Comment from WLU Business and Economics

I take what you are doing very seriously and respect your heart. But I am
not going to ratchet down to $5 per day-it took me 44 years to get to
current consumption levels-and it is not going to help anyone directly
beyond raising my level of empathy.

On a technical note, I am not sure that your statistics are correct. In your
newsletter you mention that over 700,000 are on social assistance. This may
be true, but according to the Government of Ontario there are only 196,000
cases (376,000 beneficiaries) in the Ontario Works program as of December
2006. Of those beneficiaries, approximately 159,060 are children. Thus, over
two thirds of recipients live with dependents, most of whom are children.

See:
/1017/OntarioWorkseng.pdf>
http://www.mcss.gov.on.ca/NR/rdonlyres/F5EF844D-DE16-4AD5-A226-F109866B951C/
1017/OntarioWorkseng.pdf

The fact that most live with a dependent should mean that the household
budget is a little higher than you suggest in the newsletter. For example,
if each individual receives $536, then a household with one parent and one
child will receive $1,072. If rent is $335 per month and a bus pass is $57,
then there is $680 left over for two people, which is $22.67 per day.

This still isn't enough to live on, and so I agree with you that an increase
is appropriate. However, there are a number of caveats to consider.

First, I am not sure that an across-the-board increase is appropriate. Some
areas have lower rent than others. It would make sense to adjust the monthly
benefit according to the average rent in the area. For example, individuals
in Midland would not receive as much as those in Waterloo who would not
receive as much as those in Toronto.

Another caveat is that there are positive incentives associated with keeping
welfare benefits low: it encourages people to take jobs. The higher the
benefits, the lower is the incentive to work especially at low wage jobs.
This may explain why the number of beneficiaries has fallen over time from
733,000 in June of 1998 to 376,000 currently. Of course, the economy has
also been strong over this period and so there are more jobs available. The
U.S. has experimented with timed-limited benefits and had considerable
success at lowering the number of people on social assistance.

Other ways to improve the entry into the work force would include: 1) free
bus passes for all individuals attending training or actively looking for
work; 2) full tuition and book reimbursement for individuals who attend
training or courses. By giving the benefits in-kind rather than in cash, one
can be more confident that the program is not abused.

You mentioned that the minimum wage should probably be raised. I read a very
good argument against that idea recently. If the minimum wage is raised,
then employers will hire fewer low-skill employees. (Supply and demand.)
This will make it harder for youths, immigrants or unskilled people to get
their first job and transition out of the Ontario Works program. However,
there is a work-around. It is called a guaranteed minimum income. The idea
is that all Canadians get a minimum guaranteed income. If they are
unemployed, then the government pays them up to that minimum. It is like a
negative income tax-if you earn income you pay tax and if you don't then you
receive. This has the advantage of not distorting the labour market like a
high minimum wage does. But there is still the issue of the appropriate
level for the guaranteed minimum

The irritating thing is that total government budgets are so huge now that
there is easily enough money in the system to guarantee everyone a generous
minimum. Unfortunately, much of the money does not end up in the hands of
the poor. It goes out as corporate welfare, it is wasted on boon-doggles
like the gun registry, or it is transferred to middle and upper class
individuals who don't need it.

Associate Professor

School of Business and Economics

Wilfrid Laurier University
_________________________________________________________________________________
Dear Professor,

Thank you for your comments and attention to this issue.
In our flyer we said that 700000 people including 200000 children rely on social assistance in Ontario. This figure includes ODSP which is an equally important program that also needs to be addressed. For the purpose of this initiative we though it would be more practical for people to try to experience living on Ontario Works rather than trying to fake a disability for a week.

The statistic is from:
The formal Government Report to
The Honourable Sandra Pupatello,
Minister of Community & Social Services
Review of:
Employment Assistance Programs
in Ontario Works & Ontario Disability
Support Program

which can be found here.
http://www.mcss.gov.on.ca/NR/rdonlyres/F1B51636-3FFA-4490-A703-CCEC8CEE7272/95/EmploymentAssistanceProgram_Matthews_eng.pdf

We believe that the figure of 300000+ living on OW is still a mojor issue because they are living on appallingly low income levels.

Also the $335 is the housing allowance given to individuals on Ontario Works, this is a component of the $536, the remaining being the $201 for food, clothing, and everything else. The only accommodations one could acquire following this rate of $335 would be in a rooming or boarding house where they would have a single room usually with a single bed.

If one had dependents they would of course need more than this. If they were to qualify for social housing (Subsidized) and get past the wait lists, they would still be spending well over $335 for a two bedroom apartment. This would leave them with of course much less than the $22.67 /day for two people that you have suggested. This is of course inadequate.

For the purpose of our campaign, we chose to use the single individual amounts with no dependents in order to make it more feasible for people to participate (by reducing impacts to any of the family members of those participating).

If the housing allowance was based on the average rental rates then for a single person it would have to be at lease $427/month for Waterloo Region. It is obviously not that right now.

To address the caveats you mentioned including incentives for employment:
Many people on Ontario works do not work for many reasons; lack of education, training, undiagnosed mental health issues, social isolation, etc. Another is the lack of availability of affordable childcare which you did not mention. This effects many single parents throughout Ontario.

As for the minimum wage issue, I too recently read an interesting article that said “Raising the minimum wage will create a demand for more goods and services”. (When people have more money they spend it). “To keep the minimum wage in line with rising costs is an act of economic justice. The only jobs that might be lost would be those of economists who have, in the past, made the debate over the minimum wage a source of their perennial employment.”

Reference:
Mazur, J. (1995). The minimum wage revisited. Challenge, 38(4), 23.

The problem is that the cost of living has increased and the wages and salaries have also increased in many other levels of the market except for the minimum wage. It is the minimum wage that is behind.

I do agree that a minimum guaranteed income program would be a major step forward in the area of social security policy.

As for an increase in minimum wage leading to less hiring of low-skilled employees, a universal pay rate change will not change people’s job descriptions or their quantities in the labour market. It will still be the same market of people working at these job levels. As for the skill level of immigrants, in this country most of our immigrants are extremely high skilled (due to our point system of immigration) and are forced to take low-paying, low-skilled jobs (because when they get here they often are not hired because they lack “Canadian” experience or need more English language training).

Thanks again for your comments and attention to this issue.

Regards,

Ameil J. Joseph