Income Security

In Saskatchewan, the majority of people get the income they need to live from paid employment or self-employment. In an ideal labour market, there would be work for everyone who needs income, wages would be high enough to provide a living for workers and their dependents, and employees would be able to save enough during their working life to provide income in old age. But in the real world of the labour market there are always imperfections: involuntary unemployment, skill or opportunity mismatches, gaps between earnings and needs, etc. Dependents, including children, share the economic risks of workers. There are also some adults, such as people with severe disabilities, who may not have the capacity to be fully self-sufficient. Even for those who can provide adequately for current needs, it may be difficult to plan enough savings to provide an income in old age.

All societies establish a balance between the individual’s responsibilities and the protection that society offers its members. Income security policies and programs are one of the means that societies can use to protect citizens from some of the economic risks that an individual is exposed to in a market economy. Because citizens are expected to be as self-reliant as possible, good income security policy provides protection, but also encourages people to act in their own and the community’s best interests. When Saskatchewan was formed in 1905, governments had limited involvement in income security. Families were expected to take care of their own members; and where that was not possible, religious and charitable groups frequently responded to hardship and need. As the province developed, however, governments were called on to make more formal arrangements for the well-being of citizens.

The involvement of governments in income security has increased in stages as public attention and sympathy have focused on particular social issues. The first benefit plan for widows and dependent children, for example, began in Saskatchewan in 1916 during World War I. Long-standing concerns about elderly people in need were first addressed through the Saskatchewan Old Age Pension of 1928—the first major social program cost-shared between the provincial and federal governments. While governments gradually addressed the needs of groups of people who were generally seen as blameless and worthy of public support, there was less consensus on how to respond to “able-bodied” people who found themselves in need owing to unemployment or other circumstances. At the end of the 1920s, programs for the health and welfare of able-bodied people in need were still organized and funded by municipal governments. The onset of the Great Depression in 1929, however, quickly overwhelmed the resources of these local governments to respond to rapidly growing demand for assistance.

The Depression was deeper and more prolonged in Saskatchewan because the global economic downturn coincided with a prolonged and severe Drought on the Prairies. Between 1929 and 1933 Saskatchewan’s per capita income dropped by 72%, compared to 48% for Canada as a whole, and the per capita relief burden in Saskatchewan was more than three times the national average. The Great Depression demonstrated the vulnerability of individuals and governments to broad economic forces. While the onset of World War II solved the unemployment crisis, greater economic and social justice became part of the Western allies’ war aims. The Atlantic Charter, a joint statement of Churchill and Roosevelt in 1941, promised that victory would secure “for all, improved labour standards, economic advancement, and social security.” Although there was essentially no unemployment during the war, a modest national unemployment insurance was enacted in Canada in 1941 in anticipation of future needs. In 1943, Dr. Leonard Marsh’s Report on Social Security for Canada outlined a post-war vision: an economy managed for full employment; benefits for children to fight family poverty; and comprehensive social insurance to protect income in the case of unemployment, illness, or lack of resources in old age.

Except for the Family Allowance, introduced in 1945, most of Marsh’s ideas were not acted upon immediately. However, federal financial support for income security programs continued to grow. The federal share of national social welfare costs, figured at 52% in 1933, had climbed to 84% by 1960. Much of this increased federal spending was for cost-sharing of provincial programs to help categories of needy persons such as the elderly, blind persons, disabled persons, and finally in 1956, those in need owing to unemployment. Between 1966 and 1971 there were major changes in national social programs, involving publicly funded Health Care, the contributory Canada Pension Plan, the Guaranteed Income Supplement for low-income seniors, an expansion to unemployment insurance, and other measures. In Saskatchewan, a new provincial social assistance plan replaced most municipal and categorical provincial welfare programs. Of all the changes of this period, the most effective pertained to public and private pension reform; they have drastically reduced the depth and incidence of poverty among older citizens.

These reforms came after more than two decades of growth and prosperity. The economy had been strong, and was assumed to be able to support a comprehensive social security system. Beginning with the early 1970s, these positive labour market conditions began to change: international oil crises, low growth, unemployment, and inflation increased financial pressures on governments and citizens and brought social reform to a halt. The economic events of the 1970s were the first signals of economic restructuring towards more open international trade and more global competition for lower-skilled labour. At the same time, western society was undergoing a rapid change in family relations and the status of women. One impact of this change was an increase in the number and proportion of single-parent families, generally more at risk because they have only one earner and more likely to incur child-care costs. These factors combined to push many households, especially those headed by single parents, out of the work force and onto Social Assistance. By the early 1990s, social assistance caseloads represented almost 12% of the population in Saskatchewan and across the country. By some measures, over 20% of Canada’s children were living in poverty.

While some social advocates called for higher social assistance benefits as a response to family poverty, Saskatchewan instead chose to focus on supports to employment. The first reforms in this direction occurred within the context of the National Child Benefit, Canada’s first significant new national social program since the 1960s. The National Child Benefit initiative has both federal and provincial/territorial components. The federal component is a new benefit to replace social assistance for children in lower-income families. Because the benefit is available whether a parent is working or on welfare, it increases disposable income of employed parents and encourages low-income parents to work. Parallel reforms under Saskatchewan’s Building Independence initiative increased cash and in-kind supports to low-income working families, and strengthened employment supports provided with social assistance and other public benefits.

Many observers believe that the child benefit reforms that occurred in the late 1990s were a step forward in the evolution of Canada’s social security system. Until that time there was very limited support to low-income families with children outside of the social assistance programs. Under pressure from labour market conditions, many families were drawn towards social assistance and out of the labour market, even though employment income was these families’ best hope for escaping poverty. By helping both parents on social assistance and low-income working parents with children’s needs, the new approach arguably allows governments to provide direct benefits for children without systematically discouraging work by low-income parents. Programs such as social assistance, which provide for the needs of adults, are more controversial because the availability of benefits is often viewed as a disincentive to work.

Proposals have been put forward over the years for a “guaranteed income” provided by government to all working-age citizens. No such plans have been implemented because of concerns about cost and work incentives. Governments and communities are still working towards the right balance between individual incentives and security of income. A perfect system would encourage individual effort and enterprise, while still ensuring that the overall wealth of society is distributed fairly enough to prevent both undue hardship and extremes of inequality. The search for this balance in income security policy continues.

Rick August

Further Reading

Grauer, A.E. 1939. Public Assistance and Social Insurance: A Study Prepared for the Royal Commission on Dominion-Provincial Relations. Ottawa: King’s Printer; Guest, D. 1997. The Emergence of Social Security in Canada. Vancouver: UBC Press.