In 1997, the provinces and Ottawa reached two important agreements, one about benefits directed toward children and the second about the provinces’ flexibility in designing their own tax systems. Together these agreements give the Atlantic provinces a historic opportunity to improve the lives of low-income families with children—without costing those provincial governments a cent of their own money.

In the first agreement, the National Child Benefit (NCB) agreement, the federal government agreed to supplement the refundable tax credit it provides to low-income families with children. Provinces can choose to allow welfare families’ overall cash payments (federal and provincial) to rise by the amount of the NCB supplement or to reduce provincial welfare payments by that amount and redirect the consequent savings to other programs directed toward children. In signing on to the NCB, the provinces agreed that the money would go toward the following objectives:

• Reduce and prevent the depth of child poverty;
• Promote attachment to the work force; and
• Reduce overlap and duplication between governments.

Permitting an increase in total cash payments to welfare families appears to satisfy the
objective of reducing child poverty. In his paper, Ken Boessenkool argues that this approach is shortsighted. Instead, provinces should heed the theory and evidence showing that poverty reduction over all but the shortest of time horizons is better achieved by easing the transition from welfare to work.

Read the full paper.