Tearing Down the WallsImproving Access to Assets through

Government Programs

June 6th, 2011

Catherine GatesJennifer RobsonJohn Stapleton

Richard Shillington

Why don't we want the poor to own anything?

SEED Winnipeg

June 6-7, 2011

TD Economics, From Welfare to Work in Ontario, 2005

“In the financial community, we’re always urging Canadians to save more, because we know how important even a small pool of savings can be in cushioning families through a financial shock.”

“Basically, welfare policy is caught in a trap of its own making that strips applicants of the same productive assets they will need to leave and stay off welfare later on.”

Social and Enterprise Development Innovations, Wealth, Low-Wage Work and Welfare: The Unintended Costs of Provincial Needs

Tests, 2008

The Social Policy Context

Governments employ income tests, needs tests and asset tests to ensure that benefits from these programs only go to people who need them.

Interesting that governments have greatly reduced # of program to which asset limits apply but apply them ever more harshly where they do apply.

We all tend to think things were tougher in the past. . .

• We walked to school in the snow, we made less money, welfare was harder to get--wasn’t it?

The picture prior to the introduction of the Canada Assistance Plan in 1967

• In the 1930’s, the thought was that if a family on relief actually came into some money, it should be used to help meet their needs.

• The asset limit on the Mothers' Allowances was $1,000. Any assets in excess of the limit were allowable as long as they were spent on raising children.

• In 1951, the Blind and Disabled Persons Allowances asset limits were set at $50,000.

Changes with the Canada Assistance Plan (CAP)

• Asset limits brought in with CAP in 1966: $1,000 limit• From 1967 to 198, asset limits increased . • In 1981, CAP guidelines:

– $2,500 for a single (unemployable) person

– $5,000 for a family with $500 added for each child

– $2,500 limit for the first child in a one-adult family.

The demise of CAP

Asset limits were scrutinized in the mid 1990's.

CAP ended by 1995,

Provinces and territories followed Ontario's lead to reduce asset limits.

Activists, preoccupied in 1995 by the social assistance rate cuts of 21.6% did not make the asset limit cuts a matter of public protest

Asset Limits in Ontario: A 60 Year Roller-Coaster Ride

• Roller coasters are expected to go up and down without warning. Public policy is expected to be anticipatory, planned, deliberate, and subject to reasonable public expectations.

Asset Limits in Social Assistance in Ontario: 1951 to 2009 Single Person (non-disabled but unable to work)

Base Year for inflation calculation: 1951Note: Introduction of the Canada Assistance Plan (CAP) 1966

$-

$250

$500

$750

$1,000

$1,250

$1,500

$1,750

$2,000

$2,250

$2,500

$2,750

1951

1956

1963

1966

1967

1971

1976

1981

1995

1998

2005

2006

2007

2008

2009

Year

Ass

et L

imit

Asset Limit in selected years If the 1951 limit had been retained and indexed to inflation

Asset Limits in Social Assistance in Ontario: 1948 to 2009 Lone Parent with One Child

Base Year for inflation calculation: 1948Note: Introduction of the Canada Assistance Plan (CAP) 1966

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

1948

1951

1956

1963

1966

1967

1971

1976

1981

1995

1998

2005

2006

2007

2008

2009

Year

Asse

t Lim

it

Asset Limit in selected years If the 1948  limit had been retained and indexed to inflation

Asset Limits in Social Assistance in Ontario: 1951 to 2009 Single Person with a Disability

Base Years for inflation calculation: 1951 and 1967Note: Introduction of the Canada Assistance Plan (CAP) 1966

$-

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

1951

1956

1963

1966

1967

1971

1976

1981

1995

1998

2005

2006

2007

2008

2009

Year

Ass

et L

imit

Asset Limit in selected years If the 1951 and 1967 limits had been retained and indexed to inflation

Asset Restrictions on Federal Savings Instruments: A Study in Inconsistency

• Registered Retirement Savings Plans (RRSPs) are not exempt from social assistance clawbacks. Registered Education Savings Plans (RESPs) are exempt.

• The Registered Disability Savings Plan (RDSP) is completely exempted from social assistance clawbacks. The Tax Free Savings Account (TFSA is not exempt.

Treatment of tax assisted registered savings instruments under Ontario social assistanceType of Registered

InstrumentTreatment underSocial Assistance

Asset & Income Rules

ContributionAvailable from

FederalGovernment

Date ofPolicy

decision

PublicFederal

Interventionto exempt

RRSP Non-exempt No 1958 NoTFSA Non-exempt No 2009 NoRESP Exempted Yes 2004 YesRDSP Exempted Yes 2008 Yes

Disabled recipients, and Those with children, have an Advantage

• Other people may contribute to savings plans for children or people with disabilities.

• With the exception of Alberta, Newfoundland and Quebec, all provinces and territories count RRSPs as disqualifying assets and income for welfare purposes.

• Unemployed workers with a few thousand dollars in RRSP's who apply for welfare are told that they have to liquidate.

• They are cashed out at a low point, spend the proceeds before getting assistance, then face a tax bill in the next year when they can least afford to pay it.

Asset Stripping in a Culture that Promotes Saving • Canadians need up to one million dollars in savings to retire in comfort.

• A steady regimen of saving until retirement is required.

• Most Canadians will live through three recessions during their adult years.

• If a rough patch is hit in one recession and application to an asset- tested program is necessitated, our savings will be depleted and we must start again.

Asset Stripping in a Culture that Promotes Saving

• When recessions happen, the number of welfare recipients grows even after the economy starts to recover.

• The cost of moving into accommodation from a shelter – just the basics, like Hydro, phone, pots and pans, a little furniture, a first food shopping, a transit pass – amounts to more than $2,000.

The Welfare Agency is always willing to be

flexible. . .but only under certain limited clearly

defined circumstances.

Asset Stripping in a Culture that Promotes Saving

• In a society that promotes saving and cherishes self-reliance, what is the rationale for public policy that almost guarantees people will grow old in poverty?

A National set of standards?1. Raise asset limits for social assistance, subsidized housing,

and legal aid to $5,000 for single people and $10,000 for families and people with disabilities.

2. Exempt a further $5,000 per adult in Tax-free Savings Accounts and RRSPs. Consider a blanket exemption in registered instruments of $60,000.

3. Exempt all assets for the first three months of receipt of assistance

4. All provinces and territories should exempt modest RRSP and TFSA amounts from their welfare asset and income rules.

Tearing Down the WallsImproving Access to Assets through

Government Programs

June 6th, 2011

Catherine GatesJennifer RobsonJohn Stapleton

Richard Shillington

Breaking down barriers to assets in Canadian social

assistance systemsJennifer RobsonABLE, Winnipeg

June 2011

13 different social assistance systems

% of household income from government transfers, Census 2006, Canadian Atlas, NRCAN.

and 13 different sets of rules (independent of % of income from

government transfers)

$500$500

$50 -200

$862 -1500

$1000 $500

$1500

$572$583

$4000

$300

$500

$0

Asset limits for single employable applicants and recipients, January 2009, NCW “Welfare Incomes 2009”

Asset rules are complicated• Income or asset?• Yours or dependant’s?• Exempt or not?• Value?• Applicant or recipient?

but generally, the dollar limits are getting lower

especially when you factor in inflation

and they don’t seem to have a clear effect on entry

r = 0.27

but the literature suggests an effect on household saving and

asset-holding• “Disaving”• Pacing asset accumulation• 16% ? 20%? 25%? More?

Why do we have these crazy things anyway?

What might be better?• Tinkering with exemptions

– Influence of federal government– $46B+ in personal asset subsidies

• Set more rational limits– Tied to net worth of comparable

households ($3,500 for household with after-tax income under $10,000)?

What might be even better?• Get rid of the asset tests altogether

– Virginia– Ohio– Medicaid

But that on it’s own probably won’t be enough

Tearing Down the WallsImproving Access to Assets through

Government Programs

June 6th, 2011

Catherine GatesJennifer RobsonJohn Stapleton

Richard Shillington

. . . . . . . . . . . . . . . . . . .

Asset Building - assets give people hope.

Manitoba Context

• Financial exclusion – low-income people are excluded from mainstream asset building tools others take for granted.

• Geographic concentration - fringe banking systems are concentrated in low-income neighbourhoods.

• Our experience – focus has been on providing income support without breaking the cycle of poverty; now more emphasis on creating human capital (education and training) and building assets.

Employment and Income Assistance

• Provides goods and services necessary for health and well-being.

• Department directly delivers services to people.

• Major focus of anti-poverty efforts and assets building policies is contained within welfare.

• Manitoba Saves! is the major program policy on asset building largely for people on assistance.

Manitoba Saves!

• Major public policy shift which recognizes that savings and asset building help to build human capital and break the cycle of poverty.

Interventions

• Liquid Assets - people on welfare can have more cash on hand.

• Registered Disability Savings Plan and Registered Education Savings Plans - plans to help people save money for the future that do not affect welfare benefits.

• Family Contributions – families can now contribute up to $500/month for people with disabilities on welfare without affecting benefits.

• Other Exemptions – substantial federal child benefits (over $2,000 per year per child) are exempt.

SEED Winnipeg

• Supporting Employment and Economic Development Winnipeg Inc.

• 10 years of asset building

• Hope and confidence

• Rural expansion

Individual Development Accounts (IDAs)

• Matched savings accounts

• Information, training, support and resources

Savings Circle

• Smaller-scale asset building program

• Additional supports and provisions

• Household essentials

Financial Literacy Training / Money Management Training

• Setting financial goals, identifying expenses, budget, using banking services and creating a savings plan

• Mandatory component

Lessons Learned

• Importance of partnerships

• Outreach

• Individualized programming

Tearing Down the WallsImproving Access to Assets through

Government Programs

June 6th, 2011

Catherine GatesJennifer RobsonJohn Stapleton

Richard Shillington