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On decile groups

First

2.4

7.4

11.8

0.0

3.4

0.5

0.4

1.5

3.4

Second

1.6

9.6

17.7

0.0

6.6

1.3

0.7

6.1

9.8

Ninth

0.4

16.0

4.4

0.0

7.7

5.6

0.0

14.3

12.7

Tenth

4.6

7.3

8.6

0.0

12.1

5.6

0.0

15.0

27.2

With disposableincome below the subsistence minimum

2.0

7.9

14.4

0.0

3.7

0.9

0.4

6.5

7.2

The share of households whose membersreceived subsidies and privileges rather sharply differs across regions andcategories. At the same time, in 1998 there was a fall in the number ofrecipients among vulnerable households. In 1999 the situation returned to theone reported in 1997. Due to the fact that the surveys of households budgetswere implemented on comparable samples with high degree of probability one canspeak about an absolute reduction in the number of the social programsparticipants in 1998. Meanwhile, it should be noted that in Komi Republic theshare of aid recipients increased among households belonging to tenth decile in1998 against 1997 and in 1999 that proportion decreased. In Voronezh Oblastrespondents did not report receipt of food subsidies and in Volgograd Oblastthere were insignificant number of recipients of food subsidies. In KomiRepublic that type of aid is widespread among the poorest groups and the mostwell-to-do ones, and that can be explained by the measures taken by the socialprotection agency (first decile) and by the employers (tenthdecile).

The most widespread type of benefitsconstitute transportation subsidies. Data from all the pilot regions testify tothat. The largest number of recipients of that type of aid is among the mostwell-to-do households (ninth and tenth deciles) due to the highest number ofemployees there.

The number of recipients of housing subsidiesand privileges are less, however, they are reported in all the pilot regions.Since considerable part of that type of subsidy is paid by employers thedistribution of recipients across the income groups depends on the number ofemployees among the household members.

Among the recipients of vacations subsidiesare mostly well-to-do households. Subsidies on health care tend to be renderedto groups of population with higher income. Recipients of subsidies on kidsgoing to kindergartens are evenly distributed among categories of populationirrespective of their well-being.

The size of subsidies and privileges isbigger for the high income groups of population, first of all it relates tosubsidy on vacations.

More evidently unevenness of distribution ofprivileges is demonstrated in analysis of distribution of privileges receivedacross income groups. For example, in Komi Republic in the third quarter of1998 among all food subsidy recipients two highest deciles got 36 per cent andtwo lowest deciles got only 10 per cent, in the third quarter of1999—correspondingly26 per cent and 22 per cent; on vacations—correspondingly 57 per cent and 0per cent, 42 per cent and 0 per cent.

As follows from the analyses the existingpractice of rendering subsidies and privileges is far from perfect and does notcorrespond to the criteria of social justice. Moreover, their influence of thematerial situation of the poorest households is insignificant.

4. ThePost-Welfare State in Canada: Income-Testing and Inclusion

Introduction

It has become accepted wisdom amongst both advocates and opponentsof globalization that nation states are struggling to cope with powerfuleconomic forces which challenge their power and do not respect politicalboundaries. Governments everywhere are trying to rethink their roles andreinvent their ways of operating.

Citizens are questioning what they get for their taxes. Thisis especially true in countries like Canada which have experienced the twinpains of substantial tax increases and cuts in spending  notably on social programs in the effort toeliminate government deficits and reduce the growing debt burden.

There is no question that advanced industrialized nations facecommon challenges arising from profound economic, social and politicalchanges. But the notion that globalization necessarily createsconvergence in social policy as well as in economies is wrong.Differences in history, culture and political systems, to name a few of themore obvious factors, continue to shape both ends and means in socialpolicy.

The Canadian social security system1а shares some similarities with othercountries, especially Anglo-American nations such as the UK and the US.But we do have a unique system of social programs with its own particular mixof objectives and instruments. These programs reflect such distinctlyCanadian characteristics as our decentralized federal system of government, ourtwo founding languages (French and English) and our long tradition of a freemarket economy tempered by collective provision through limited governmentintervention. In Canada, social programs seek to civilize, not replace,capitalism.

This paper is intended to offer our Russian colleagues insightinto how Canada is transforming its social security system. The paperfocusses upon the growing use of the methodology of income-tested targeting toreplace both universal income benefits and needs-tested socialassistance.

Core Concepts inCanadian Social Policy

Before examining major changes in Canada’s social security system in itstransition to a post-welfare state, we first explore some core concepts thatunderlie social policy in the industrialized world and their application inCanada.

The ‘Why’ ofIncome Security

All nations struggle with the concept of economic security and howto ensure that citizens have sufficient income to meet their basic and specialneeds. There are several key policy issues which countries must face indetermining how best to meet these needs.

The first challenge is to identify the causes or contingenciesagainst which financial assistance is deemed to be required. Most nationshave some form of public income support to provide financial security forseniors and retired persons  generally defined for the purposes of income security programs asage 65 and over. The United States, however, counts 67 as the retirementage for its Social Security system. Canada makes provision for reducedearnings-related public pensions as early as age 60, though the income securityprograms that form the foundation of the retirement income system becomeavailable at age 65.

Retirement income benefits (described below) canbe delivered and paid for in a number of ways. Indeed, Canada’sretirement income system consists of several tiers supported through acombination of tax revenues, employer and employee contributions, and privatecontributions by individuals.

There is typically not much debate in industrialized countries asto whether nations should provide income protection for seniors. It isgenerally agreed that citizens considered no longer able to work are entitledto some form of income support.

But while there may be general agreement on the need for suchprovision, there is no end of debate as to how best to provide thesebenefits. Indeed, Canada has seen heated discussions over recent proposedchanges to its system of public pensions. And the debate is only expectedto get more intense over the years as cost pressures mount in response togrowing demands from an aging population.

The second area around which there tends to be general agreementin industrialized countries has to do with income security protection in theevent of disability. It is not highly contentious to have in place someform of income security program for persons who were born with or acquired adisabling condition that prevents them from earning full or partial wages.

But like pensions, the issue is not clear-cut. Controversyin the disability area arises around two major issues. First, if there issome capacity for paid work, then what are reasonable labour marketexpectations How much labour market attachment should workers havebefore they are considered employable

The second issue arises around the best way to provide suchfinancial assistance. Should it be through some type of incomeguarantee Should it be through a form of public or private insurancetoward which the individual has contributed to a certain extent Shouldit be through a combination of insurance and public guarantee that togethercomprise a reasonable income

Nations first must come to grips with the question of what theyare trying to achieve through the provision of disability benefits. Dothey want to compensate for an accident or injury Do they seek to offsetthe costs of the disabling condition Do they wish to provide incomesecurity in recognition of current and/or future incapacity to work

It appears that Canada has said ‘yes’ to all these questions.The disability ‘system,’such as it is, is composed of a patchwork of programs, each of which isfinanced and delivered in a different way.

Income support to replace earnings lost due to unemployment isanother common element in modern income security systems. But here too,controversy reins and many countries have changed their programs to lowercosts, reduce dependency and encourage return to the labour force. Whatproportion of earnings should be replaced For how long What aboutpeople who become chronic recipients of unemployment assistanceHow long should individuals be required to work before they become eligible forunemployment benefits How should these programs be financed

Another issue with which industrialized nations grapple is theextent to which they should ensure the financial security of certain householdsbecause it is good not only for those households but also for the well-being ofthe nation. This type of payment is made not so much for the purposes ofcompensation for a predictable eventuality, such as retirement, or anunpredicted risk, such as disability. Rather, it is seen more as aninvestment in the citizens of the country.

Most of the industrialized world makes payments to households withchildren for this very reason – as an investment in the next generation whose well-being isessential to the economic prosperity and social health of the nation.Even here, not surprisingly, debates arise around delivery.

Should payments be made to all families with children or targetedto lower-income groups Should the amount of benefits vary according tothe age or rank of children, and the income of the family Shouldbenefits be paid only as a supplement to families’ earnings from paid workHow much is appropriate and on what basis should benefit levels bedetermined

Canada is currently engaged in this debate and is still strugglingwith these questions as it seeks to develop and expand its system of childbenefits. The issues around which major policy decisions must be made arediscussed in the description of child benefits that follows.

As in the case of disability, the answers to these questions liein the policy objectives that a nation seeks to achieve. If it wants toprovide some compensation to all families in respect of the costs they incur onbehalf of raising children, it likely will pay benefits to all households withchildren, regardless of family income.

If, by contrast, the nation wishes to tackle the problem of childpoverty, then it likely will provide an additional or targeted benefit thatdelivers financial aid to households whose income falls below a certainlevel. Additionally, if a nation seeks to encourage paid employment, thenit may choose to reward participation in the paid labour market throughsupplementation of low earnings.

Finally, most industrialized nations have in place some form of‘lastresort’ program ofincome support. This type of program provides limited income benefitswhen all else fails. Households have insufficient or no work earnings andhave no private resources to meet their basic needs.

In Canada, the last resort program is known as social assistance,and is commonly referred to as ‘welfare.’ It is administered by 13 different governments – each province and territoryoperates its own unique welfare system with distinct rules and benefits.2а

Welfare is easily the most controversial of all income securityprograms – it is theleast popular from the perspective of public support. Being on welfare isoften viewed as a personal failure. It certainly is a guarantee ofpoverty; all jurisdictions pay benefits that fall below generally acceptedmeasures of low income.

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