May 24, 2002
What the poverty industry won't tell youKen Boessenkool
CALGARY - Alberta's poverty industry is at it again. A recently concluded review of Alberta's welfare program saw the usual suspects trot out their heart-wrenching, single-mother-on-welfare anecdotes along with laments about welfare rates that are too low, affordable housing that is inadequate, medical coverage that is poor and child care that is in short supply.
Despite all this, the Alberta government decided not to raise Alberta welfare rates or introduce other massive changes, because, "sorry folks, we just don't have the money."
It was the right decision, of course, but for the wrong reasons. For the fact of the matter is that the Klein Conservatives have a remarkable story to tell about the success of their welfare reform measures. And to tell that story, you must get beyond heart-wrenching anecdotes and pore over the raw data.
In the beginning (for Alberta, that was 1993), 7% of Alberta's population was on welfare and 14% fell below Statistics Canada's Low Income Cut-Offs (LICO), measured after taking into account all taxes and government transfers. Its welfare program was poorly administered, benefits were too generous and growing numbers of young people were getting trapped in a cycle of dependency -- almost half of recipients were single, and about two-thirds were under 34 years old).
Today, the percentage of Albertans on welfare has dropped to 2%. The most recent measure (1998) of the number of Albertans living below the LICO -- again, after taking into account taxes and the now reduced government transfers -- has fallen to 12.5%, a drop that is two-and-a-half-times larger than the drop in Canada as a whole over the same period.
These are impressive numbers, but they do not tell the entire story. The real story is what happened to those individuals who no longer relied on welfare to pay the bills. That answer is found in a remarkable set of data recently drawn out of the 1996 Census by C.D. Howe Fellow John Richards.
Richards compared labour force data in the cities of Calgary and Edmonton to Winnipeg, Regina, Saskatoon, Toronto and Montreal. He found that employment rates in Alberta were more than seven percentage points higher, and unemployment rates were 2.1 percentage points lower, than in these other cities.
Even more interesting, Richards dug down to the neighbourhood level, and divided neighbourhoods into poor and non-poor neighbourhoods. He found that Alberta's employment rate in poor neighbourhoods was 8.5 percentage points higher, and unemployment rates 4.7 percentage points lower, than in other Canadian cities.
These results bolster earlier findings that showed that a large proportion of the reduction in welfare use came from preventing young (below 34) Albertans from getting onto welfare, and, more importantly, that the increase in employment rates for these same individuals was large enough to explain the reduction in welfare roles. In short, earlier evidence suggested that Alberta had discovered the most impressive job-creation program for youth that the country had ever seen. The twist that Richards has added is that Alberta has found the most impressive job creation program for poor youth that the country has ever seen.
And, just to placate the critics, it wasn't the economy which did the job. Economic growth in Alberta following the 1993 welfare reforms was weaker than economic growth during the late 1980s. Yet during the late 1980s, the number of welfare recipients in Alberta increased.
Alberta's success at welfare reform is all the more impressive when you compare it to similar efforts elsewhere. Ontario had 11% of its population on welfare in 1995 when it initiated its own reforms. It now has 7% on welfare -- the level Alberta started with in 1993, and equal to the current national average. And Ontario's reforms have been very expensive -- workfare costs money, and Ontario has left its very generous disability program largely intact. According to data collected by Ottawa, Ontario spends 40% more per welfare client than Alberta does: $5,660 per individual versus $4,050 in Alberta (which is still higher than the national average of just under $4,000).
Alberta's 1993 welfare reform is a true and lasting example of what is now called compassionate conservatism. Before the Americans ended "welfare as we know it," Alberta conservatives were putting it into practice.
The only real shame is that they seem so reluctant to defend this legacy. Alberta should not maintain the welfare status quo because they have no money, but because of the remarkable success of a welfare reform package that has resulted in poorer, younger Albertans getting back to work.Ken Boessenkool heads up a Calgary-based economic and public policy consulting company and is an Adjunct Research Fellow at the C.D. Howe Institute.
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