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Ontario should trim “punitive” welfare clawbacks and hike earnings exemptions for a more effective welfare system, says a new report from the C.D. Howe Institute.

In “Lifting Lives: The Problems with Ontario’s Social Assistance Programs and How to Reform Them” authors Parisa Mahboubi and Mariam Ragab provide recommendations that would reduce the cost of taking on work to social assistance recipients, and tackle disincentives to join the workforce. The report also suggests a new approach for disability programs geared towards empowering people with disabilities with increased opportunities to join the workforce.

The authors note the province of Ontario has the worst dependency rate on social assistance programs in Canada, with nearly 50 percent of all recipients residing in the province. The report argues the system needs to be reformed, drawing on the example of a number of international success stories.

The core Ontario social assistance programs – Ontario Works (OW) and the Ontario Disability Support Program (ODSP) – have been characterized by high costs and poor recipient outcomes. With about one million Ontarians receiving social assistance benefits, the cost of the program was about $9 billion in 2018. Despite the strong labour market performance in 2018 and mandatory work participation requirements, only 10 percent of OW cases exited the program to employment, down from 13 percent in 2014. Furthermore, the average dependency duration on OW has substantially increased from 19 months in 2009 to 35 months in 2018.

“The impact of the COVID-19 pandemic on the labour market,” added Mahboubi, “including a surge of unemployment among Canadians, particularly low-income earners, magnifies the role social assistance systems can play in getting recipients of welfare after the crisis.”

The report recommends:

  • Reducing the cost of working through less punitive benefit claw-back rates; and
  • higher exemptions for earned employment income while on the program. In particular, more generous claw-back rates and higher earnings exemptions generate more incentives to exit to employment, and can generate long-term cost savings as recipients leave the program, or rely less on it.
  • Ensuring appropriate work requirements and support. An important way to improve social assistance is to increase the desire and ability of people to bounce out of the net and into the labour market by providing them the right tools. The types of job preparation activities assigned to beneficiaries based on their needs and program goals matter.
  • Placing supplemental benefits outside social assistance. The loss of supplemental benefits as employment income grows beyond the eligibility threshold for social assistance raises the costs of leaving welfare and going to work, creating financial disincentives to labour participation.
  • Shifting the focus in disability support programs from the inability to work to the ability to work. Here, it is important to recognize that disability exists on a spectrum, and that employment requirements and supports should be based on an individual’s assessed capacity to work.

Read the Full Report

For more information contact: Parisa Mahboubi, Senior Research Analyst; Mariam Ragab, Research Intern; or David Blackwood, Communications Officer, the C.D. Howe Institute, 416-873-6168, email: dblackwood@cdhowe.org 

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.