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Wednesday, March 26, 2003

Life after welfare

1994 to 1999

Family incomes rose for the majority of people who stopped receiving welfare benefits during the 1990s. However, for about one out of every three individuals, family income declined significantly, according to a first-ever national study of the economic outcome for people who left welfare rolls.

The study found that after they left welfare, about 6 in 10 people saw their after-tax family income improve substantially from the level of income they received when they were on welfare. Such gains are to be expected, as they are often the reason for leaving welfare.

However, just under one-third of welfare leavers did not experience such gains. Rather, they saw their family income decline significantly following their exit.

The study found that over the five years following an individual's leaving welfare, people generally became more self-sufficient, as average family earnings improved by about 40%.

Also, within this five-year time frame, less than one-third of those who left welfare eventually returned for a full-year or more.

The study also found that marriage played an important role, both in dramatically increasing the likelihood that someone would leave welfare, and in improving their financial situation after they had left.

Many Canadians left the welfare rolls during the 1990s as economic conditions improved and welfare reform was introduced. For example, from 1994 to 1997, the proportion of the population collecting social assistance declined from 10.7% to 9.3%. The declines were highest in Alberta and, to a much lesser extent, Ontario. This prompted the question: "What happened economically to welfare leavers?" This is the first-ever large-scale study on a national level that addresses the issue.

Note to readers

This release is based on a research paper that examines family employment earnings and family incomes (after taxes) of individuals after they stop receiving social assistance. It compares these to the level of assistance received while on welfare.

The results are based on Statistics Canada's Longitudinal Administrative Databank. The analysis covers welfare leavers. These are individuals who, between 1992 and 1997, were in families that relied primarily on basic social assistance in one year (that is, at least 80% of their total annual family income consisted of basic social assistance). Two years later, they no longer collected assistance.

Throughout the study, it is the income or earnings of the family that is studied, as opposed to the individual's income or earnings. This is because welfare leavers may still enjoy a reasonable level of economic success after they stopped receiving assistance if a spouse has a well-paying job.

Three in 10 welfare leavers saw their family income decline

Two years after they left welfare, about 30% of individuals registered significantly lower family incomes than they had while on social assistance. Their average family income after welfare was only about one-third of their average income while on welfare.

Jobs provided little income for these individuals in the short term after they left welfare. For example, one-third of people who were receiving welfare in 1992, and who had left the system within two years, had average annual family earnings of $1,500 in 1994.

However, these earnings did increase with time, reaching $12,000 by 1998. This returned their family income to levels they had received while on welfare six years earlier.

The significant decline in family income, and the lack of employment earnings during the two years after the departure from welfare were observed for about one-third of welfare leavers in all provinces. (Analysis was not possible for Prince Edward Island because of a low sample size.)

The reasons for this marked decline in family income after leaving welfare are not clear. The data used in this study do not shed light on why people stopped receiving welfare assistance.

Many people who left welfare registered dramatic gains in family income

Family income rose for about 6 in 10 welfare leavers, quite dramatically for some.

Among the one-third of welfare leavers who saw the largest increase in family income, average income was 2.4 times higher after leaving welfare than it was while receiving assistance. For these people, after-tax family income increased from $13,900 while on welfare to $33,600 two years later, and remained high during the following five years.

Employment earnings played a major role in these gains. For this group, average family employment earnings were $35,700 two years after they left welfare, and remained at about this level over the next five years.

People who married more likely to leave welfare

Among lone-parents and unattached people, those who married or formed a common-law relationship were two to three times more likely to leave welfare than others. This was primarily the result of employment earnings brought to the family through the marriage.

Both single women and single men on welfare were more likely to leave welfare if they married, and both benefited substantially from the earnings of the new spouse.

However, marriage had a much stronger impact for single women on welfare. Single women on welfare were about three times more likely to leave welfare if they married than if they did not.

Of all single women on welfare in any given year, about 20% of those who married had left welfare two years later, compared with 6% of those who did not marry. Single men on welfare were about twice as likely to leave welfare if they married.

Among these single women who married and left welfare, the new spouse contributed more than three-quarters of family earnings. Among single men who married and left welfare, the new spouse contributed one-half of family earnings.

Welfare exit rates were highest in Alberta in the 1990s

Welfare recipients in Alberta were leaving the system at a much higher rate than recipients in other provinces during the study period, which covers most of the 1990s.

More than 13% of Albertans who were on welfare throughout one year had stopped receiving assistance completely two years later. The proportion in Ontario, which had the second highest exit rate, was just above 9%.

Among other provinces, the average exit rate was just under 8%. The higher rates in Alberta and Ontario could be due to the stronger economic growth or to welfare reforms occurring in these provinces during the 1990s.

In terms of family income following welfare, people who left welfare in Alberta generally stood in the middle of the pack compared with other provinces. All provinces had roughly one-third of welfare leavers who experienced a significant economic decline following exit, and Alberta was no exception. Similarly, all provinces had welfare leavers who did much better economically.

Average family income after leaving welfare was highest among people in Ontario, and lowest in Newfoundland and Labrador and New Brunswick.

It should be noted that differences in educational attainment and work experience among welfare leavers, and their effects on earnings, could not be taken into account with the available data.

Furthermore, the results in this study are not necessarily applicable to all welfare recipients. The results apply to persons who actually left the system, and they tend to be the more employable people.

The research paper Life after welfare: The economic well being of welfare leavers in Canada during the 1990s (11F0019MIE, no. 192, free) is now available on Statistics Canada's website (). From the Our products and services page, under Browse our Internet publications, choose Free, then Social conditions.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Marc Frenette (613-951-4228) or Garnett Picot (613-951-8214), Business and Labour Market Analysis Division.

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Date Modified: 2003-03-26 Important Notices