T N E Preventing hardship among those with few or no resources is no T M easy task. Today, institutions whose goal is to help those at the margins h e seek to integrate and encourage them in order to avoid social B P a O exclusion. How can social assistance best balance the adequacy of t benefits with financial incentives to work? What policy measures are tle L E essential to promote independence and reduce (intergenerational) a g V welfare dependence? What can be done to promote individual a in E responsibility in societies where taxpayers and voters are explicitly st D regarded as major stakeholders in social policy? These are some of the E most pressing social issues this book addresses by comparing social x D c assistance policies in four Canadian provinces – Alberta, New lu N s Brunswick, Ontario and Saskatchewan – and four Swiss cantons – io A Graubünden, Ticino, Vaud and Zürich. n N V In Switzerland, few people were forced to rely on social o O lu I The Battle assistance until unemployment rose sharply at the beginning of the m T 1990s. The authorities are now struggling with how to promote social e A inclusion by keeping benefit levels high whilst at the same time N R improving measures designed to get benefit recipients back into work. o E against Exclusion . In Canada, all provinces have stressed the role of work as the best way 3 P of avoiding benefit dependency, and some provinces have also cut O benefit levels and restricted access to benefits. The success of Canada - O in reducing social assistance benefit dependency stands out in an area of social protection where across the developed world there are C VOLUME 3 remarkably few such successes. C I Further reading M Social Assistance This book is part of "The Battle against Exclusion" series, O in Canada and Switzerland consisting of comparative studies of social assistance policies. To get a N more comprehensive picture of social policies in OECD countries, O please consult the first two volumes of the series, both published in C 1998: the first volume covers Australia, Finland, Sweden and the E United Kingdom, and the second volume, Belgium, the Czech R Republic, the Netherlands and Norway. O F N O I T A S I N 9:HSTCQE=V\VU]Y: O A E G C R (81 1999 07 1 P) FF 150 D OECD ISBN 92-64-17108-8 99 O File: $1$DIA3:[PAGER.SAVE.PUB]COPYR–1623E.;7 NGUYEN Seq: 1 Page: Free: 4140D Next: 0D VJ: J1:1 9-AUG-99 10:55 (cid:211) OECD, 1999. 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THE BATTLE AGAINST EXCLUSION Volume 3 Social Assistance in Canada and Switzerland ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT Pursuant to Article 1 of the Convention signed in Paris on 14th December 1960, and which came into force on 30th September 1961, the Organisation for Economic Co-operation and Development (OECD) shall promote policies designed: – to achieve the highest sustainable economic growth and employment and a rising standard of living in Member countries, while maintaining financial stability, and thus to contribute to the development of the world economy; – to contribute to sound economic expansion in Member as well as non-member countries in the process of economic development; and – to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance with international obligations. The original Member countries of the OECD are Austria, Belgium, Canada, Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The following countries became Members subsequently through accession at the dates indicated hereafter: Japan (28th April 1964), Finland (28th January 1969), Australia (7th June 1971), New Zealand (29th May 1973), Mexico (18th May 1994), the Czech Republic (21st December 1995), Hungary (7th May 1996), Poland (22nd November 1996) and Korea (12th December 1996). The Commission of the European Communities takes part in the work of the OECD (Article 13 of the OECD Convention). Publie´ en franc¸ais sous le titre : COMBATTRE L’EXCLUSION L’aide sociale au Canada et en Suisse Published in German by OFAS (Bern, Swiss) under the title: Beka¨mpfung sozialer Ausgrenzung, Band 3, Sozialhilfe in Kanada und in der Schweiz (ISBN 3-905340-00-3) Photo credits: Upper photo: Roger-Viollet (‘‘Mont de Pie´te´’’, F. Heilbuth). Lower photo: Nascimento/R.E´.A.  OECD 1999 Permission to reproduce a portion of this work for non-commercial purposes or classroom use should be obtained through the Centre franc¸ais d’exploitation du droit de copie (CFC), 20, rue des Grands-Augustins, 75006 Paris, France, Tel. (33-1) 44 07 47 70, Fax (33-1) 46 34 67 19, for every country except the United States. In the United States permission should be obtained through the Copyright Clearance Center, Customer Service, (508)750-8400, 222 Rosewood Drive, Danvers, MA 01923 USA, or CCC Online: http://www.copyright.com/. All other applications for permission to reproduce or translate all or part of this book should be made to OECD Publications, 2, rue Andre´-Pascal, 75775 Paris Cedex 16, France. FOREWORD Policies designed to assist those at the margins of society seek to end exclu- sion and reduce long-term benefit dependency. This study looks at how selected provinces and cantons in two federal states – Canada and Switzerland – have tried to achieve those goals. It originates from a decision by the Employment, Labour and Social Affairs Committee to undertake in-depth reviews to promote a better understanding of key developments in social assistance policy, in the light of inter- actions with the labour market and the general economy. In order to have an agreed field of study for very different countries, it was decided that for this study social assistance should be defined as: those means- tested benefits, in cash or in kind, having eligibility criteria which target individuals or households in the lower segment of the income distribution, or below some threshold which approximates a similar target. The first review of social assistance covered Australia, Finland, Sweden and the United Kingdom, while the second considered policies in Belgium, the Czech Republic, the Netherlands and Norway. Both reviews were published in 1998. This third review is based on visits to countries that took place in September/October of 1998. It was discussed by the Employment, Labour and Social Affairs Committee in March 1999, and is published under the responsibility of the Secretary-General of the OECD. 3 OECD 1999 TABLE OF CONTENTS Chapter 1. Introduction to the review...................................................................... 11 Background to the review.................................................................................... 11 Terms of reference and focus of the report....................................................... 11 Chapter 2. The social policy context........................................................................ 15 Constitutional structures..................................................................................... 15 Macroeconomic indicators.................................................................................. 16 Labour market indicators.................................................................................... 19 Systems of social protection............................................................................... 25 Switzerland........................................................................................................ 28 Canada................................................................................................................ 30 The distribution of income and poverty............................................................ 31 Conclusion............................................................................................................. 36 Chapter 3. The benefit systems................................................................................. 37 Unemployment benefits...................................................................................... 37 Unemployment insurance................................................................................ 37 Unemployment assistance............................................................................... 38 Duration of unemployment benefits.............................................................. 39 Social assistance................................................................................................... 40 Who is eligible for social assistance?............................................................. 40 The basic allowance.......................................................................................... 42 Assets’ ceilings.................................................................................................. 43 Adapting for differing needs............................................................................ 45 Work and social assistance receipt................................................................. 48 Child and family benefits.................................................................................... 49 Net benefit rates................................................................................................... 50 Caseloads.............................................................................................................. 50 Chapter 4. Clients and safety net provisions: adequacy, access and attitudes............................................................................................. 57 Adequacy............................................................................................................... 57 The philosophy behind the setting of benefit rates.................................... 57 Basic benefit payment rates............................................................................ 60 5 OECD 1999 THE BATTLE AGAINST EXCLUSION Meeting exceptional needs............................................................................. 61 Adapting benefits to family size...................................................................... 62 The provision of services and the role of NGOs........................................... 64 Overall benefit generosity............................................................................... 66 Access to benefits................................................................................................. 69 Family resources................................................................................................ 69 Repaying social assistance............................................................................... 70 The role of elected officials and the attitude of staff....................................... 70 Switzerland: professionalism versus political legitimacy?.......................... 70 Canada: how tight should administration be?............................................... 72 Concluding remarks.............................................................................................. 76 Chapter 5. Avoiding long-term dependency............................................................ 79 Introduction........................................................................................................... 79 Financial incentives to work................................................................................ 84 The gap between benefits and earnings: net replacement rates............... 84 Combining work and benefit receipt.............................................................. 87 Other barriers to work within the social assistance system......................... 92 Financial incentives and their consequences for reintegration strategies 94 Reintegration strategies....................................................................................... 95 Enhancing job search........................................................................................ 96 Reintegration of persons with unemployment benefits.............................. 100 Reintegration of social assistance clients: the short road towards employment?..................................................................................................... 103 Placement in the primary and secondary labour market............................. 105 Compulsory participation in ALMPs and workfare........................................ 106 The impact of policy reform on caseloads......................................................... 110 The effect of social assistance policy reforms............................................... 110 The effect of unemployment insurance policy reform................................. 112 Are those who left social assistance back in work?.......................................... 115 Conclusions........................................................................................................... 119 Chapter 6. Policy coherence....................................................................................... 123 Introduction........................................................................................................... 123 The organisation and financing of social assistance......................................... 124 Canada................................................................................................................ 124 Switzerland......................................................................................................... 128 Balancing subsidiarity and minimum standards.............................................. 130 The new Social Union........................................................................................ 131 Subsidiarity and minimum standards in social assistance policy.............. 132 Consequences of the financial arrangements................................................... 136 6 Fiscal arrangements between federal and intermediate governments..... 136 OECD 1999 TABLE OF CONTENTS The role of local government........................................................................... 138 Possibilities for cost-shifting............................................................................ 142 Employment services and social assistance..................................................... 145 Who provides services?................................................................................... 146 Improving coherence in delivery of labour market services....................... 150 Conclusion............................................................................................................. 153 Chapter 7. Conclusions................................................................................................ 157 Objectives of policy............................................................................................. 157 Adequacy, access and attitudes......................................................................... 158 Reintegration......................................................................................................... 159 Policy coherence................................................................................................... 161 Caseloads.............................................................................................................. 163 Annex.............................................................................................................................. 165 Notes .............................................................................................................................. 169 Bibliography.................................................................................................................... 177 Liste of tables 2.1. Population and area.......................................................................................... 16 2.2. Main economic indicators................................................................................ 17 2.3. GDP per capita at market prices in Canada................................................... 18 2.4. Immigrant population in Canada, 1997.......................................................... 20 2.5. Employed foreigners in Switzerland, 1990.................................................... 20 2.6. Main labour market indicators........................................................................ 22 2.7. Part-time employment..................................................................................... 22 2.8. Provincial employment and unemployment rates, annual averages......... 23 2.9. The earnings structure...................................................................................... 25 2.10. Public social expenditure as a percentage of GDP, 1980-95....................... 26 2.11. Public social spending on the working-age population, 1980-1995............ 27 2.12. Public spending on unemployment compensation, 1985-1997.................. 27 2.13. Public social spending on disability cash benefits and occupational injuries, 1980-1995............................................................................................ 28 2.14. Cantonal spending on social assistance and unemployment assistance.. 29 2.15. Low-Income Cut-Offs in Canada, 1997............................................................ 33 2.16. Incidence of low income in Canada and Switzerland................................... 33 2.17. The incidence of low income by age and household type, Switzerland, 1992.............................................................................................. 34 2.18. The regional distribution of poverty, Switzerland, 1992.............................. 35 2.19. Low-income rates in Canada (1991) after taxes and transfers..................... 35 3.1. Net monthly unemployment insurance benefits in 1998 US$ PPP............. 39 3.2. Categorisation of social assistance recipients in Canada............................ 41 3.3. Maximum monthly basic payment rates in 1998 US$ PPP........................... 43 7 OECD 1999 THE BATTLE AGAINST EXCLUSION 3.4. Assets disregards for social assistance clients.............................................. 44 3.5. Health coverage of social assistance beneficiaries in Canada.................... 46 3.6. Shelter allowance for social assistance recipients in Canada, 1998 US$ PPP...................................................................................................... 47 3.7. Exceptional expenditure items covered by social assistance in Saskatchewan................................................................................................ 47 3.8. Earnings exemptions in the SA means test in Canada................................. 48 3.9. Maximum National Child Benefit as of July 1998........................................... 49 3.10. Monthly net social assistance payment rates in 1998 US$ PPP................... 51 3.11. Social assistance caseloads by employability in Canada, 1998.................. 52 3.12. Caseload by family type, annual averages, 1998........................................... 53 3.13. People of foreign origin in the total SA caseload in Switzerland, annual averages, 1998.................................................................................................... 53 3.14. Educational attainment and literacy scores, Canada, 1994......................... 54 3.15. Reasons for going on welfare........................................................................... 55 4.1. Equivalence elasticities for additional household members related to base amount.................................................................................................. 65 4.2. Financial adequacy of benefits, US$ PPPs..................................................... 67 4.3. Use of food banks in Canada, March 1998...................................................... 68 4.4. Fraud investigations in Ontario, 1997/98........................................................ 75 5.1. Net replacement rates for single persons...................................................... 86 5.2. Net replacement rates for a couple with two children................................. 87 5.3. Earnings range where METRs are high........................................................... 91 5.4. Saskatchewan additional health coverage to lower income working families: Family Health Benefits..................................................................... 93 5.5. General categorisation of unemployed clients in Fredericton, New Brunswick................................................................................................... 98 5.6. Expenditure on labour market policies in Canada and Switzerland, as a percentage of GDP.................................................................................... 102 5.7. Declining EI coverage of Canadian unemployment, by province, 1989-1997............................................................................................................ 114 5.8. Regulatory changes to employment insurance............................................. 115 5.9. Primary reason for leaving social assistance in Ontario, 1996-97................ 116 5.10. Reason for termination of social assistance benefit receipt by age of client for the City of Zürich, 1993-95........................................................... 117 5.11. Reason for termination of social assistance by duration of benefit receipt for the City of Zürich, 1993-95............................................................. 118 5.12. Success rates for Alberta employment and training initiatives, 1996-97... 118 5.13. Hours worked and earnings of respondents in Ontario currently employed at the time of the interview, by type of respondent, November 1997....... 120 8 6.1. Major federal transfers to provinces, 1993-98................................................ 127 OECD 1999 TABLE OF CONTENTS 6.2. Cantonal contributions to social insurance in Switzerland.......................... 129 6.3. Changes in family class sponsored immigration legislation in Canada..... 145 Annex tables A.1. Labour market expenditure in Canada.......................................................... 165 A.2. Labour market expenditure in Switzerland................................................... 166 A.3. Indicators on ALMPs in Cantons, 1997-98...................................................... 167 List of charts 2.1. GDP per capita, 1990 prices............................................................................. 17 2.2. Unemployment rates........................................................................................ 21 2.3. Incidence of long-term unemployment......................................................... 23 2.4. Unemployment rates by canton...................................................................... 24 3.1. Duration of unemployment and social assistance benefits in Canada and Switzerland................................................................................................. 40 5.1. Caseload and unemployment trends in the cantons, 1991-97.................... 80 5.2.a. Caseload and unemployment trends in the provinces, 1990-98................ 81 5.2.b. Caseload and unemployment trends in selected provinces, 1981-1999... 82 5.2.c. Structural change in caseload in New Brunswick, Ontario and Saskatchewan 83 5.3. Financial incentives for social assistance recipients.................................... 89 5.4. Employment rates after interventions........................................................... 95 5.5. To what degree did Alberta’s welfare programme help you to become independent?.................................................................................................... 119 6.1. Organisation of social assistance and related policies in Canada.............. 125 6.2. Organisation of social assistance and related policies in Switzerland...... 128 List of boxes 4.1. Social housing.................................................................................................... 63 4.2. Treatment of clients in Alberta........................................................................ 73 5.1. Testing for the impact of policy reform.......................................................... 85 5.2. Earnings disregards and incentives to work.................................................. 88 5.3. Incentives to work for lone parents: the Self-sufficiency Project................ 94 5.4. Federal spending on labour market policies in Canada and Switzerland................................................................................................. 101 5.5. Regulatory reform of the Canadian unemployment insurance system...... 113 6.1. Social assistance for First Nations populations............................................ 133 6.2. Co-location and integration in Alberta........................................................... 152 6.3. Co-location and integration in Ontario........................................................... 153 9 OECD 1999