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1944 – Family Allowance Program: Supporting Canadian Children

The family allowance was Canada’s first universal welfare program. Widely called the ‘baby bonus’, the Family Allowance Act of 1944 began a monthly payment to Canadian families with children, regardless of income.

Toward the end of the Second World War, Canadians were afraid economic depression would return to Canada and were looking for social security. It was in this context that the Government of Canada brought in the family allowance and other measures, such as unemployment insurance and a proposal for health insurance. (See 1941—Unemployment Insurance Act: Providing Employment Income Security.)

The family allowance was introduced to increase spending power for families with children, and ensure that children’s basic needs were met. The payment was also intended to help moderate the impact of the wage freeze that was in place at the time. (See 1941—Wage and Price Controls: Managing a Wartime Economy.)

Critics felt the benefits should only go to the most needy families, not everyone. Others felt it was an incentive for poorer families to have more children (although birth rates continued to decline over the next decades). Some felt it was a waste of taxpayers’ money. Trade unions opposed the family allowance as a substitute for adequate wages.

The family allowance program began on July 1, 1945. All families with children under age 16 received tax-free benefits, which varied based on the children’s ages. The benefits were provided to everyone because it was felt that determining who was needy would cost too much.

The program went through various changes over the years. In 1964, the allowance was extended to 16- and 17-year-olds who attended school or who were physically disabled. In 1973, all children 18 and under became eligible. The allowance, also indexed to inflation by that time, became taxable.

Beginning in 1978, social security benefits underwent a major restructuring. A refundable child tax credit, developed to help low- and moderate-income families, was brought in. To pay for this, the allowance amount was reduced, as were tax exemptions for children.

In 1989, the shift toward targeting of benefits to lower income families continued, as recovery of family allowance payments from higher-income families were introduced. The change was controversial, with some people maintaining that the program would be more vulnerable to future cutbacks since it was no longer protected by universality. However, child benefits have been enriched substantially since then. In 1993, the family allowance, the refundable child tax credit and a non-refundable child credit were replaced by a new income-tested child tax benefit that provided monthly benefits based on the number of children and the level of family income.

Federal assistance to families with children is now delivered primarily through the Canada Child Tax Benefit (CCTB), which replaced the Child Tax Benefit in 1998. The CCTB is an income-tested benefit that has two components: the CCTB base benefit for low- and middle-income families and the National Child Benefit supplement for low-income families. The Government of Canada paid out $6 billion in child tax benefits to Canadian families in the 1999–2000 fiscal year. About two-thirds of that amount went to low-income families. The 2000 budget and October 2000 Economic Statement and Budget Update add $2.6 billion annually to the CCTB until 2004, and will bring the maximum CCTB benefit for the first child to more than $2,500. Today, most provincial governments also provide benefits to families with children.

Canada Child Tax Benefit (CCTB)
Source: Canada Customs and Revenue Agency
http://www.cra-arc.gc.ca/benefits/cctb/menu-e.html

Latest Increase in the Canada Child Tax Benefit
Source: Prime Minister of Canada
http://www.universalchildcare.ca/en/home.shtml

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