CCPA urges provincial government to bring back flat rate earnings exemption for people on welfare

October 13, 1999

In a brief delivered yesterday to Social Development and Economic Security Minister Moe Sihota, the Canadian Centre for Policy Alternatives urged the provincial government to re-instate the flat rate earnings exemption for people on social assistance.

The flat rate earnings exemption was eliminated in early 1996, as part of a package of welfare reforms. The exemption allowed single people on welfare to earn up to $100 from paid work and keep the extra income. Couples and singles with children were allowed to earn and keep an extra $200. 75 per cent of any income earned above this amount was clawed-back from welfare cheques. Today, people on social assistance face the 75 per cent claw-back from the first dollar of earned income, effectively requiring BC's poorest residents to pay the highest marginal tax rate in the province.

"Eliminating the flat rate earnings exemption made no sense," says Seth Klein, the Centre's BC Director. "What incentive is there for people to find part-time paid work in order to get off welfare, if they only get to keep 25 per cent of what they make? The 75 per cent claw-back means someone trying to make a few extra bucks at a minimum wage job is, in reality, working for only $1.79 per hour. That's no way to help people move from welfare to work."

"The flat rate earnings exemption was a good way to encourage people to take part-time work, gain new experience, and increase their self-confidence," says Klein. "The flat rate exemption also recognized that there are certain fixed costs associated with going back to work -- like transportation and clothing costs. There is now strong evidence that earnings exemptions help in the transition from welfare to work."

"Most importantly, people on social assistance need the extra income. Welfare rates in BC are too low, and have not kept pace with inflation. A single person on welfare gets only $500 per month, $325 of which is designated as a shelter allowance. That leaves only $175 per month -- or about $5.80 per day -- to cover all other costs. It is virtually impossible to live on that amount in BC. An extra $100 or $200 per month of earned income could make a real difference to people's lives."

"The government is to be congratulated for extending the Family Bonus and Healthy Kids programs to low-income working families. That policy certainly helps in the transition from welfare to work. Now we need the next steps to be taken -- further increases to the minimum wage, increased availability of high-quality and accessible child care, improved access to quality training and education, tax cuts targeted to low-income people, and re-instatement of the flat rate earnings exemption."