Tales from the deep end of the poverty pool: How Ontario Works keeps ODSP from rising and what Oliver Twist might ask

 Setting the scene

In early 1941, the number of people with disabilities receiving ‘relief’ exceeded the number of non-disabled people for the first time since the early 1930’s. The reason was that the outbreak of World War II resulted in the cancellation of all relief for single people. General welfare was not reinstated for this group until 1958.

Social assistance for people who don’t have disabilities has been renamed many times. Recipients were formally called ‘relief’ recipients from the 1930’s to the mid 1950’s, ‘welfare’ recipients from the late 1950’s until the 1990’s and Ontario Works recipients in the post millennial era.

For people with disabilities, unless they were blind, they were called permanently unemployable (PUE) from the 1930’s to the early 1950’s, PUE and disabled from the mid 1950’s to the 1980’s, disabled until the late 1990’s and ODSP recipients since then.

By the end of 2004, the number Ontario Disability Support  Program (ODSP) payments exceeded the number of Ontario Works (OW)  payments for the first time in 63 years (200,000 ODSP vs. 192,000) and by the end of 2015, the number of people receiving ODSP (men, women and children) blew past the number receiving OW (451,000 vs. 443,000).

In December 2019, there are 522,120 beneficiaries (men women and children) receiving ODSP and 432,025 receiving OW. This compares to a population of 14.57 million in Ontario.

Put another way, ODSP beneficiaries comprise 3.6% of Ontario’s population and OW beneficiaries represent 2.9% of Ontario’s population.

One in 28 Ontarians receives ODSP and 1 in 34 receives Ontario Works.

In aggregate, social assistance recipients comprise 6.5% of Ontario’s population and 1 in 15 people in Ontario receive social assistance.

Historically speaking, the lowest percentage of people receiving social assistance in Ontario was during World War II and into the 1950’s where the percentage receiving assistance was as low as 1%. In contrast, approximately 15% of Ontario’s population received relief in the early 1930’s and almost 14% received assistance in early 1994.

The multi-decade average is in the 5% to 7% range and the 2019 numbers are not only well within the historical range, they have hardly moved at all for most of the new millennium.

Looking under the hood

The largest single change that occurred among social assistance beneficiaries in the last 20 years is indeed the surge in ODSP recipients along with a precipitous 26 year decline in OW beneficiaries, most of which occurred in the late 1990’s and the early 2000’s. This decline mirrors the real decline in social assistance rates[1].

Large declines have occurred in the number of non-disabled lone parents while the largest increases have occurred among single ODSP and OW recipients and especially among men[2].

Other notable post millennium increases in percentage terms have occurred in lone parents with disabilities receiving ODSP and developmentally handicapped singles although both of these populations are not among the largest categories.

But none of these latter changes compare to the surge in ODSP recipients compared to OW. And there was no World War that we can point to as the cause as in 1941.

So what’s going on?

There are at least 13 good answers for an increasing social assistance share among disability income systems. In brief, they are:

  • Workforce changes whereby persons with disabilities and others do not have tenured salary and wage jobs that would trigger disability benefits
  • Cuts in some 7  disability income systems leaving social assistance with more to do
  • Embedded rules that do not support work in older disability income systems (like CPP-D)
  • Changes in medical treatment and especially advances in medicine and trauma treatment
  • Aging of the population in general
  • Inclusion of mood disorders and neuroses  as disabilities within the ODSP definition
  • Existence of separate social assistance disability programs and large differences in benefit levels between them and general social assistance
  • Reductions in OAS and GIS for immigrant seniors
  • Post-economic crash unemployment among persons with disabilities and continuing economic stagnation
  • lack of knowledge about disability income systems other than social assistance
  • Post-recession differences in employment patterns and benefits
  • Differing financial incentives among programs to bring people with disabilities back to work  
  • Barriers to work in general

The problem with having 13 correct reasons for increases in ODSP recipients is that there are too many correct reasons. When I have been asked by media to talk about why ODSP is increasing in recipients and cost, I warn them that in order to do justice to the topic, I have to discuss a ‘perfect storm’ of reasons why the program is growing.

They try to bargain with me and ask whether I can talk about the three most important reasons.

I apologize and say that I can’t. I have had only one or two media interviews on this subject after 18 years out of government.

The large benefit differences between ODSP and OW

Today, I would like to take just one of the reasons for ODSP growth (#7 above concerning separate social assistance programs) and talk about it in a little bit of detail.  

In 2020, the maximum single rate for ODSP is $1,169 a month and $733 a month for OW. The maximum ODSP increment is $436 a month. The ODSP maximum payment is almost 60% (59.5%) higher than OW.

In the absence of payment adequacy, few argue that ODSP payments are too high. Both OW and ODSP payments are too low such that the difference between them is seldom discussed.

But the reality is that if OW payments were more adequate, the idea of a 60% increment for disability would become a topic of conversation. And I don’t believe that there is either any evidence or any advocacy that would support a 60% increment for benefits for people with disabilities. The increment is just too much.

So how did we get here?

To explain it, we have to go back to the beginning of the GAINS-D program which the Davis government inaugurated in 1974 with indexation to the cost of living. The political talking point was that every aged or disabled person in Ontario will receive at least $50 a week (216.33 a month).

One year into the program and with high inflation, the GAINS-D program was de-indexed as Ontario ran its first post-war deficit and the payment stood at $250 a month.

At that time, the single welfare maximum was $177 a month and the residual PUE rate was set at $190 a month. A travel and transportation (T and T) increment was $15 a month.  

So you read it right. There were 4 separate social assistance rates:

  • $177 for welfare ($877 today)
  • $190 for PUE’s   ($942 today)
  • $205 for those receiving  ‘T and T’; ($1,016 today) and
  • $250 for persons with disabilities ($1,239 today);

The policy conundrum in the late 1970’s centred on the PUE category; a relic from the 1940’s which largely applied to those who we called ‘dependent fathers’.

The ‘disability premium’,  as it was called by some, was a murky concept but the increment for a person receiving GAINS-D at $250 was 41%, an amount that did not seem too out of line as the increment for a PUE was 32% and only 22% for a PUE who was receiving ‘T and T’.

No one worried much about the disability increment being too high as the standard view was that the increment should be in the neighbourhood of 30%[3].

The problem as it was seen by insiders is that appeals to the Social Assistance Review Board (SARB) had become something of a ‘conveyor belt’ where unemployable welfare recipients appealed to become PUE, PUE’s appealed to attain T and T and then  applied to get disability status to obtain GAINS-D.  

In 1983, MCSS took a submission to Cabinet under Minister Frank Drea to consolidate the various rates from four down to two and the changes were made that year such that, by 1984, there was one welfare rate and one GAINS rate. The PUE category was decommissioned and the special travel and transportation amounts were cancelled. PUE’s were grandfathered into GAINS-D.

From 1983 to 1993, MCSS provided ‘across the board’ rate increases to welfare and GAINS-D recipients and with minor roundings, the disability increment stabilized at (41% in 1975 to) 40.3 % in 1993. The welfare single rate had increased to $663 a month and the GAINS-D rate was $930 a month[4].

Then everything changed.

The welfare cuts of 1995

In 1995, the Mike Harris government lowered welfare rates by 21.6% but left the GAINS-D rates alone. Now the difference between welfare and GAINS ballooned from 40% to 79%: $520 welfare vs. $930 for GAINS-D.

Issues of adequacy aside, it makes little sense to have a disability income rate that is 79% higher than the rate for people who are not disabled. It is almost as senseless as the 129% increment OW recipients get when they turn 65 but that’s a separate issue[5].   The 79% gap was carried into OW and ODSP legislation and stayed inert for 18 years.

First, there were no increases of any kind to OW and ODSP from 1995 to 2004 and then each increase between 2004 and 2012 applied the same percentage increase to both rates keeping them the same in percentage terms but growing the increment in dollar terms (that’s how percentage increases work).

It was in 2013 when the first break came when the new government of Kathleen Wynne increased the single rate for OW by $14 more than other increases and the disability increment started to shrink.

These extraordinary increases were carried on until 2018 when once again, the flat percentage increases were restored. The PC’s cut a Liberal 3% across the board increment to 1.5%.

When the dust settled, the gap between to OW single rate and the ODSP single rate is what it is today: $1,169 vs. $733 or $463. The percentage gap shrunk since 2013 from 79% to 59% by 2018 and stays there today in 2020.

How OW keeps ODSP down

Living on OW is living the life of a hunter gatherer[6]. If you’re not sick before going on for any length of time, you will be sick afterwards from substandard housing and food insecurity.

Living while receiving ODSP is barely possible – but it is possible. That’s what a 59% increment of $463 a month does, so it is little wonder that people receiving OW with little prospect of reasonable paid work would look to ODSP – especially if chronically sick – as a prospective way to boost their income to a livable level.

Needless to say, it should not be this way. But there it creates a new conundrum.

Any normal ‘across the board’ percentage increase to ODSP increases the dollar gap between OW and ODSP by 59 cents on the dollar (as ODSP rates are 59% higher than OW rates). But any money the government uses to increase OW by an extraordinary amount, in theory, reduces the pot of money available for ODSP increases.

But the situation of those on OW is much direr than those on ODSP. On balance, the government of Ontario should immediately resume the previous policy of providing special increments to OW singles to bring them back up to the historical average where ODSP has a 40% increment over OW. To do this would require an $88 a month increment to bring the OW single rate to $821 a month.

In an ideal world, this increment would be paid through a special credit outside of social assistance but I fear in the near term that the delivery mechanisms are not be in place to make this practicable.

The cost of this increment would be about $150 M for the approximately 145,000 OW single in Ontario.

It would do three good things:

  1. It would restore the 40% ODSP increment over OW which may slightly dampen the constant incentive for single OW recipients to consider disability as their only meaningful route to higher income adequacy.
  2. It would help OW singles to live a less hardscrabble existence; and
  3. It would allow policymakers to recalibrate social assistance payments such that ODSP would not be held down by low OW rates in the future.

The problem of course is that the income of an OW single would still be less than one half of Canada’s new official poverty line. In this vein, I dedicate this meditation to Charles Dickens’ Oliver Twist who said: “Please sir, I want some more”[7].

Postscript

What you likely don’t know is that an $821 month single rate would, in real terms, be exactly the amount that the OW single rate would be now had it kept up with the cost of living from the time Mr. Harris’ government cut the rate by 21.6% to $520 in 1995.


[1] https://openpolicyontario.com/2703-2/

[2] https://www.toronto.ca/wp-content/uploads/2018/05/97f2-OW-Singles-Study-Executive-Summary-Report-2018_FINAL.pdf p.9

[3] In fact in 1976, Ontario did not receive full cost sharing for GAINS-D under CAP as the CAP directorate believed that Ontario’s flat rate increment under GAINS-D was too high and that an increment above $50 should be needs tested in order to justify additional payments to people with disabilities.

[4] In an earlier blog referred to here, I noted that1993 was the high water mark of social assistance rates in Ontario.

[5] https://openpolicyontario.com/thrown-in-the-deep-end-the-strange-history-of-ontarios-social-assistance-for-needy-60-64-year-olds/

[6] https://openpolicyontario.com/hunter-gatherers-in-toronto-what-a-long-strange-trip-its-been/

[7] https://www.charlesdickenspage.com/twist-more.html