Ontario Welfare Reform: From CAP to Workfare, 1990–2008

Ontario's Economic Crisis and the Roots of Welfare Reform

Ontario, Canada's largest province by population, has been facing significant economic obstacles since the early 1990s, following the severe recession of that period. Although social policies have been directed toward achieving some degree of economic improvement, many reforms remain necessary for Ontario — and Canada as a whole — to reach a greater level of economic development.

The social and economic situation of Ontario today has its roots in the early 1990s, when Canada faced a very difficult economic recession. Ontario endured severe economic problems for five consecutive years (1990–95), during which the total excess of deficits reached $10 billion and the overall increase in government debt reached $60 billion. By 1995, Ontario was in a very difficult economic position.

This economic crisis had its greatest effect on low-income citizens who were already facing social and economic difficulties. Since 1995, Ontario undertook significant steps toward a social reform intended to benefit all social categories. The results of the reconfiguration of Ontario's welfare system are observable and are analyzed in depth in this paper.

One cannot look at Canada as a whole and identify the problems of its provinces, because the subnational level of government bears responsibility for social programs and welfare. This is why it is important, when analyzing Ontario, to focus solely on the policies adopted by the Ontario government, given that it is directly responsible for the province's social and economic development. Although there may be similarities between different Canadian provinces, Ontario's policies must be viewed and discussed separately.

Considering that Canadian provinces have the power to determine their own social and welfare policies, the Canadian case is unique. As one analyst observes: "Given the relatively high degree of interprovincial variation in social assistance provision, it is not surprising that welfare reform is being launched from the bottom up."

The Canada Assistance Plan and National Welfare Standards

The Canada Assistance Plan (CAP) was created in 1966 and represented an important step toward establishing national welfare standards. CAP was a cost-sharing agreement between the provinces of Canada and Ottawa, by which the federal government agreed to provide 50% of the costs for social assistance and services. Through CAP, Canada's welfare system underwent a high degree of standardization. Because the provinces were receiving federal funds for social policies, they were bound to agree to several conditions: to provide social assistance, not to implement residence requirements as criteria of eligibility, to establish a social assistance appeal procedure, and so on. These were all regulations at the national level, and all provinces had to implement them in exchange for receiving funding.

"But most importantly, CAP introduced needs-based social assistance on a nationwide scale and prohibited the provinces from imposing work obligations on welfare recipients. From a comparative standpoint, the CAP agreement might seem like a rather weak form of a nationally institutionalized welfare arrangement. However, it significantly strengthened — and centralized — welfare discourse at the national level."

CAP generated great debate among economic analysts. Some argued that such a high degree of national government involvement was undermining provincial independence and placing too great a burden on the federal government. Starting in 1986, federally induced fiscal austerity limited the indexation of federal transfers to the provinces, aiming to decrease the real value of transfers over time.

The slow retreat of the federal government from the provinces was permanently decided in the early 1990s, when Canada faced a large budget deficit that forced the federal government to end CAP for the three wealthiest provinces, including Ontario. Federal transfers to those provinces were capped at 5% per year — a dramatic decrease from the 50% cost-sharing model under CAP. The loss of federal support for Ontario represented an estimated $18 billion less in revenue for the province in the subsequent budget year.

The End of CAP and the Rise of Provincial Workfare

CAP was completely ended in 1996 and the Canada Health and Social Transfer (CHST) was created, marking a fundamental break with needs-based, means-tested social welfare in Canada. Most analysts believe that the end of CAP marked the close of a relatively harmonious period of policy-making, and that the period following it was destined to involve great sacrifices and fewer benefits for low-income social categories. However, the federal government presented the CHST as a model of fairness and transparency. "The CHST reduced transfer payments to the provinces by 23.6%." Considering this figure, it is difficult to understand how a reduced transfer could represent a greater degree of fairness or an improvement in social services. The federal government's primary interest was in addressing the budget deficit, and ending CAP was its chosen solution.

Moskovitch correctly states: "Block funding means never having to take financial responsibility for the poor... In this respect, in the name of deficit, debt, and provincial rights, the welfare state has been returned to the pre-1956 period when the level of government with primary responsibility for economic policy had no corresponding responsibility for Canada's poor. This constitutes a fundamental change in the nature of Canadian federalism undertaken in the name of expenditure reduction... The shift to a block grant insulates the federal government from the effects of a policy favouring the reduction of inflation over the reduction of unemployment."

The creation of laissez-faire federalism granted more power to provincial leaders, but fewer funds, and did little to improve the living standards of the poor. It was particularly low-income people who were affected by the change in social policies, as they were the ones facing inequality and unemployment. The national standardization of social assistance under CAP had represented a guarantee of welfare homogenization.

Welfare reform in Ontario began in the late 1980s when the Liberal government established the Social Assistance Review Committee (SARC). The first comprehensive review of welfare reform in Ontario was conducted in 1988 and produced a report entitled Transitions. The recommendations of the report were translated into legislation and results were soon visible. The system of social assistance and allowances was improved, having a significant impact on low-income social categories. More importantly, people were encouraged to trade welfare for participation in the workforce — one of the most significant measures introduced, as welfare and social assistance were increasingly exchanged for workforce integration.

The end of CAP placed Ontario in a dire fiscal situation and accelerated political pressure for cost containment and more radical welfare retrenchment in the province. Together with the end of CAP, provincial social policies became less and less efficient in providing social security and assistance to those in need. This created the conditions for the introduction of full-fledged welfare-to-work initiatives at the provincial level.

Conclusion: An Unfinished Reform

It is clear that the social assistance projects developed in Ontario are targeted at reducing caseloads, integrating welfare recipients into the workforce, and creating a more efficient social system. There are elements of the OW reform program that represent steps forward for Ontario's social assistance system — such as the focus on integrating participants into the workforce. There are also elements that fail to account for all the factors influencing participants' lives, notably the fact that income remains low even for those who find employment. There are clearly many aspects that require improvement, as Ontario's welfare system is far from being a satisfactory program.

The lack of legislative protections for those leaving welfare, combined with tighter eligibility rules and reduced community supports, has deepened inequality rather than alleviated it. For Ontario's most vulnerable residents, the promise of the "Common Sense Revolution" has translated into harsher living conditions rather than meaningful economic empowerment. Comprehensive reform that addresses both workforce integration and income adequacy remains necessary if Ontario is to achieve a genuinely equitable social assistance system.

Bibliography

Allahwala, A., Rescaling the Canadian Welfare State: The Experience of Ontario and Quebec, June 2005.

Herd, D., Rhetoric and Retrenchment: 'Common Sense' Welfare Reform in Ontario, 2002.

Moskovitch, A., "The Canada Health and Social Transfer," in: Raymond Blake, Penny Bryden, and J. Frank Strain (eds.), The Welfare State in Canada. Concord: Irwin Publishing, 1997.

National Council on Welfare, Another Look at Welfare Reform: A Report, 1997.

Ontario Works: Background Briefing.

Ontario Social Safety Network, Five Years Later: Welfare Rate Cuts Anniversary Report. Toronto: Ontario Social Safety Network, 2000.

Peck, J., Workfare States. New York: Guilford Press, 2001.

Courchene, T.J., Responding to the NAFTA Challenge: Ontario as a North American Region State and Toronto as a Global City-Region, October 1999.

What is Ontario Works?, February 2008.