Hi again, it’s Adam King, back with the third lesson in my course on the welfare state in Canada.
In the last lesson, I detailed how federalism and neoliberalism have shaped Canada’s welfare state, or what remains of it. Using the distinction between non-market public services and income transfer programs that I developed in the first lesson, we went over the key services and programs that make up our contemporary welfare state.
In this lesson, I’m going to suggest areas where Canada’s existing public services and income transfers should be improved and expanded. Although the welfare state has been enfeebled through austerity, political pressure from the left could make a crucial difference.
Public Service Improvements
Health Insurance Expansion
Let’s start with public healthcare and the health insurance programs in Canada. As I argued in the previous lesson, single-payer Medicare is widely considered to be the pillar of Canada’s welfare state. However, Medicare faces two broad challenges: inadequate funding levels and coverage shortfalls.
First, governments need to address healthcare funding issues. While public healthcare spending has grown in recent years to meet the needs of an aging population, this hasn’t made up for the significant cuts previously imposed.
Beginning in the latter years of Brian Mulroney’s Conservative federal government in the early '90s, average annual healthcare spending began to decrease. It was under the next majority Liberal government of Jean Chrétien and his austere finance minister Paul Martin, however, that spending restraint was taken to new depths: Healthcare spending declined every year between 1992 and 1996.
Hospital funding, in particular, which is the largest component of health spending, hasn’t kept pace with need. One measure that illustrates the problem is “hospital bed density.” In 1983, Canada had a high of 6.84 hospital beds for every 1,000 people. By 2019, this figure had dropped to 2.52 beds per 1,000 Canadians. The consequences of this legacy of inadequate funding were on full display during the COVID-19 pandemic. Many hospitals were ill-equipped to deal with the public health emergency, and lacked the excess capacity to meet surges in demand.
The larger issue with Canadian Medicare, however, is its gaping coverage holes. Dental and eye services, prescription drugs, mental health services, and many forms of physical therapy aren’t covered by the provincial health insurance programs. In keeping with Canada’s liberal welfare state, employer-provided extended health insurance is ostensibly expected to meet some of these shortfalls.
However, declines in full-time, permanent employment and falling private sector union density have contributed to more workers lacking access to healthcare services not covered by public insurance. Additionally, many employers are moving away from traditional fixed benefit plans toward “health care spending accounts,” which they claim offer more “flexibility” but typically provide a lower overall amount of coverage. Those without employer-provided insurance in most cases must pay out-of-pocket, if they’re able.
For example, as of 2018, just under 65 per cent of Canadians had employer-provided or private dental insurance, leaving the remaining roughly 35 per cent to pay out-of-pocket or forgo care. Moreover, those with extended health insurance often struggle with costly premiums, or find that their plans only cover part of the cost and/or place onerous caps on services.
There’s currently a patchwork of public dental coverage targeted at some of the most disadvantaged, such as low-income children and Indigenous peoples. However, as we learned previously, these types of means-tested, targeted benefits tend to be poorly resourced and stigmatize recipients.
Only fully-public dental insurance would create the universal buy-in necessary to sustain the program over time. Implementing means-tested public dental insurance with an income cut-off, as the federal NDP proposes, could create a path to full public coverage. However, this too poses the same risks as all means-tested programs: those with adequate private insurance have no stake in the public system working.
The story is much the same for optometry.
There are also proposals for national pharmacare, some of which are promising. The advantage of introducing pharmacare is that staggering access to coverage is less harmful. For example, providing public insurance for prescription drugs first to those most in need, such as seniors and children and youth, could be an initial step toward full coverage.
Eventually, public healthcare should include the full coverage of mental health and addiction treatment services, as well as forms of out-patient physical and occupational therapy. Although these areas of healthcare have received less attention from political parties in Canada, any equitable welfare state must include them as well.
Overall, the growing crisis in Canadian public healthcare could be addressed by restoring the original formula for 50/50 cost-sharing between the federal and provincial governments, and/or by increasing the size of federal transfer payments.
Educational Funding
As we learned in the previous lesson, education funding has been on a precipitous decline in Canada. As a result, fairly significant government commitments are required to bring public education funding back to adequate levels.
During the '70s, Canada was funding public education at levels comparable to the Nordic countries today (in the range of 7 to 8 per cent of GDP). This should again be the rough target. As part of this funding increase, provincial governments must be forced to address growing class sizes and the decline of stable teaching jobs in some areas of the country.
Across North America, education has been a site of class struggle as teachers have gone on strike to protect and extend their collective bargaining rights and to fight for increased funding, reduced class sizes, more support services for students, and improvements to school infrastructure. These fights will continue to be essential to improve K-12 public education.
In the next lesson, we’ll look more closely at what could be done to reach a fully public, tuition-free model of higher education, including university and community college, as well as vocational and other job training.
Childcare
As I’ve written in the Class Struggle newsletter, we’re on the cusp of a national, public childcare program. Unlike past failed iterations that focused on providing more subsidies and generating additional spaces, the present Liberal proposal calls for a $10 per day program by 2026. Although the four year wait for the full impact of the program is troubling, its fee-targeting strategy is a welcomed change to childcare policy. What is needed is adequate long-term funding commitments, and plans to ensure sufficient service capacity to avoid excessive waitlists — as well as bilateral agreements with the provinces, of course.
Canada currently has embarrassingly low levels of public childcare funding relative to other wealthy countries — and the outrageous service fees that go along with this. Some mainstream commentators would scare readers and voters with the dollar-value price tag of public childcare. However, the truth is that countries with robust public childcare programs spend approximately 1 per cent of their total GDP on these services, while sustaining high levels of labour force participation among women, and overall gender equality.
A public childcare and early years program with affordable fees, adequate spaces and a well-compensated workforce is entirely feasible — and, hopefully, within sight.
Income Security
I devote much of my research and writing energy to issues dealing with work, the labour market and unions. In the realm of paid employment, the past several decades have seen growing income inequality and the spread of precarious forms of employment. As we will see, though, addressing income inequality primarily through changes to employment often proves inadequate. This is because growing income inequality is not simply the result of more income going to capital than labour — although this too is happening.
For one thing, it’s increasingly not the case that “capital” and “labour” are two mutually exclusive groups of people — the former a small minority holding productive assets and performing no paid labour, and the latter having no assets and therefore relegated to waged work.
In fact, a growing layer of people in advanced capitalist economies earn very large market incomes through a combination of highly skilled and salaried labour, and extensive asset and investment profiles. In the late sociologist Erik Olin Wright’s terms, these people are in a “contradictory class location,” earning significant incomes from both capital and labour. Under these circumstances it’s not so straightforward to shift the balance of power toward “workers” as a class in order to extract more market income from capital. (In the next lesson, we’ll explore ways to deal with this issue.)
Second, since the '80s, North America and Western Europe have seen a major decline in the share of workers in manufacturing. This is significant because manufacturing was in large part the driver of the high levels of economic growth of the postwar years — the years in which labour made its greatest gains. As the economic historian Aaron Benanav argues, “deindustrialization” is not only the result of offshoring factories to less developed countries. Rather, it’s part of the overall stagnation of economic growth and productivity. The low skill, low wage service employment that has replaced much former manufacturing employment is difficult to improve through capital investments, as well as being difficult to unionize.
Labour Market Reforms
Nevertheless, there are two primary ways we could first address the distribution of market income through changes to employment policy.
First, we could create more public sector jobs and increase the share of workers who are employed in the public sector. Because public sector jobs are much more likely to be unionized and to pay, on average, above market incomes, greater government employment would in itself help reduce income inequality. To accomplish this, higher rates of taxation on market incomes at the top of the income distribution could be redistributed through government spending in the form of greater public sector employment.
Canada currently has around 18 per cent of its total workforce employed in the public sector, whereas Sweden, Denmark and Norway’s public sectors account for between 28 and 30 per cent of their respective workforces. The Nordic countries demonstrate that employing greater numbers of workers in the public sector and devoting a larger share of GDP to government spending is entirely feasible.
Second, labour law reforms could facilitate greater unionization among workers in the private sector. At just under 16 per cent as of 2020, private sector union density in Canada has shrunk considerably since its nadir during the mid-to-late 20th century. In fact, across North America and Europe, union decline and economic globalization have contributed significantly to the growth in income inequality.
Making it easier for workers to form or join unions, preventing employers from engaging in “union avoidance” and employee intimidation, and generally enhancing the ability of workers to collectively bargain and strike could help reverse union decline in the private sector.
The most important reform, however, is moving toward a system of sectoral or “broader-based” bargaining, wherein unions are able to negotiate contracts covering whole industries rather than single workplaces. No country without sectoral bargaining has ever been able to unionize a majority of private sector workers. Unless deep reforms, like sectoral bargaining, are introduced, this is unlikely to change.
Income Transfer Improvements
Pre-tax, market income inequality has grown substantially across developed countries, particularly the share of income going to the top 1 and top 10 per cent. However, it’s important to be clear that after-tax income inequality has not grown nearly as consistently across countries. What this tells us is that, where countries have raised or maintained the incomes and living standards of those at the bottom of the distribution, government transfer payments have been the primary way they’ve accomplished the feat.
As much as we need changes to industrial policy and labour law, the welfare state remains the primary mechanism in the fight against poverty and inequality.
Some income transfers increase automatically because they are related to earnings, such as EI or CPP, or because they are indexed to prices, such as some old age benefits. In this way, benefit levels generally keep up with economic growth or inflation. However, many other transfers are simply set by elected officials and policymakers, meaning that changes in political leadership can have (usually negative) effects on benefit levels. Provincial social assistance and disability support benefit rates are examples of the latter.
Social Assistance
Reforming income transfers in a progressive direction should, therefore, begin with the most disadvantaged. Provincial social assistance and disability support payments should be raised to levels that bring recipients out of extreme poverty. For example, as of 2014, a single person receiving Ontario Works (OW) benefits faced a “poverty gap” of 59 per cent — that is, the distance between their monthly benefit amount and what it would take to live above the official poverty line. In 2016, the Canadian Centre for Policy Alternatives estimated that it would require an additional $12,301 to close this gap.
The poverty gap is smaller for different family types — particularly those with children — receiving benefits (in the range of 11 to 38 per cent), but transforming social assistance into a poverty elimination program requires additional funding commitments across the country.
Along with these immediate reforms, rates should be indexed to inflation, both to protect the purchasing power of income recipients and to remove the ability of elected officials to freeze payments for political gain. The Progressive Conservative government of Mike Harris in Ontario instituted the largest cut to social assistance in Canadian history, slashing rates by 21.6 per cent in 1995 and then freezing them for the duration of their government. Indexing — after reforms to bring recipients out of poverty — would prevent this from ever happening again.
Although the situation is less extreme with provincial disability support programs, rate raises and indexing are needed here as well.
Beyond this, several changes could be made to EI and CPP to improve income security for those outside of paid employment, whether temporarily in the case of the unemployed or new parents, or permanently in the case of retirees.
As we’ve previously discussed, the pandemic exposed just how frayed the Employment Insurance program has become over the years. Next to hospitals, it’s safe to say that no other area of the social welfare system performed so badly during the pandemic.
Employment Insurance
There are three major reforms to the orientation of EI that could significantly improve the program.
First, a concerted fight needs to be waged against the policy framing of unemployment as a personal responsibility. As political scientist John Grundy’s work shows, responsibilizing the unemployed has been an integral part of the reorientation of unemployment insurance in Canada. Indeed, reducing benefits and tightening eligibility were intimately related to the reframing of unemployment as a personal, rather than a social, problem. Again treating unemployment as a socio-economic failure of capitalism would change the way we politically respond to it.
Second, and more practically, overall access to the EI program needs to be improved in order to cover more workers. The eligibility rules could be loosened, which would require moving away from the more stringent “insurable hours” requirements that have characterized EI since the '90s. Cracking down on employee misclassification — particularly among gig workers — would also ensure that greater numbers of workers have “employment” status and that their employers of record are consequently paying their share in EI premiums.
Importantly, we should fight to raise the replacement rate above its current 55 per cent. Social democratic countries, such as Denmark and Iceland, pay unemployment benefits at 70 per cent of previous wages or higher. This should be our goal. We might also consider introducing a “job seeker” benefit that is available to anyone looking for work, regardless of whether they have any previous employment record. Young workers entering the labour market for the first time could benefit from this added income security.
Third and last, we should ideally decouple the unemployment insurance benefit portion of EI from its other maternity, parental and sickness benefits.
Recall from the last lesson that the provincial jurisdiction over employment and social policy initially made it difficult to construct a national unemployment insurance program in Canada. The result of this is that, years later, when these other benefits were introduced, the easiest way to ensure they were under federal jurisdiction was to funnel them through the already existing EI system.
Creating a separate program that administers these benefits could move them away from employment dependence. For example, needing insurable hours of employment to access maternity benefits is inegalitarian and harms poor mothers. Maternity, parental and long-term sickness benefits should constitute a separate national support program, distinct from unemployment insurance.
Canada Pension Plan
The general trend in pension policy over the years has been to progressively shift responsibility for retirement security onto individual workers.
In line with other neoliberal policy reforms, governments and employers faced with an aging population have sought to relieve themselves of pension burdens. Employers have moved away from defined-benefit pension plans, where workers are guaranteed specified retirement benefit levels, toward defined-contribution plans, where employee/employer contributions are invested in registered retirement savings plans (RRSPs), mutual funds or other investment devices. Corporations have fought bitter strikes against once powerful unions — in auto and mining, for example — to end defined-benefit pension plans.
Rather than significantly expand the public pension system, governments have created various tax incentives meant to increase the use of individual RRSPs and other personal retirement saving and investment options. The growth of RRSPs and defined-contribution pension plans undermines the social insurance model on which the welfare state is based, and tends to individualize retirement planning and erode the worker solidarity that results from social insurance.
The Canadian Labour Congress and others in the labour movement have long been fighting for an expansion to CPP, which was partially achieved through Bill C-26 in 2016. The CPP “enhancement” will increase retiree benefit levels from one-quarter to one-third of eligible prior earnings through higher employee and employer deductions (with a tax credit for low-income workers to offset these larger taxes.)
Although this is an important victory, the overall retirement income security system also needs to ensure seniors live in dignity by raising benefit levels in the programs that are not based on prior employment earnings. As I discussed in the previous lesson, the Guaranteed Income Supplement (GIS) as a part of Old Age Security (OAS) does a relatively good job of this. However, both OAS and the GIS could be enhanced to protect seniors.
The reforms outlined above could go some distance in fixing and enhancing Canada’s existing welfare state. Many of these policy interventions are needed to address the ways that neoliberal politicians and governments have imposed austerity and harmed workers and their families over the previous decades.
However, my suggestions for social welfare reform in this lesson don’t tackle the deeper problems with Canada’s liberal market welfare state. Uprooting and transforming Canada’s welfare state toward a social democratic model — and eventually something more akin to democratic socialism — would be a huge, though worthwhile, undertaking.
In the next and final lesson, we’ll dream a bit better and explore some features of what that might look like.
Thanks for reading,
Adam