass. Asa result, many jobless Canadians end up on provincial welfare.

Neither is there is a comprehensive income security system forpersons with disabilities, many of whom have to rely on socialassistance. Canada’s medicare system never expanded as planned by its creators tocover a wide range of preventive and community-based services.Policy-makers are only now are beginning to address this weakness.

Roots ofReform:

Canadian Context

Pressures to reform Canada’s social programs have arisen outof several profound changes  economic (fiscal and labour market), social and political.

Economic Changes

The major expansion of Canada’s social security system ended inthe mid-1970s. A federal proposal to supplement the incomes of theworking poor was defeated. Canada’s economic growth began tosputter with the world oil price shock and the rise of low growth and highinflation.

Mounting government deficits and accumulating debt pushed Ottawaand the provinces increasingly to reduce public  especially social  spending in the 1980s and1990s. The forces of social policy reform-through-restraint gatheredstrength as Ottawa managed to convince most Canadians that the deficit had tobe cured no matter how bitter the medicine.

Canada’slong retreat from any semblance of a full-employment economy has been one ofthe heaviest pressures on the welfare state. It is the main reason forthe divergence between the theory and practice of universalist socialsecurity.

Rising unemployment has placed high demands on welfare,Unemployment Insurance, social services and employment services, health careand other social programs. To make matters worse, mass unemployment hasrobbed federal and provincial treasuries of badly needed tax revenues, andresulted in hikes in income taxes, consumption taxes and payrolltaxes.

Canada’sofficial unemployment rate has fallen considerably over the past fewyears. But the real unemployment rate remains high. (The‘real’ rate counts those who have givenup an active job search or are working part-time because they cannot findfull-time work.) There are still regions and communities afflicted bychronic joblessness.

Like the US, Canada’s labour market is characterized by a growing split. Thereis a core of good jobs requiring advanced education and specialized skills inreturn for good pay, career advancement, and generous pension and otherwork-related benefits. At the same time, there is a ‘nonstandard’ labour market for part-time,seasonal and temporary employees, the self-employed and people who hold downmultiple jobs. Its characteristics are the opposite of the core workforce low skills, poorpay for many, instability, few if any work-related benefits such assupplementary health care and dim career prospects.

There is evidence of earnings polarization, with growth in bothlower-paid and higher-paid jobs, and shrinkage of middle-incomeemployment. The latter includes many well-paid blue-collar jobs intraditional industries, such as manufacturing and transportation, which havebeen victims of technological change. Middle-management positions havebeen cut in the downsizing of public and private bureaucracies.

Canada also has seen a growing polarization of working time.Hours of work are increasing for some full-time workers who tend to have highincomes. At the same time, there has been a growth of part-time work,much of it involuntary and most producing low earnings.

Social Changes

Social and demographic changes also are rocking Canada’s social security system.The typical family of the 1950s and 1960s  father in the labour force,mother working at home, three children  has been transformed byprofound changes in the economy, society and culture.

A growing number of Canada’s families feel insecure andvulnerable. Many turn to social programs for support at the same timethat governments have been cutting back on funding for those very programs.

One of the most significant changes in the family arises from thedramatic increase in women’s participation in the paid labour force since the1960s. In seven out of every ten couples with children, bothparents work outside the home. Nearly two-thirds of married women withchildren under age 6 are in the labour force. The majority of singleparents are now in the labour force as well.

Not only are most parents employed, but an increasing number areworking longer hours on the job in order to make ends meet. They haveless time for housework, shopping and the other domestic labour required tomaintain a household  not to mention time to spend with their children. Jugglingthe dual and sometimes conflicting demands of their responsibilities as workersand parents is a stressful and tiring daily struggle for most parents.The burden is especially hard on mothers, who continue to shoulder most of theresponsibility for caring for children and housework

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