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New Study Warns Against Expansive Welfare Policies in Ontario

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Release Date: December 7, 2004
A new study Welfare Reform in Ontario: A Report Card released today by The Fraser Institute, gives Ontario praise for its previous welfare reforms but warns that these policies may be under threat.

"Ontario has been a leader in Canadian welfare reform by focusing on employment and diverting potential welfare recipients to alternatives," said Sylvia LeRoy, policy analyst at the Institute and co-author of the study.

"However, last week, the Ontario Government received a report by Liberal MPP Deb Matthews which recommended abandoning many of those reforms and returning to policies that were in place pre-1995. Such policies had disastrous effects, including the doubling of welfare use between 1985 and 1995, increasing from 5.2 percent of the population in 1985 to 12.4 percent in 1995 and a substantial increase in welfare spending," she continued.

The Fraser Institute study estimates that some 680,000 Ontarians have left the welfare rolls since reforms were introduced in 1995, reducing social assistance expenditures by over 42 percent. More importantly, the incidence of low income, especially among single mothers and children, has also been reduced.

These economic and social gains could be jeopardized if the Ontario government rolls back the post-1995 reforms and eliminates diversionary policies and sanctions, abandons technological gains, and extends new income supports to employable adults, as suggested in the government report.

The Fraser Institute study examined welfare policies in Ontario beginning in 1985 and specifically evaluated the 1995 welfare reforms against reform principles proven to play a role in reducing dependency, increasing employment and earnings, and lowering poverty rates in other Canadian provinces and US states.

The 1995 Ontario reforms received an overall grade of B-, with particular areas of strength including: diversion policies (B+), work requirements and sanctions for non-compliance (B), and reducing the costs of entering the workforce (B). The study also noted areas of deficiency, including the continuing entitlement status of welfare (D) and a lack of competition for service delivery (C).

Overall, the reforms enacted in 1995 were positive in that they focused on diversion and transition back to the labour force.

The recommendations of the Matthews report, if implemented, will most likely have the unintended consequence of trapping a new generation of Ontarians in welfare and poverty. Despite progress in the 1990s, the province's welfare rate is still roughly double the level of the most successful jurisdictions in North America.

"The province should build on the relative success of a decade of reforms, rather than reverting to the failed policies of the past that kept one in eight people on welfare," concluded LeRoy.