The Failure of Welfare Reform in Newfoundland

How social advocates stymied attempts to return welfare recipients to the workforce, despite popular public support.

By Peter Fenwick, AIMS research fellow

The winds of change that reformed welfare systems in the United States and Britain in the last decade died to a zephyr when they hit the shores of Newfoundland. Instead of eliminating welfareas we know it, and encouraging welfare recipients to return to work, the provincial government backed down in the face of opposition by social advocates.

And that’s a shame.

For a full 15% of all Newfoundlanders rely on welfare at some time each year. By contrast American states that have adopted active welfare reforms have driven their welfare dependency rates to less than 3%.

When the 15% of the population on welfare is added to the 15% of the work force on EI, and the thousands of fishermen that are on fisheries EI, Newfoundland has between 30 and 35% of its working age population on some form of income support year round. And while a major change in federal government thinking will be needed to reform EI, welfare reform was an area where the province could have broken new ground.

Yet there appears to be little political will to tackle the problem of excessively high welfare dependency.

A year ago the province started an extensive consultation process in which it polled various groups on whether or not employment and career planning should be mandatory for the three quarters of welfare recipients who are not physically or mentally impaired. Although it was not workfare, it was an attempt to tell welfare recipients that they should start planning for a return to work.

The pubic was highly supportive. In a province wide survey by Corporate Research Associates, over 80% of those polled were strongly, or generally, in favor of mandatory career and employment counseling.

But the idea received much less support in the consultations held with various groups throughout the province. A long list of reasons were given for dismissing “mandatory” career and employment counseling. Among them was the fear that this kind of counseling would set up the “precedents for workfare”

But the department’s consultation document did not even suggest that workfare was on offer. The much milder suggestion (i.e. that people on welfare who are employable should plan to go back to work) was put forward as a surrogate. The generally negative reaction to that suggestion from the groups consulted makes it highly unlikely that any progress towards the politically more difficult workfare will occur. So far participation in career planning and counseling remains voluntary.

Of course the department has only itself to blame for the responses. The groups that were consulted consisted of welfare recipients themselves, and a long list of social justice groups that perceive themselves as the champions of the poor. They include a number of women’s groups, advocacy groups for people with mental and physical handicaps, hospital boards, government departments and a plethora of groups that exist on government grants and handouts.

Not surprisingly, few expressed support for the measure. When the department released its summary of the consultations, supporting comments were outnumbered two to one.

Absent were any groups such as the Board of Trade or the Chamber of Commerce. Although they might be expected to be more supportive of active measures to return people to work, they either were not invited to contribute, or they declined.

While dependence on social assistance is still widespread in Newfoundland, the government is taking some comfort in the recent decline in welfare numbers. In the 1992-96 time period there were over 100,000 Newfoundlanders supported by welfare. From 1996 onward the  numbers declined sharply with only 76,000 left on the welfare rolls by 2000. That huge decline over five years appears to be the result of some fundamental changes in eligibility,  and the general melting away of Newfoundlanders, as large numbers of people emigrated to other provinces.

For example, the number of children supported by welfare payments declined 36% in the decade after 1991 — a significant drop. But since the number of Newfoundland children declined by almost 30% in the same time period of time, the improvement is marginal. And a strong increase in the Canada Child Benefit may have nudged other families off welfare.

Although the provincial government and its advisors did not address the issue of workfare, their statistics indicate a crying need for some positive programs to help make the transition to work.

In the United States the welfare reforms of the 1990s limited entitlement to two years at any one time, and to five years in the aggregate in a person’s lifetime. Welfare recipients were required to take training, to take subsidized jobs or be cut adrift from government support. In Britain similar restrictions were imposed on welfare recipients – especially the young. In some American stateswelfare roles that were at 5% of population dropped to 2% or less, one seventh the rate in Newfoundland. This reduction in welfare rates was all the more remarkable, coming, as it did, in states with much less generous unemployment insurance systems.

But Newfoundland welfare rolls are replete with undereducated, poorly skilled individuals. Seventy per cent of current welfare recipients have not finished high  school, despite high school retention rates that now see up to 90% of high school students graduate.

Tellingly, the ten per cent who drop out make up almost three quarters of the welfare rolls.

There is also a need to provide greater incentives for people on welfare to  re-enter the work force. In the last decade the number of welfare recipients that were on welfare for a full year has almost doubled, from 31% of the caseload in 1991 to 57% today. Since returning to work becomes more difficult with time, these hard core cases are in need of extra incentives to get them moving again.

In the past getting off welfare has not been easy. In a recent AIMS study the marginal tax on people moving from welfare to employment was higher than that imposed on the richest in society. To partially counteract that tax, the provincial government has pushed most of its additional monies of late into programs such as child benefits that remained whether people were on welfare or not. The theory behind this move was simple: if much of one’s  support was disconnected from welfare, people would be encouraged to take whatever jobs were on offer since they would lose less.

But even with those reforms a single mother with two children would lose $953 out of $1431 per month if she were to return to work. A minimum wage job would net her only $130 more per month while she gradually loses her drug card, worth an average of $90 a month. Even when the increase in the child benefit announced in the last federal budget cuts in, she will only be $200 a month ahead of her welfare income. Child care costs are likely to consume all that and more.

Although the American states that pioneered welfare reform have seen their case loads drop, their costs have not declined proportionally. Much of the savings from the drop in case loads was used to improve education levels among recipients, to subsidize employment, and to provide affordable day care for parents. In Newfoundland a full one third of welfare recipients are on welfare because of commitments to family care. Active measures to return these people to the work force
must address the problem of child care.

Yet the poor response to mandatory career planning makes it difficult for the government to adopt any radical solutions when it comes to welfare reform. Despite the support of up to 80% of the population, little is likely to be done.

Which is a shame. When social action groups impose their own ideology on government policy, itis often the poor who suffer the most.

Britain’s Prime Minister Tony Blair often argues that leaving people at home on welfare is to isolate them and bar them from participating in society. His reforms and
those tried in the US have eliminated much of that exclusion and have given people the strongest incentive to get back on their feet.

Too bad the Newfoundland government allowed itself to be cowed into not  doing the same.