Reduce welfare clawback to increase workforce: MEI

The Montreal Economic Institute is calling on the federal and Quebec and other provincial governments to reduce the welfare clawback rate, to encourage more people to rejoin the workforce.

"Nous embauchons" and "we are hiring" signs are common throughout Quebec and North America. The lack of workers is having an effect on customer service, sometimes resulting in long lineups at supermarkets, long waits at restaurants and high turnover. And during COVID, The Suburban heard, many staying home and receiving funding made more money than many who had to keep working as part of essential services.

The MEI estimates some 100,000 people capable of working are living on welfare in Quebec.

“The steep taxes and benefit reductions discourage recipients of social assistance from joining the labour market,” says Jason Dean, associate researcher at the MEI and author of the institute's latest study, and an Assistant Professor of Economics at King’s University College at Western Ontario. “By making the reduction in benefits more gradual, the federal and provincial governments would make the prospect of working more attractive.”'

Dean calculated, according to 2020 data, that a Quebecer working full-time at minimum wage made $25,414 a year.

"This same Quebecer would lose $16,112 to taxes, mandatory social contributions, and the loss of specific benefits. The net gain, compared to staying on welfare, would therefore be $9,302, or $4.61 per hour worked," he explained. "For this worker, the participation tax rate—the portion of one’s salary eaten up by taxes and lost benefits—would be 63.6%."

Dean said that government should reduce the social benefit clawback by half "to encourage employable social assistance beneficiaries to join the labour market.

“The more of one’s employment income one gets to keep, the more attractive it is to work,” he added.“Unfortunately, taxes and the quick reduction of benefits in Quebec mean that there is an income level at which working hardly seems worth it.”

The latest MEI study can be seen at www.iedm.org/wp-content/uploads/2023/02/note042023_en.pdf.