Welfare Dynamics in Canada: The Role of Individual Attributes and
Economic-Policy Variables
by Ross Finnie, Ian Irvine and Roger Sceviour
Business and Labour Market Analysis Division
Analytical Studies Branch research paper series, No. 231
Context
The use of social assistance (SA) is an important issue on Canada's
social and economic policy agenda for a number of reasons. For families,
adults and children, SA usage often reflects a situation of economic
deprivation and social exclusion, it can lead to a deterioration of
human capital and the accumulation of "stigma" effects,
it may be associated with adverse developmental effects. For governments,
SA programs are relatively expensive to run and pose design challenges
regarding the incentives they typically create.
Objectives
The contribution of this study is to exploit the unique properties
of the Longitudinal Administrative Database (LAD) to provide a national
level study of SA dynamics in Canada covering the period 1992-2000.
It begins with a look at SA participation in any given year (i.e., a
cross-sectional perspective), and then probes the underlying entry,
exit, and re-entry dynamics.
It focus on how these dynamics vary with individual and family characteristics
(family type, age, number of children, province, area size of residence),
the degree to which exit and re-entry rates vary over the length of
a spell (i.e., duration effects), and the general trends in these relationships
over time. It also investigate the role of some key policy-related variables,
including SA benefit levels, the local unemployment rate, and a measure
of the generosity of the Employment Insurance (EI) system.
Findings
The variables representing personal characteristics follow the anticipated
patterns. The combination of models provides a full picture of the evolution
of SA usage in terms of the underlying entry, exit, and re-entry processes.
Furthermore, the effects were quantified, which has also allowed for
comparisons across family type and sex groups regarding the strengths
of various influences.
The unemployment rate and SA benefit level effects are especially clear
and strong in the "purer" entry models, and movements in these variables over
time—lower unemployment rates and reduced benefit levels—appear
to have had a significant effect on the overall declines in SA rates
observed over the period studied.
The results also generally imply that SA usage is related to the EI program: a reduction in its generosity appears to lead to reduced SA
usage, as individuals seek alternative to entering the combination of
income support programs.
Data Sources: 1992-2000 Longitudinal Administrative Database (LAD).
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