Unequal Distribution of Wealth

In addition to the many barriers to employment that individuals participating in workfare face, they also face dire economic barriers due to unequal distribution of wealth. Although the idea of workfare was originally pitched as a strategy to help the unemployed enter the workforce, it is primarily a strategy for protecting income rates of the upper-class. Bringing all adults who are eligible to work in the workforce ensures the “long term health and vitality of Canada’s income security system.” This strategy therefore ensures the security of a free market where the incomes of individuals in the upper class are protected by the contributions of underpaid workers to the free market. Not only are underpaid workers in the workfare system less likely to find upward mobility due to the barriers to employment that workfare perpetuates, but they have also felt the burden of the “poverty gap” due to the effect that inflation has had on social assistance.

As a result of inflation from 1995 when Ontario Works replaced welfare to ten years later in 2005, individuals on social assistance received significantly fewer benefits as the years passed. Over this ten year period, there was a 35% decrease in the average benefits that workfare participants received. Not only is it unfair to have inflation result in such punitive measures on those in need of social assistance while incomes of the upper-class increase, the original cuts to benefits during the 1995 switch from welfare to Ontario Works were deeply felt by those in need of the service. In order to increase the incentive to find paid employment, the Government of Ontario cut workfare benefits by 21.6%, making it more difficult for people to get on an Ontario Works List, and making it more difficult to people on Ontario Works to get by without seeking outside employment. For example, before the 1995 Ontario Works Reform, single adults received a maximum monthly allowance of $663 which dropped to $520 after the reform. For lone parents with one child under 12, the pre-reform monthly allowance was $1,221. Post-reform, $957 was the monthly allowance that these lone parents received. Although an additional monthly income from another job would help Ontario Works recipients, seeking outside employment is unfortunately not an option for these recipients, as there are disincentives to combining adequate pay with the menial assistance that Ontario Works recipients receive.

The most striking disincentive that Ontario Works recipients face to entering the workforce is outrageously high tax claw backs. As of 2005, a two year punitive measure was in place, permitting individuals who needed to supplement their Ontario Works benefits with additional income little access to their hard-earned dollars. This punitive measure allowed Ontario Works recipients to have a “taste” of their income over a two year period in order to encourage full participation in the labour market soon, while warning them that they could not reap the “benefits” of Ontario Works assistance plus additional income from low-paid labour. For example, if an Ontario Works participant ever supplemented their benefits with income from another job, then they would face a 75% claw back on their income for taxes over the first 12 months. If they continued to work without leaving the program for an additional 12 months, then they would be subject to an 85% claw back rate. If Ontario works participants ever received additional income for a third consecutive year, then they became trapped in the system, facing a 100% claw back rate on the additional income that was never sufficient enough for them to exit the program in the first place.

Since Ontario Works participants face so many disincentives to enter the workforce due primarily to the barriers to employment that the program perpetuates, and punitive claw backs to income while participants attempt to transition away from the program, it would seem that the objective of the program to encourage labour market participation among the unemployed has failed. The alternative objective of the program to protect the free market on the other hand has so far succeeded, as barriers to employment, and inadequate benefits coupled with claw backs from employment related sources of income has protected the free market, elevating incomes for those in the upper class while perpetuating the unequal distribution of wealth.

Information about Ontario works benefits and tax rates obtained from the TD Economics Special Report: "From Welfare to Work in Ontario: Still the Road Less Travelled." September 8, 2005.