1. Conviction thatgovernment has major role to play in altering the market economy’s unequal distribution of income,wealth and opportunity; 2. It is recognized that the state has a responsibilityto ensure universal access to essential public goods; 3. Social benefits areregarded as rights to be granted to citizens according to objective criteria ofneed; 4. The model envisages a much broader set of social policies directed tolarger segments of the population; a “universal,” not specifically targetedapproach dominates; 5. Much attention is paid to labor market problems, forinstance, more effective and full employment; 6. Government seeks to ensurebasic living standards.
1. Social assistanceschemes are designed on the basis of recipients’ income-testing replacing formeruniversal approach; 2. More attention is paid to unintended work disincentiveeffects (both objective and subjective); 3. Attention to interactions and linksbetween tax and social policies; 4. Desire to balance ‘active’ and ‘passive’ social programs; betweenreactive and preventive approaches; 5. Concern about the financialsustainability of social programs; 6. Concern to harmonize federal and provincial socialprograms; 7. Recognition that there are several players (public, private sectorand voluntary) in social policy, and the need to better utilize and combinetheir resources through partnership; 8. Increased recognition that communitieshave a major role to play in social policy design as well as delivery; 9.Emphasis on the economic functions of social policy, especially in educationand training to ensure a competitive workforce, and on functions of socialpolicy in generating economic growth; 10. Emphasis on transparency as amechanism of social policy and the use of the results of social reporting.
Summing up the table, it may be noted thatthe key trend in the development of Canadian socialpolicy from the “free market” model of late 19th century via various Keynesian andneo-Keynesian constructions (judging by the contents of the “universalist”model it is a typical model of an age characterized by rapid economic growthand desire to effect the transition to a “welfare state”) to a rathertechnocratic, conservative by its political dominants model, which attempts to combine a balanced participation of the stateand other social actors in social policy with more effective methodologicaltools.
The “universalist” vision has never beenfully realized in Canada’s social policy and all its implemented elements were put in placebetween the 1940s and 1970s6.
Factors preventing the creation of anintegral model of social policy in Canada over the last three decades will belisted and briefly analyzed below:
Factorsbehind the revision of “welfare state” in Canada
1. End of rapideconomic growth in mid-1970s;
2. Higher inflation rates;
3. Mounting federal and local governmentdeficits, reduced funding of social programs in the situation of growingdemand and increased number of programs (unemployment and household incomessupport); 4. Growing unemployment (including concealed unemployment) andpart-time employment;
5. Polarization of earnings at the expenseof middle-income employment;
6. Increase in hours of work.
1. Changing socialroles in families (the dramatic increase the number of families with bothspouses working);
2. The high rate of marriage breakdown andremarriage;
3. A dramatic increase in the number ofsingle-parent families; 4. Less children per family (that increasing the burdenof housework on parents);
5. Increased mobility of families (as aresult many of them are isolated from traditional supporting structures);
1. TheKeynesian-inspired civil servants and politicians have long retired. They havebeen replaced by neoconservative bureaucrats, especially in financialinstitutions.
2. The change in the political paradigm– the cost of welfareshall be taken into account, there is the need to put the finances in order.
3. Strengthening centrifugal trends– at present theFederal Center has less rights in the social field of policy thanprovincial governments.
Therefore, the situation of the Canada’s social policy sphere isaffected by practically the same set of factors, as in Russia. Of course, the full analogy would be out of place (for instance,the Canada’s externaldebt is considerably less than that of Russia, and Canada did not experience adefault over last five decades). However, it would be appropriate to emphasizethe importance of political variables, such as a change in the paradigm ofsocial and economic theory and the influence (both positive and negative) ofabsolutely external unpredictable economic perturbations, such as fluctuatingprices of energy resources.
Apparently, atpresent expensive systems of social protection andassistance are a luxury even for rather well-to-do countries. At the same time, the predominance of purely monetarist approachmay ruin both the most fine part of the social protection system – its infrastructure, andseriously damage the human component of economy.
INNOVATIONS IN CERTAIN AREAS OF SOCIALPROTECTION SYSTEM OF CANADA
A. Child Benefits and SocialAssistance
Two components of social security -- child benefits and the socialassistance system --underwent the most dramatic reform.
The reform of social assistance is aimed totighten the rules of its provision and to narrow eligibility reqirements.
Social assistance programs, based on households needs-testing and financed from provincialbudgets, vary across provinces with regard to thesocial constraints on eligibility.
For instance, in Quebec adults 18 years ofage and over who have not yet declared their independence (e.g., they are notmarried; they have no children of their own to support) are considereddependent. Therefore, their parents are required to contributemaintenance and support.
Ontario announced in 1995 that an employableperson quitting or losing a job without justification was disqualified fromapplying for welfare for three months. Besides, in 1997, the provinceintroduced a program which made it mandatory for employable welfare recipientsto participate in work-related or community service programs (like taking careof the elderly, persons with disabilities, etc.).
In principle, allreforms of the system of social benefits are implemented in accordance with theuniform scenario recommended by OECD, which seeks to provide welfare recipientswith the supports and skills they require to move off the program as quickly aspossible. The social assistance may take the forms inessence associated with active labour market measures, like skill training andupgrading, preparation of résumés,job search, etc.
In Canada, the system of child benefitshistorically has pursued two fundamental objectives: social support to the poorand the “horizontal equity,” i.e. a way for society to provide some financialrecognition for the fact that families at all income levels with children facelarger costs than childless households.
The history of Canadian child benefits can bedivided into five main periods:
The first phase, between the two World Wars, can be characterizedas ‘regressivetargeting.’ Thepersonal income tax system provided a children’s tax exemption that deliveredits benefits in the form of tax savings which increased with taxable income andexcluded families with low incomes (in fact, most families were excludedin the times of the Great Depression characterized by widespread poverty andlow average incomes);
The arrival of universal, monthly Family Allowances in 1945heralded the second phase: ‘untargeted universality.’ Child benefits wereextended to include low- and modest-income families. But better-offhouseholds still got more because they were eligible for both systems;
The 1970s ushered in the third phase: ‘progressiveuniversality.’Family Allowances were tripled, indexed to the cost of living and madetaxable;
The fourth phase, ‘progressive targeting,’ began in the 1980s. Itculminated in 1993 with a single, income-tested Child Tax Benefit. Itincreased payments for working poor families with children, maintained benefitsfor other low-income families, reduced amounts for middle-income families andexcluded high-income families;
Canada recently entered a fifth phase: an ‘integrated childbenefit.
The reform of child benefits - known as the federal-provincial National Child Benefit, which treats all low-income families equally, whether they areworking or not – isnow underway.
. Since the funding system of thisbenefit is of mixed nature, as the federal government increases payments underthe Canada Child Tax Benefit, provinces are allowed to reduce their socialassistance-provided child benefits by the amount of the federal child benefitincrease. Provinces must reinvest the resulting savings in other programsand services for low-income families with children.
Over time, governments’ objective is to raise the CanadaChild Tax Benefit to the point where it would fully displace socialassistance-delivered child benefits. These are estimated at a target ofabout $2,600 in today’s dollars7. Inthis way the system will become an integrated child benefit financed from thesingle source.
B. From Unemployment Insurance toEmployment Insurance
Unemployment Insurance, one ofCanada’s first modernsocial programs based on the universalist model, was introduced in 1940.
While initial coverage under the program waslimited (generally, to industry and commerce) and extended to less than 43percent of the labour force, by 1971 almost all workers, including theself-employed, were covered.
The system existed (with some minor changes)until 1996, when the federal government announcedthat a new program –Employment Insurance would replace all old programs.
The new Employment Insurance Act provides fortwo types of benefits: income benefits and employment benefits.
The first type ofbenefits is paid to provide temporary income supportfor income claimants while they look for work and may include sickness, maternity or parental benefits.
The second type of benefits is similar to Russian “unemploymentbenefit.”
Benefits are calculated as 55percent8 of average insurable earnings. The upper limit in the bandof earnings over which benefits are calculated was decreased from $ 42,380 to $39,000. Maximum benefits are at $ 413 a week. The new EmploymentInsurance Act reduced the maximum length of claim from 50 to 45 weeks.
The Act tightened up the eligibility criteria by increasingthe number of hours(previously the number of weeks) worked required to qualify for benefits (from420 to 700 hours, or the equivalent of 12 to 20 weeks), depending on theunemployment rate in the region9. This change representsan increase of between 180 and 300 hours over the former entrancerequirement.
C. Elderly benefits
Canada has a multi-tier retirement incomesystem with the following elements:
The base is made upof an almost-universal, income-tested old age pension program, financed throughgeneral government revenues.
There are five independent programs in thebase tier:
Old Age Security, created in 1952. Itpays a flat-rate, but taxable, monthly payment. For year 2000 the maximummonthly payment was $ 429.
The Guaranteed Income Supplement is amonthly benefit ($ 510 a month for a single person and $ 327 for each member ofa couple) for seniors with no income other than the first benefit.
The Spouse’s Allowance equal to the sum of twofirst benefits has been paid to widowed pensioners since 1975.
The Age Credit provides a nonrefundabletax credit to pensioner taxpayers. It is worth a maximum $ 900 in totalfederal and average provincial income tax savings.
The Pension Income Credit provides a taxbreak of up to $ 25510 in combined federal andaverage provincial taxes to taxpayers who have income from occupational pensionplans or individual retirement savings plans.
The second tier is the contributoryearnings-related Canada Pension Plan that covers the entire workforce;
The third (private) tier is composed ofprivate pension insurance programs (employer-sponsored occupational pensionplans, and individual retirement savings accounts);
The fourth public tier consists of incometax breaks for pensioners.
The story of introduction and implementationmechanism of the so called “claw-back” tax intended to offset increases insocial payments with additional taxes on pensioners is of a special interest.
After the claw-back was introduced in 1989,Old Age Security and Family Allowance recipients with individual net incomesover $ 50,000 had to repay their benefits at the rate of 15 cents for everydollar of net income above the $ 50,000 threshold.
The claw-backaffected only four per cent of seniors when it was introduced in 1989. However,the initial trigger level for the claw-back was only partially indexed untilyear 2000, what resulted in the fact that the trigger level declined rathersharply in real terms. Only in 2000 was the threshold fully indexed, rising to$ 53,960 (but this amount is worth only $42,540 in 1989 dollars). Thispartial deindexation, naturally, results in a considerable increase in thenumber of those paying the claw-back and, respectively, of budgetary revenues,even if these revenues were targeted for social payments. Starting in July1996, the claw-back on Old Age Security is applied before cheques are sent outto seniors, on the basis of last year’s income, rather than after theyfill in their tax return as was previously the case.
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