{"id":266018,"date":"2018-03-06T11:28:33","date_gmt":"2018-03-06T16:28:33","guid":{"rendered":"https:\/\/policyoptions.irpp.org\/issues\/the-budgets-ambitions-must-navigate-the-federation\/"},"modified":"2025-10-07T22:00:37","modified_gmt":"2025-10-08T02:00:37","slug":"the-budgets-ambitions-must-navigate-the-federation","status":"publish","type":"issues","link":"https:\/\/policyoptions.irpp.org\/fr\/2018\/03\/the-budgets-ambitions-must-navigate-the-federation\/","title":{"rendered":"The budget\u2019s ambitions must navigate the federation"},"content":{"rendered":"

Ottawa\u2019s lofty ambitions for solving some of Canada\u2019s more thorny policy issues, including plans to redesign the social safety net, are on full display in Budget 2018<\/a>. But good intentions and great ideas must also take into account the challenges of intergovernmental coordination.<\/p>\n

Take, for instance, the 2018 budget\u2019s changes to the Working Income Tax Benefit (WITB). It was created in the mid-2000s to help reduce the challenges Canadians face when transitioning from social assistance into the workforce. For many Canadians, the decision to take up work is penalized: low-income workers face losses in take-home pay as income-tested government transfers, like social assistance, get clawed back. This challenge, commonly known as the \u201cwelfare wall,\u201d erodes rewards from earned income and discourages work.<\/p>\n

The original WITB program, designed in 2007 as a refundable tax credit, was supposed to help supplement low-income workers\u2019 earnings and counter these negative incentives. It originally supplemented income by giving 20 cents for each dollar earned above $3,000 in annual earnings, up to a maximum credit of $1,000 for families, with benefits phasing out at higher income levels.<\/p>\n

This year\u2019s budget renames the WITB the Canada Workers Benefit (CWB) and will allow automatic enrolment for those who file taxes, eliminating the need to check boxes on tax forms. One of the most expensive changes proposed, it is expected to help out an additional 300,000 low-income workers in Canada. The government deserves full marks for this change, which will help many workers gain traction in the labour market.<\/p>\n

Also, the benefits are larger \u2014 for individuals and families \u2014 while clawback rates are lower, ensuring more people have access to benefits than previously. This too is a modest move in the right direction.<\/p>\n

However, the success of these changes is complicated by how provinces and territories, independent of the federal government, pursue policies to reduce poverty and support low-income workers.<\/p>\n

For instance, changes to provincial-territorial minimum wages impact the ability of the CWB to reach targeted groups. In 2007, the range of minimum wages across the provinces and territories was roughly $7.25 to $8.50 per hour, meaning that a full-time, full-year worker would make between $12,700 and $14,900 annually, depending on where he or she lived.<\/p>\n

Figure 1 plots the federal benefit in 2007. The estimated range of annual earnings for typical full-time minimum wage workers is shaded. Full-time workers in families earning at the low end of the minimum wage range would have qualified for about $1,000 ($20 for single individuals) of benefits, and those with annual earnings at the high end of the range would have qualified for about $940 ($0 for singles).<\/p>\n

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