The Decline of the Canadian Welfare State: Policies and Implications of Retrenchment

1. The Decline of the Canadian Welfare State: Policies and Implications of Retrenchment

2. For all intents and purposes the term ‘welfare state’ refers to: a capitalist society in which the state has intervened in the form of social policies, programs, standards, and regulations in order to mitigate class conflict and to provide for, answer, or accommodate certain social needs for which the capitalist mode of production in itself has no solution or provision. The welfare state includes, but is not limited to: • regulation of minimum wage • working hours • employment health & safety • employment insurance • pensions • hospitals • public education • income supplementation

3. What are the common elements of welfare states? 1.) It is a product of capitalist society 2.) Role of government is to ensure its maintenance and reproduction 3.) Welfare state is determined by the boundaries of the nation-state Q: When does a state become a welfare state? A: When class conflict, reduced to the contest between workers and the representatives of capital, presents a chronic threat to the stability of the system and has to be institutionalized (placed within a legal framework)and when the majority of social needs pertaining to the reproduction of the working classes are addressed formally (by the state via policies) rather than informally (via friends and family).

4. HISTORY of the WELFARE STATE Only after WWII did all conditions that underlie the modern State fall into place, and the welfare state came into being. The modern welfare state is referred to as the KEYNESIAN WELFARE STATE (kws), so named after John Maynard Keynes. His principal assumption was the existence of a national economy, in which, he argued, the state could intervene to effect levels of investment and domestic income, and thereby partially regulate unemployment by these national “demand management” policies.

5. Why was the post WWII era ripe for the KWS? • The overwhelming majority of the labour force was working • class with sizeable percentages organized into trade unions. • Class conflict now implied a chronic threat to the reproduction • of the system and so had to be contained by institutional means. • With the transformation of the labour force and demise of • precapitalist modes of production, the majority of social needs • necessary for social reproduction were not met by the private • sector and could only be done through public policies, • programs, and standards, that is, macroeconomic policies based • on state indebtedness and the social wage.

6. CANADIAN CONTEXT Most aspects of the welfare state were designed to redistribute a portion of wages and salaries, collected by the state in the form of tax revenues, premiums and deferred income. It was not intended to redistribute social wealth. Many programs in Canada such as unemployment benefits, pension plans and hospital insurance are financed by the working class. Some costs are shared by corporations, but most of the taxes are from wages and salaries.

7. REDISTRIBUTION CONTINUED There are two forms of redistribution: 1.) The general redistribution of deductions from wages & salaries to assist the working class to reproduce itself. i.e. Employment Insurance 2.) Redistribution of revenues upward in the social strata since the well-to-do make proportionately greater use of more costly programs. i.e. Health Care and Education

8. PRESENT STRUCTURE “The present structure of the welfare state in Canada is a ‘hodge-podge’ of policies, programs, laws and standards strewn across political jurisdictions, categories of people and types of needs.” The most common methods of grouping the programs are by: a.) mode of financing and b.) nature of recipient. • Those defined by mode of financing represent attempts to • moderate provincial disparities and maintain national standards across the country. • Those defined by the nature of the recipient have three categories: • Universal programs or ‘demogrants’ which apply to individuals of a unit. • Social insurance programs which provide benefits to contributors. • Social assistance programs which pertain to those below a particular income.

9. The Decline of the Welfare State In Canada? Federal Transfers to Provinces for Health and Education, 1997 - 2004 Figure 16.2 from Social Issues and Contradictions in Canadian Society (pg.450)

10. Funding for Provinces The federal government provided Major Transfers to Other Levels of Government. These payments—almost $30 billion—went to provinces and territories to help fund health care, post-secondary education and other important social services. (up from $15.5B ’00-’01) http://www.fin.gc.ca/taxdollar/where_e.html

11. Minimum Wage on the Rise … PEI went from $6.30 to $6.80 (+7.9%) Ontario went from $6.85 to $7.45 (+8.7%) Alberta went from $5.90 to $7.00 (+18.6%)

12. Employment Insurance – Cut Back or Moving Forward? • Reduced hours required before becoming eligible! • Greater income earning allowed before benefits effected! • Longer periods for receiving benefits! • Government has in excess of $41 billion in EI surpluses!* • Is it okay for the government to spend the surplus on other programs? • CPP – Sustainable Portion of the Welfare State? • Relies on present-day employees to finance the pensions of the retired! • Funds have been reinvested in bonds and stocks! • What role will immigration play? * Sheila Fraser, FCA , Auditor General of Canada

13. Charities – Shoring up the Welfare State? • Charities are being encouraged by governments because of three trends: • Increase in social needs due to increasing long-term structural unemployment • Growing limits on further expansion of the social wage • Planned reductions in the welfare state Charities contribute to the decline of the welfare state by not only replacing it but by also allowing donations to be tax deductible – a planned paradox. Should charities be done away with and the government pay for everything with our tax dollars?

14. DISCUSSION QUESTIONS One of the issues at the heart of the 2006 election is gun violence and related crimes. Is the increase in gun violence an indication of the welfare state’s decline? What can be done by the welfare state in order to potentially remedy the situation? How does Canada’s immigration policy effect the welfare state? Things to consider might be health care, employment insurance and CPP.