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2.1 The growing number of cases explains only part of the emergence of welfare reform

Trends in the level and composition of caseloads underlie much of the welfare reform of the last decade. In most jurisdictions, caseloads did not fall significantly after the North American recessions of the early 1980s and early 1990s. In fact, U.S. caseloads expanded by 27% from 1990 to 1994, despite a period of recovery. Even in light of Canada’s slower economic recovery, the Canadian experience was nothing short of dramatic: the number of cases increased by 55% (from 1.1 million to 1.7 million) during this same period (National Council of Welfare, 1998a).

Beyond the volume of cases, the composition of these caseloads also began to worry administrators.³ In Canada, social assistance included single adults who, many in the public believed, should be employed or in school. It also included a growing number of children in social assistance families. The number of children living in poverty remains a central issue in social welfare policy.

It is worth noting that single individuals in the United States have typically never been eligible for federal social assistance, aside from Food Stamps. Single individuals may be eligible for state welfare, although this varies widely. This lower and more fragmented safety net remains an important difference between the United States and Canada and explains why U.S. welfare reform has been directed mainly at single mothers.⁴ In a sampling of Temporary Assistance for Needy Families (TANF) recipients between July and September 1997, it was reported that single-parent households represented 70% of all TANF households. In Canada, according to the National Council of Welfare, approximately 29% of Canadian social assistance recipients are single parents, the majority of whom are female (91%).

Other factors that have helped to prompt the move toward welfare reform include:

• Public opinion has apparently shifted in the direction of less spending. This appears to be reflected in reluctance to extend income support, especially to those who are not disabled or without dependent children. While the direct evidence of this shift is meagre, most welfare administrators simply accept it as fact.
• Traditional educational and vocational training strategies that were primarily classroom-based and voluntary apparently have failed to reduce the number of clients on social assistance. Evidence from 20 years of evaluation on training economically disadvantaged adults has been discouraging. By the mid-1980s, academics reviewing this literature concluded that, typically, older women benefited most from this training, but men and younger recipients showed little in the way of increased wages or labour force participation.⁵ This persuaded many researchers that education and training programs for social assistance recipients needed restructuring in light of the possibly unrealistic expectations placed on the outcomes of short-term skills training offered to those with weak academic backgrounds.
• Social workers and others working with families argued that long-term social assistance has corrosive effects on children. Children who grow up in poverty, whether on social assistance or not, are more likely to encounter problems with health (drug abuse, physical safety, nutrition) and education. Many lack a stable and nurturing home environment. The growing number of children who live in poor families with parents on welfare raised the possibility that many will enter youth and adulthood without good role models of self-reliance, thereby perpetuating reliance on social assistance. This child-centred perspective created much of the broad political support needed to reform social assistance programs.
• Finally, for some social assistance recipients, accepting a low-wage position was often irrational. In some cases, recipients could earn only relatively small amounts without resulting in a reduction in benefits. Most social assistance recipients, especially those with children, receive a range of health, transport and housing subsidies. Often, the total income in cash and in-kind supports exceeded what could be earned in low-income occupations. In this situation, a single mother on assistance reduced the, economic position of her family by working. Also, many program elements, such as exemptions, supplements, and tax benefits, work in opposite directions. The cumulative effect of these interventions can inadvertently produce substantial penalties for those who leave welfare.

2.2 Recent Canadian reforms have developed a welfare-to-work emphasis

Canadian welfare reform may appear new, but the thrust behind the most recent reforms began in the early 1980s, continuing through to the early 1990s. Changes to the Canada Assistance Plan (CAP) and the creation of the Canada Health and Social Transfer (CHST) represented the culmination of legislative and philosophical changes that helped redefine provincial/territorial social assistance programs. However, it should be pointed out that given the provincial/territorial nature of Canada’s welfare system, many jurisdictions had already begun welfare reform before the creation of the CHST.

The CAP, created in 1966, provided for federal cost sharing with the provinces and territories. Under this funding arrangement, provinces and territories based receipt on "need" as defined by budgetary requirements and means tests (eligibility based on total family income and assets). Jurisdictions had to offer services to individuals regardless of residency and, most importantly, benefits could not be contingent on training or work requirements.

In September 1985, federal and provincial/territorial ministers for Social Services convened and agreed upon a seven-point strategy to maximize use of the Canadian Jobs Strategy (CJS), the CAP and other employment strategies to help social assistance recipients obtain and keep jobs. The seven points included negotiating CJS participation targets for social assistance recipients; changing CAP guidelines to increase the incentives for recipients to participate in training and employment; and increasing the, amount of education and training opportunities available (Hunter, 1993).

In Canada, many observers date recent welfare reform to the so-called "cap on CAP" in 1990, which limited federal funding increases under CAP to 5% annually for Ontario, British Columbia and Alberta (the so-called "have" provinces). This limit provided a financial incentive for these provinces to begin reforming their programs. The unilateral federal move also eroded the "shared" element of CAP, and signalled to some that the end of CAP was near. Some have suggested that increased benefit levels in Ontario during the early 1990’s recession prompted the federal government to find ways to limit its spending on social assistance.

In 1996, the creation of the CHST helped further current welfare reform. The CHST eliminated all but the residency conditions of welfare programming as established under CAP. As a result, provinces and territories must still provide social assistance to all individuals regardless of how long they have resided in their jurisdiction. However, the non-conditional aspect of the CHST allows provinces and territories greater freedom to experiment with different approaches to welfare reform.

Simultaneously, important collateral changes were the reform of Employment Insurance (EI) and federal reductions in social and health spending. For example, restricted eligibility to, and time on EI, increased pressure on social assistance programs. Many who fail to qualify for EI, or who receive low benefits, or who exhaust their eligibility, end up applying for welfare.

The National Child Benefit (NCB) has extended support to low-income households (not just those on social assistance), while encouraging provinces and territories to reinvest in programs that help fight child poverty and promote the labour force attachment of parents. The NCB has served as a more efficient, non-stigmatizing, income-tested program for Canadian families. The flip side to this broader coverage is that the benefits from the NCB can be small unless supplemented because they are not designed solely for those on social assistance. Overall, the net impact of this program on work incentives and the economic position of social assistance clients remains to be determined.

While reforms in Canada do not feature time limits, most provinces and territories will either reduce or eliminate benefits for employable clients who refuse to participate in job-search or training programs. In some jurisdictions, sanctions (benefit reductions) are designed to increase participation in other types of activities, such as counselling, volunteering or literacy upgrading, all with the aim of promoting some involvement in the labour market. Nevertheless, Canadian jurisdictions resort to sanctions sparingly.

As with American states, provinces and territories have had room to experiment. Under a general block grant, the federal government has necessarily relinquished its authority to direct how social assistance is to be organized. Welfare administrators in both the United States and Canada stress that reform legislation has allowed them important discretion in designing new programs.

One such design modification relates to decentralized social assistance delivery. Larger provinces such as Alberta and Ontario allow considerable local input into the design and delivery of social assistance. Smaller provinces, particularly those in Atlantic Canada, retain central management of the social assistance program. The rationale for decentralization in a larger jurisdiction is that various components of welfare reform need fine-tuning and further integration with local employment opportunities. At the same time, clients can benefit from tailored interventions.

2.3 The United States has adopted comprehensive welfare reforms

The United States has paid more attention to reforming and experimenting with its welfare system than any other country. Yet even before these most recent changes, several differences made the U.S. system stand out. Unlike Canada, U.S. welfare systems have generally provided lower benefits and a stronger welfare-to-work emphasis. The United States has also kept other low-income supports, such as Food Stamps and Medicaid, to a minimum, which has made its social assistance system dissimilar to the Canadian model. In addition, the United States has had lower minimum wage levels and greater job mobility. Understanding these features of the U.S. system is important in order to put their latest welfare reform into perspective.

The Clinton administration began the most recent phase of welfare reform in 1993 by enabling states to apply for Aid to Families with Dependent Children (AFDC) waivers. These welfare waivers enabled states to develop experimental welfare-to-work programs that varied from the actual AFDC legislation. In many cases, these waiver programs became statewide initiatives following the passage of the Personal Responsibility and Work Opportunities Reconciliation Act (PRWORA) and the creation of the Temporary Assistance for Needy Families (TANF) block grant in 1996. While the creation of TANF marked the formal start of welfare reform in the United States, its seeds had been sown earlier. The essential features of TANF include:

• limiting risk while increasing incentive by basing federal funding on historical levels and giving states more spending discretion. The federal government limited its risk associated with increased caseloads, while at the same time creating an incentive for states to reduce the number of cases;
• requiring adults to work in some form of employment intervention after the client has received a maximum of 24 months of welfare;
• allowing states to reduce or terminate benefits of those failing to fulfill employment intervention requirements;
• legislating that all federal payments to states for welfare recipients end after 60 months of total use. States have the discretion to exempt part of their caseload from this condition; and
• increasing the experimentation and variety of programming both between and within states.

This last point is important because it has allowed individual states greater latitude to design programs unique to their situation. Let us now briefly examine what other Organisation for Economic Co-operation and Development (OECD) countries have done in enacting welfare reforms appropriate for their respective settings.

2.4 Other countries are changing their welfare policy

Other OECD countries, such as Sweden, Finland, Britain, Australia and New Zealand, have undertaken welfare reforms that parallel developments in Canada and the United States. Like Canada and the United States, these jurisdictions have designed policies and programs that emphasize a welfare-to-work philosophy, particularly among certain target groups (such as youth and single parents).

In some jurisdictions, governments have introduced income supplements and policies such as benefit exemptions and earning disregards to enable individuals to attain a higher overall income from work. In countries such as Finland, these policies appear to have encouraged more part-time work where there was previously no incentive to do so. In Australia, there has been a greater incentive for female parents on income support to work part-time.

Other welfare reforms have included mandatory participation in education and training programs as a condition for receiving social assistance. Other measures taken have included decreased benefits for groups that are considered more employable, and stricter sanctions for those who fail to adhere to their conditions for collecting social assistance (Kalisch et al., 1998; OECD, 1998; Eardley et al., 1996).

These developments suggest that other OECD nations are taking similar steps to reduce their social assistance expenditures and more closely integrate income support programs and policy with labour market education and training policies.

For the purpose of this research, we draw Lessons Learned on welfare reform from the Canadian and American experiences. Results from different political and social jurisdictions are difficult to compare even when components are similar, as they are but one part of an array of social security programs and policies. Since Canadian and especially American reforms have been subjected to more rigorous evaluation, the insights from these countries offer both a deeper and a broader literature on the subject. Insights for Canada drawn from other OECD countries may thus be less useful than conclusions obtained from within the North American context.

2.5 Important caveats on lessons learned from welfare reform

In all provinces and territories, reforms are still under way. As such, any lessons from such recent changes can only be preliminary. In addition to a caution about drawing premature conclusions, three other issues condition all understanding of what works in welfare reform.

First, reforms have been enacted during a period of rapid employment growth, especially in the United States. Much of the caseload reduction experienced in North America would not be possible without rapid growth in the economy. At the same time, changes to social assistance regulations have encouraged more recipients to search for and retain employment. Therefore, it is unlikely that economic recovery alone would have produced the sharp reductions in the number of cases experienced in many North American jurisdictions.

Second, caseload reduction has been used as a universal measure of success for welfare reform, though not necessarily the only one. Using such a one-dimensional measure of success during a time of economic boom, many jurisdictions have reported nothing short of remarkable reductions. Yet the critical questions remain – what happens to those who leave welfare? Do they gain successful employment? Does their standard of living improve once they are in the labour force? Do their wages increase? Do they move up the occupational ladder? Success indications such as these are not readily available.

In the United States, considering each state has implemented a different mix of policies, the conditions might seem ideal for extracting lessons learned. Unfortunately, the opposite is true. Because caseload reduction is the common measure of success, most jurisdictions have experienced lower welfare numbers by virtue of economic growth. States with radically different approaches to welfare reform have achieved similar levels of “success.” Therefore, as long as such diverse policies appear to lead to the same level of success in terms of caseload reduction, significant uncertainty will persist as to what really constitutes the success of welfare reform.

Third, although the evaluation literature on welfare reform is extensive, covering many jurisdictions and types of programs, comparative measures should be viewed cautiously. Several factors affect the performance of any one program, including the nature of the caseload, quality of intervention, motivation of the administration, regional variations in the economy, overlapping influence of other programs, attitudes and aptitudes of the clientele, and quality of the research. Although it can be difficult to isolate what has worked, why and when, the similarity of results does support some generalization. Strategies may be effective for some participants, but there are no simple solutions to deal with the entire caseload. Specific tailoring and fine-tuning of programs will always be required. Further, very few evaluations provide long-term results due to the cost of evaluation and the difficulty of conducting follow-up once individuals leave the rolls. Therefore, any “lessons learned” should be considered with these caveats in mind.

Footnotes

3	This is drawn from key informant interviews in Canada and the United States.
4	In the United States, the proportion of families with children headed by single mothers rose from 10.2% in 1965 to 23% in 1995, although this trend levelled off in the latter half of the 1990s. In comparison, according to Statistics Canada, the 1996 Census reported 12.1% of families in Canada as headed by single mothers.
5	According to Friedlander et al. (1997), “The broadest generalization about the current knowledge of government training programs for the disadvantaged is that they have produced modest positive effects on employment and earnings for adult men and women that are roughly commensurate with the modest amounts of resources expended on them. The positive effects for adults are not large enough to produce major aggregate effects on employment and earnings among low-income target groups, and the programs have not made substantial inroads in reducing poverty, income inequality, or welfare use. Moreover they have failed to produce positive effects for youth.”