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If social assistance rates are extremely low, work will always be financially rewarding compared to assistance. This simple maxim – sometimes known as the principle of ‘less eligibility’ – was the guiding design principle of income security in Canada until at least the 1960s, and some would argue that it remains the design principle today. The Social Assistance Review Advisory Council unequivocally rejects the principle of less eligibility in all its guises. The goal instead is an income security system which simultaneously provides decent incomes for those not working while ensuring that work is financially rewarding.

As Tables 3 and 4 show a lone parent in Ontario with one child under six years of age, and no earned income, has a total income of $18,351. Table 5 shows that a lone parent working 37.5 hours per week at the minimum wage will realize an annual after-tax income of $26,797. The financial gain in income would be $8,446.

Table 5 : Lone parent with one child under six living in Toronto, Ontario 2010
Full time minimum wage based on 37.5 hours at $10.25 $19,988
Canada Pension Plan contributions $816
Employment Insurance premiums $347
Income tax paid $0
Subtotal taxes -$1,163
Child Tax Benefit $1,340
National Child Benefit Supplement $2,076
Ontario Child Benefit $1,100
Universal Child Care Benefit $1,200
GST tax credit $626
Ontario tax credits $320
Harmonized Sales Tax credit $635
Working Income Tax Benefit $857
Subtotal credits +$8,154
Total Net Income $26,797
Low-Income Cut-Off $23,039
Low Income Measure $23,534
Market Basket Measure $23,298
Source and assumptions: Calculations by Social Assistance Review Advisory Council. Rent is assumed at $1,000 per month.

That increase in income is substantial, but does not account for the cost of child care. Even if a fully subsidized space is available, this will cost at least the full amount of the Universal Child Care Benefit. In addition, a working parent who has moved on from Ontario Works will not have supplementary health benefits after a short period of time, such as drug benefits, but will have additional costs such as transportation to work and clothing for work. This implies that the true net gain is considerably less than $8,446.

Nevertheless, working full-time will result in financial improvement, mostly due to tax credits which are available to all Ontarians, whether they work or not.

A lone parent with one child is one example, but the situation is not atypical for families with children. To achieve an income security system that provides both an adequate income and ensures work results in financial reward for all Ontarians, the solution lies in making more financial and other benefits portable. By portable, we mean paying benefits to both working and non-working Ontarians.

Ontario has already made important strides in this area. The Ontario Child Benefit, for example, is a portable benefit. It is paid to parents receiving Ontario Works and the Ontario Disability Support Program as well as low-income working Ontarians. Benefits such as the refundable GST tax credit are also portable between work and social assistance. When Ontario’s new Harmonized Sales Tax comes into effect in 2010, it will be accompanied by tax credits for low-income households which have been calculated by independent organizations to more than compensate for additional taxes paid. These portable benefits have the effect of removing barriers in the system that can discourage people from working, while also supporting people in low-wage work.

“I worked for eight hours, requiring a babysitter for nine hours. Half of my earnings had to go to the babysitter and half was deducted from my Ontario Works equalling an income from the part time job of nearly zero. It was not worthwhile working financially only socially.” - Ontario Works recipient, Windsor.
Other programs, such as the federal government’s Working Income Tax Benefit, help offset the cost of employment and supplement low wages. Ontario has also made a number of changes to Ontario Works and the Ontario Disability Support Program to make it easier for people to work, such as decreasing the percentage of earnings deducted and allowing prescription drug benefit cards to be retained for a period after exiting welfare. Ontario’s increases in the minimum wage, now at $10.25, and better enforcement of employment laws will improve incomes from work and also result in better working conditions for many working for low wages. Ontario’s Early Learning initiatives are also expanding access to affordable early learning and child care, which will provide crucial supports for families with children, including low-income households