Do Government Transfer Programs Really Help?

New data from Statistics Canada shows that government transfer programs have a positive impact on getting Canadians out of low-income status. But for some demographics, these positive effects have declined over time. It’s a timely topic, as the holiday season reminds us that the most vulnerable demographics, which includes women and seniors, may not have the resources to enjoy the holidays or share with their families.

The report, entitled The effect of government transfer programs on low-income rates: a gender-based analysis, 1995 to 2016, was released on November 6, 2018, and outlines the following:

• As the largest benefit programs, OAS/GIS and CPP/QPP had the largest effect in reducing low income for eligible recipients of all categories. However, the effect is less significant than it used to be.
• Unattached mothers and elderly women were most susceptible to low-income, and benefited the most from government transfers.
• Child benefits have helped single parents, both male and female, as well as couples. However, have been most effective in reducing low income for unattached women.
• Transfers reduced low-income rates and helped mitigate the disparity in low-income rates between women and men.

Though this new data shows that a range of government transfers have helped Canadians of all ages over time, the most significant impact has been to the most vulnerable taxpayers: women and seniors.

How have these programs helped women in Canada? The report shows that these programs are having some success in helping Canadian women escape poverty. In 1995, the low-income rate of women would have been 30.7 percent without government transfers, versus 12.6 percent with all transfers. In 2016, the low-income rate of women would have been 30.2 percent without transfers; this rate was 13.8 percent with the transfers.

Additionally, the programs available to women have mitigated the disparity in low-income rates between women and men. Promising, when recent federal legislation has placed more emphasis on gender equality. In 2016, without government transfers the difference between the low-income rates of women and men would have been 3.8 percentage points. With the actual transfers, the difference was 1.6 percentage points.

The report highlighted the fact that lone-parent female households benefit from the programs more than single males with children, or couples. Low-income rates for couples with children were much lower than those for female lone-parent families and somewhat lower than for male lone-parent families. Among individuals living in a couple family with children, the low-income rates without transfers from the child benefits programs would have been 16.9 percent while it was 9.6 percent with the transfers.

Progress has also been made in helping Canadian seniors. Although the impact is less significant than it used to be, especially for senior women, OAS/GIS and CPP/QPP had an effect in reducing low-income rates among all seniors. In 2016, these transfers reduced the low-income rate from 75.6 percent to 34.3 percent among senior unattached women, and from 69.9 percent to 32.5 percent among senior unattached men.

Over time, OAS/GIS and CPP/QPP have become less effective in reducing low-income among seniors. This is particularly true for elderly unattached women. In 1995, OAS/GIS and CPP/QPP reduced low-income rates for elderly unattached women by 69.3 percentage points (from 78.6 percent to 9.3 percent), whereas in 2016 these programs reduced low-income rates by 41.3 percentage points (from 75.6 percent to 34.3 percent). Low-income rates steadily increased for elderly unattached women during the period from 1995 to 2016, from 9.3 percent in 1995 to 34.3 percent in 2016.

These trends were similar for elderly men and senior couples, although the reports point to unattached senior women requiring the most help. In 2016, retirement transfers reduced the low-income rate among elderly couples from 51.6 percent to 8.3 percent. The low-income rate of this group increased slightly from 1995 to 2016, and government transfers became somewhat less effective over this period.

The takeaway: While government transfer programs have benefits—and tax and financial advisors can play a role in ensuring that their clients have access to all of the tax deductions, credits, and programs they’re eligible for—those with low income are rarely in a position to seek professional assistance.

It’s a great time of year to start thinking about how family-focused financial planning could help, about giving back to initiatives that support vulnerable communities, and advocating for legislative improvements to our income redistribution programs.

Additional educational resources: You save $50 on tuition when you register in any professional designation program with Knowledge Bureau before December 15!
Learn more about the tax credits and assistance programs available to low-income Canadians by becoming a certified DFA – Tax Services Specialist. Help retirees by obtaining your MFA – Retirement and Succession Services Specialist Designation. Or, better position yourself to help Canadians give back to the most vulnerable during this season of giving and year-round with Knowledge Bureau’s new MFA – Philanthropy designation. Pre-register today before this program is released in January.

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