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AFB 2024: Income and poverty

Alternative Federal Budget: what the federal government could achieve on income and poverty

August 24, 2023

15-minute read


Poverty is a policy choice and a violation of human rights.1 It undermines the fundamental rights and freedoms that every individual is entitled to under international law. Canada has ratified the Universal Declaration of Human Rights, which states that “everyone has the right to a standard of living adequate for the health and wellbeing of [themself] and [their] family,” while the International Covenant on Economic, Social and Cultural Rights legally binds Canada to implement the right to an adequate standard of living. This includes access to food, clothing, housing, health and mental health care, and social services.

Poverty, in part, is the inability to meet these basic necessities. Poverty limits people’s access to education, employment, and other opportunities. The effects of poverty include impaired health and mental health, lower educational and occupational attainment, higher likelihood to be involved in risky behaviours, and an elevated risk of premature mortality.

    Poverty disproportionately affects groups marginalized by colonialism, racism, ableism, sexism, and other forms of systemic oppression which lead to further rights violations, such as discrimination, exclusion, and exploitation. People experiencing the intersection of poverty with race, Indigeneity, disability, gender, sexual orientation, and other socially devalued characteristics and identities experience triple jeopardy. First, they are subjected to higher poverty rates. Second, they experience the stigmatization of poverty. Third, they experience discrimination that is based on race, Indigeneity, disability, gender, sexual orientation, and/or other characteristics and identities.

    The federal government has made repeated commitments to address all forms of poverty, including the 1989 unanimous resolution to end child poverty by the year 2000 and the implementation of the United Nations’ 2030 Agenda for Sustainable Development.2 The first Sustainable Development Goal is to “end poverty in all its forms everywhere,” which the federal government also adopted through its 2018 Canada Poverty Reduction Strategy.

    Despite these legal obligations and commitments, poverty persists throughout the country.


    During the first year of the COVID-19 health pandemic, Canada saw historic reductions in poverty rates across all jurisdictions, ages, and most socio-demographic groups. Often, when the economy contracts, poverty rates increase. However, in 2020, when large parts of the economy shut down in response to the pandemic, the federal government stepped in, spending more than $102 billion on direct transfers to families and individuals. These temporary transfers included the quick implementation of new programs like the Canada Emergency Response Benefit (CERB) and the Canada Recovery Benefit (CRB), as well as one-time top ups to all major federal income programs (like the Canada Child Benefit and the Disability Tax Credit).

    Although these temporary measures were not designed to be poverty- reduction programs, they did reduce poverty rates across the country.

    Combined, they contributed to a 40 per cent decrease in the national poverty rate from 2019 to 2020 (according to Statistics Canada’s Market Basket Measure) and led the federal government to exceed its 2030 goal of cutting poverty in half a decade early.3

    Rather than celebrating these historic outcomes, sustaining progress, and continuing momentum towards eliminating poverty, the government let all these income security measures expire. Many people with low income have been pushed further into poverty by record increases in inflation rates on basic needs, and by having to repay CERB payments received in good faith and used for their intended purpose but later deemed ineligible. There was a concerning uptick in poverty rates in 2021,4 and they were projected to reach pre-pandemic levels by 2022.5

    The 2023 budget did not include new commitments to sustain poverty reduction. The only new income security program was the temporary extension of the GST rebate, marketed as a “Grocery Rebate,” which provided a one-time payment of up to $467 for eligible families, $234 for singles, and $225 for seniors.

    However, the 2023 budget did invest $53 million—in addition to the $260 million committed in 2020—to pursue individuals for CERB repayments. Statistics Canada data showed that low-income people, women, Indigenous and racialized people, and young workers were more likely to receive CERB. Now the federal government is disproportionately targeting these groups in its aggressive pursuit of repayment. The process, which resulted in a record $3.7 billion in repayments in the first quarter of 2023 alone, is harsh and deeply stressful for low-income people.

    Canadian Poverty Reduction Strategy

    The federal poverty reduction strategy, “Opportunity for All,” strives to achieve dignity, inclusion, and resilience for all. The strategy identifies human rights and intersectional gender frameworks as tools to identify and remove systemic barriers to well-being, and says that those living in poverty must be included in the strategy’s implementation.

    But the strategy lacks new programs or budget investments, and it’s unclear how a sustained reduction in poverty will be reached by 2030. The strategy’s official measure of poverty only considers the aspect of material deprivation (i.e., whether someone can meet their basic needs) across the provinces. The survey data used to calculate that measure (Canadian Income Survey, or CIS) only uses a small sample that’s subject to error and excludes several marginalized groups. These include First Nations living on reserve in the provinces; rural and remote communities;6 and people living in congregate settings.

    Statistics Canada’s Low Income Measure (LIM) would be a better measure to use. The LIM is a relative measure of income poverty that sets the threshold as 50 per cent of median income; anyone who falls below that is living in poverty. When the LIM is calculated using income tax data, it captures most of the population. The LIM is also more closely related to social and health outcomes, and it allows for international comparisons.

    Poverty is a dynamic experience that includes more than income poverty. Looking also at well-being indicators, or indicators of social deprivation, can give us a fuller picture of the experiences of poverty and how far we need to go to reach inclusion for all. International human rights frameworks can be used in the construction of such indicators, as has been done with the Multiple Overlapping Deprivation Analysis for the European Union (EU-MODA), which seeks to identify the extent and nature of multidimensional deprivation experienced by children across EU countries.7

    The Canadian Poverty Reduction Strategy could be made more effective by doing the following:

    • Using the Census Family Low Income Measure, After Tax (CFLIM- AT) calculated with annual tax filer data (which is much more representative than the Canadian Income Survey) to measure progress.
    • Resetting the time frame for a 50 per cent reduction in poverty from 2030 to 2026.
    • Committing to halve the number of people who live in deep poverty (more than 50 per cent below the poverty line) by 2026.
    • Creating a plan to eliminate poverty by 2030.
    • Committing to reducing poverty by 50 per cent for subgroups below the national average applied to marginalized groups, including

    First Nations, Inuit, and Métis Peoples; Black and other racialized groups; immigrants; people with disabilities; and lone-parent families (particularly female-led lone-parent families).

    • Including indicators that measure social inclusion and well-being.


    Four pillars of income security: A new system to eradicate poverty

    Two of the four pillars set out below (the Canada Child Benefit for children and families, and Old Age Security and Guaranteed Income Supplement for seniors) already exist and function relatively well, with some important areas for improvement. The AFB will create the third pillar, a benefit for working aged individuals. The fourth pillar is the much- awaited federal benefit for people with disabilities, which recently had its legislation receive royal assent. Individuals and families would access one pillar at a time, depending on their life stage and disability status.

    Pillar 1: Benefits for children

    The Canada Child Benefit (CCB) for children significantly reduced poverty rates for families with children when the program was first introduced in 2016, and again with the benefit’s additional uptake in 2017. But research shows that the CCB has been losing its power to lift children and their families out of poverty since then.8,9 The benefit is just not large enough to reach families in deep poverty. For example, the after-tax average poverty gap10 for a lone parent with two children (the largest of all family types in 2020) was $14,825. It’s no surprise that the poverty rate for children growing up in low-income, lone-parent households (which are mostly female-led) was nearly 27 per cent compared to the national average of 13.5 per cent.11

    The AFB will initiate the non-taxable Canada Child Benefit End of Poverty Supplement (CCB-EndPov). The CCB-EndPov would provide an additional $8,500 per year for the first child to eligible families with an earned income of less than $19,000. Additional amounts would be provided for multiple children and the supplement would reduce at a rate of $0.50 for every additional dollar of income. This supplement would have a dramatic effect on the rates of child poverty, reducing it from 11.4 per cent to 6.3 per cent with 369,000 fewer children in poverty, according to the Market Basket Measure (MBM) in 2024.12 Lone-parent families, who are mostly female-led and who have extremely high rates of poverty, would see their MBM poverty rate reduced from 26.3 per cent to 12.9 per cent in 2024.13

    Pillar 2: Benefits for seniors

    The poverty rate for people 65 years and older has been cut nearly in half since the mid-1970s.14 Still, about one in 18 seniors lived with poverty15 and one in 12 seniors lived with food insecurity in 2021.16 The largest share of federal government transfers to individuals in 2023-24 will go to seniors ($75.9 billion). This includes the Guaranteed Income Supplement (GIS) for eligible low-income seniors and Old Age Security (OAS), including the 10 per cent increase that kicked in as of July 2022, which is providing additional benefits of more than $800 to full pensioners in the first year. However, most of the seniors who receive OAS don’t live in poverty, making this a costly and poorly targeted program that could be better used to reduce poverty.

    The poverty rate for people between the ages of 60 and 65 is particularly high. People in this age range may be off work due to injuries or because they are caring for someone who can no longer work. While those aged 60 and up can choose to receive the Canada Pension Plan (CPP), this flexibility is not available for the GIS.

    The AFB will therefore provide a 10 per cent increase to GIS for those 75 years and older but will cancel the OAS boost for that group and redirect those funds to lower the age of eligibility for the GIS to age 60. Reducing the age of eligibility for GIS lifts 84,000 people out of poverty (MBM).17

    Pillar 3: Benefits for working-age adults

    There are very few income supports for working-age adults (people aged 18 to 64) if they do not have children or are unattached/living alone. Although the CCB and GIS have lowered the number of people in the children’s and seniors’ age groups living in poverty, there are still nearly three million working-age adults who continue to suffer the harsh effects of poverty. The largest benefit for this age group is the Canada Workers Benefit (CWB), which provides a maximum amount of $1,515 per month to single individuals with an income less than $24,925 (in 2024). Earned employment income is a requirement to receive the CWB, which means that those with the lowest—or no—incomes are left out.

    The AFB will introduce a new Canada Livable Income (CLI) to target adults in deep poverty. This new program would be available to adults aged 18 to 64 who cannot access other pillars, and who are not students.

    It would target those living in deep poverty by providing up to $9,000 for individuals or $11,000 for couples. Clawbacks against earned income
    would commence on the first dollar at the rate of 50 cents per dollar. This program would lift 391,000 adults out of deep poverty (defined as 75% below the CF-LIM) cutting the deep poverty rate by 69%.18

    Pillar 4: Benefits for people with disabilities

    People with disabilities are twice as likely to live in poverty.19 On average, 67 per cent of working-age, unattached individuals and couples with no children receiving provincial social assistance are receiving it through a disability stream.20 Provincial social assistance is a program of disability support in most provinces. The narrow definition of disability used means that many people with disabilities do not qualify for programs such as the federal disability tax credit which, as a non-refundable tax credit, only benefits those who pay income tax, leaving out many with no or low incomes.

    People with disabilities have been waiting far too long for an income support program to afford additional costs often associated with having a disability, to be lifted out of poverty, and to be able to live a life in dignity consistent with their inherent human rights.

    Bill C-22, The Canada Disability Benefit Act, received royal assent in June 2023. The legislation does require the Market Basket Measure and higher costs associated with having disabilities to be taken into account in determining benefit amounts, but it does not require the benefit amount to be adequate to meet these thresholds. Other things it may take into account are the challenges people with disabilities may face in earning an income from work, the intersectional needs of disadvantaged groups, and Canada’s international human rights obligations, but it’s unclear how these will be adequately addressed in the act’s regulations.

    The AFB will therefore design and implement the Canada Disability Benefit, making it accessible to those aged 18 to 64 who are not receiving one of the other three federal income support pillars and who are living with disabilities. The benefit will provide $11,040 per year to be received in addition to provincial/territorial disability assistance programs. Earned income will not be an eligibility requirement, but the rate of the benefit will reduce for those working at a rate of $0.50 per dollar in earned income above $15,000/year. The CDB would fully phase out at $37,000 in employment income.

    Ensuring no one falls through gaps

    Each benefit program in the four pillars will be designed as refundable tax credits, meaning they will not be counted as earned income. This will ensure they do not reduce other means-tested benefits delivered through the personal income tax system. Rather, these new pillars will work together with other supports to ensure people, including those in deep poverty, are lifted out.

    Removing eligibility barriers for immigration status

    People without permanent immigration status have disproportionately higher rates of poverty. They lack labour and human rights protections and are very vulnerable to exploitation in their workplaces (see the chapter on immigration). Without immigration status, they are not eligible for federal or provincial/territorial income benefits. The COVID-19 pandemic illustrated the deep plight for those vulnerable workers who were forced to continue working in high-risk settings (in public-facing jobs or crowded factories and warehouses) resulting in outbreaks and deaths.

    During the first year of the pandemic, the poverty rate of non- permanent residents was 42 per cent (according to the Census Market Basket Measure) and their poverty gap was 56 per cent below the Low Income Measure. This is compared to that of immigrants, who had a poverty rate of 9 per cent and a poverty gap of 35 per cent.21 The dramatically higher poverty rate and larger poverty gap were due in part to the lack of access to income supports and emergency pandemic benefits.

    The AFB will therefore ensure that immigration status is not a barrier to accessing income supports through the personal tax system. The AFB will also repeal s.122.6(e) of the Income Tax Act, which ties eligibility for the Canada Child Benefit to immigration status.

    CERB amnesty

    The Canada Emergency Response Benefit (CERB) was designed and implemented very quickly. Communications were confusing and details difficult to follow, but the main messaging from the federal government was for people to apply for CERB because the government had their back and would not leave anyone behind.

    Many people with low incomes who applied for CERB ended up having other benefits clawed back (such as social and disability assistance in most provinces and territories, rent supplements, and federal tax credits). Many people on social assistance had to apply for CERB, regardless of eligibility. This is because social assistance legislation mandates that those seeking it must first pursue any income that may be available to them, and case workers enforced that rule by insisting their clients apply for CERB.

    For the past nearly three years the federal government has been going through a post-eligibility verification process to determine if those who received CERB were in fact eligible for it. Documentation that would be accepted for income tax purposes is not being accepted to determine CERB eligibility (e.g., handwritten receipts for cash payments).

    Some policy and legislative changes have been made to address issues with those who were self-employed, seniors, or students. The AFB will immediately retire the CERB and Canada Recovery Benefit debt, and immediately cease pursuing anyone living near or below the Low Income Measure for repayments.

    Cash transfers for non-tax filers

    Efforts to expand eligibility for benefits and increase tax filing through programs such as automatic tax filing and community-based legal clinics are important poverty-reduction measures. However, some people experiencing systemic marginalization would still face barriers to accessing the benefits they’re entitled to if those benefits were only delivered through the tax system.

    The Auditor General found that federal departments overestimate access to benefits and recommended developing a comprehensive action plan to reach people who are not accessing benefits.22 The AFB will therefore implement an alternative direct cash transfer system to ensure income benefits reach those who need them most (i.e., most often those without a permanent address, those without citizenship status, and those who work in informal or cash-based economies). The federal government must look to other jurisdictions for best practices to deliver cash benefits, whether through prepaid reloadable credit cards or electronic transfers.

    Community organizations should be relied upon to provide these cash transfers because they are the most likely to be able to reach these populations.

    Provincial and territorial social assistance programs

    The cumulative effect of the income security measures the AFB is proposing here would be the federal government essentially taking over the income component of provincial/territorial social assistance.

    Provincial and territorial social assistance programs would remain for their administrative function of accessing various supports, like those for individuals and families who have changes to their situation in between tax filing seasons (e.g., women fleeing domestic violence).

    The federal government will work with the provinces and territories to re-invest any savings they see into administration of social assistance and wraparound supports, such as employment and training help. The AFB will require the development of minimum standards for income benefits and social services funded through the Canada Social Transfer. These minimum standards must include binding conditions stipulating that income supplements are not deducted from social assistance.

    Topics addressed in this article

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