Chapter 16
The Decline of the
Canadian Welfare State:
Policies and Implications of
Retrenchment
By: Gary Teeple
Thursday, March 22, 2007
Presented By:
Charlene, Lily, Josie, & Melissa
Introduction
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Hardly any aspect of life in the modern industrial nation
is not affected by the welfare state.
Since the 1970s, in every country that claims to have
extensive social reforms, governments have made
conscious efforts to undermine, retrench, or eliminate
them.
Neo-liberalism has created a new morality.
 Neo-liberalism is a set of policies, being adopted by
governments around the world, that seeks to change
every aspect of state intervention in society with the
goal of privatizing all forms of property that embrace
collective or co-operative elements.
What is the Welfare State?
The Welfare State
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The welfare state refers to a capitalist society in which
the state has intervened in the form of social politics,
programs, standards, and regulations in order to mitigate
class conflict and to provide for, answer, or
accommodate certain social needs for which the
capitalist mode of production in itself has no solution or
provision.
When State Intervention
Becomes ‘The Welfare State’
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When class conflict, reduced to the contest between
workers and the representatives of capital, presents a
chronic threat to the stability of the system and has to be
institutionalized and when the majority of social needs
pertaining to the reproduction of the working classes are
addressed formally, rather than informally, the welfare
state has arrived.
Why and How the Welfare State
Comes About
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One cannot identify all the specific reasons and how they
contribute to each coming of the welfare state.
The shared premise of national reform programs was the
development and rise to pre-eminence of industrial
capitalism within the nation-state.
The fundamental outcome of pre-capitalist modes of
production was twofold:
 The creation of a capitalist labour market and working
class, or the ‘freeing’ of labour from its means of
production and existing forms of bondage; and
 The breakdown of social institutions, labour
processes, and communities that embodied to a
considerable degree an integrated social, political,
and economic life.
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The significance of this transformation was that it gave
rise to objective needs that had formerly been integral to
a way of life.
It created new needs and new problems, which arose
from and were associated with the capitalist labour
market, the ‘freedom’ of the worker, and new labour
processes.
In itself, capitalism had no answers for these needs and
problems; the answers were to come as imposed
reforms.
Examples: trade unions, new political parties, socialist
alternatives.
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As capital accumulation expanded, sufficient revenues
allowed the creation of a social wage.
 Social wage – state-sponsored partial socialization of
income from wages and salaries by means of
premiums, taxes, and deferred incomes. The funds
so created are used for redistribution from one class
to another through transfers such as pensions,
income supplements, or social insurance schemes.
By the late 19th century, new technology increased
productivity, and expanded markets had begun to
increase the segmentation, stratification, and social
mobility of the labour force.
The conditions that underlie the modern welfare state fell
into place in the aftermath of World War 2.
The Modern Welfare State
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The welfare state became a
political and economic necessity.
The modern welfare state also
known as the Keynesian welfare
state. Derived in part from John
Maynard Keynes.
 Intended to offset the business
cycles of capitalism. This
would be done by deficit
spending in recessionary
periods to promote public
works, offset corporate
expenses, and provide
unemployment insurance.
Redistribution
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The welfare state represents 2 forms of redistribution.
 The general redistribution of deductions from wages
and salaries to pay for schemes that assist the
working class to reproduce itself.
 A certain redistribution of revenues upward in the
social strata since the well-to-do make proportionally
greater use of the more costly programs but contribute
proportionally less income in their support because of
the structure of tax regimes.
Social Citizenship and
Decommodification
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Social citizenship: notion that all members of society
have an innate claim to certain social services and
programs such as health care, education, senior’s
pensions, unemployment insurance and so on
Concept of equality  equal status in the social realm.
The instable labour market and restrictive nature of wage
labour results in the demand for universal social security.
A way to combat the commodification of labour power is
to organize trade unions or protest state-sponsored
social and economic reform.
These efforts are referred to as a decommodification of
labour power.
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Decommodification and principles of capitalism are
therefore situated in opposition to each other.
Existence of social net and union rights vs. competition,
powerlessness, fear and poverty for the working class.
Social citizenship represents the highest development of
the principle of welfarism/social reformism.
There are limits to social citizenship however  gains
have always been temporary.
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Social and union rights often:
 do not apply to all categories universally; groups that
are marginal to the labour force.
 boundaries of application are continuously subject to a
fluctuating balance of class power.
 social citizenship is a response to demands of
marginalized classes  compromise offered by the
state and capitalist class.
 does not result in economic equality and does not
challenge existing power relations.
The Welfare State in Canada
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Social reform in Canada prior to the 1940’s did not
contain development of continuity.
1870’s ushered in an era in which educational reform
was substantiated.
The Ontario Act (1871) introduced compulsory education
 state-sponsored primary-school education was a
response to the Industrial Revolution and the need for
the state to develop the working class.
Starting in the 1880’s, the efforts to provide workmen’s
compensation was introduced.
Limit company liability .
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Prior to 1930’s “public works’” and municipal relief
payments were employed to combat high unemployment
rates.
Unemployment insurance was introduced in the 1940s.
With the advent of the Great Depression, the state
attempted to dissolve unions, arrest Communist party
members and established “relief camps” (workfare for
single, homeless and unemployed young men).
Present Structure
Modes of Financing
 This mode of delivery attempts to maintain national
standards across the country in distributing federal
funding.
 Comprised of unconditional payments given to less well
off provinces on an unconditional basis (amount
determined by a formula).
 Examples: Established Programs Financing .
 Worked to transfer federal funds to provinces to increase
growth of population and GNP.
 Canada Assistance Plan (CAP): cost sharing system in
which provinces meeting criteria would be reimbursed for
half of the cost of social programs.
 Premium payments (deductions from income).
The Nature of the Recipient
 3 categories:
 universal programs  apply to all individuals in a given
unit (public education, Old Age pension).
 social insurance programs  provide benefits for making
contributions or premium payments (worker’s
compensation, unemployment insurance, Canada
Pension Plan).
 social assistance programs  based on needs or
income assessment, provide income supplements to
households whose income do not reach a certain level.
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Categories are usually based upon income security
systems (does not take in account education or
healthcare).
Categories do not include any of the reform initiatives
that deal with the labour market or point of production
(minimum wages, employment standards, etc.).
Categories have no underlying rationale  essentially
descriptive, no explanation as to who gets what/why
programs are implemented.
The Welfare State and the
Capitalist Mode of Production
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Historically, one of the earliest arenas of intervention was
at the point of production, the most immediate sphere of
class conflict between workers and the representatives
of capital.
There are 2 main elements to this arena:
 Instituionalized in industrial relations acts or labour
codes, which set out the terms for collective
bargaining.
 Those standards and regulations that are imposed by
government on capital because of the unmitigated
power it holds in the workplace.
The Decline of the Welfare State
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Economic reconstruction carried out with advanced
Fordism in national economies, a consistent demand for
labour, rising real wages, and expanding trade unions.
In 1970, advanced Fordism was now being replaced by
computer-aided processes whose productive capabilities
were far superior.
Changes in the labour market followed, not so much for
the workers, who remained restricted by national
boundaries, but for capital, which now began to search
for ways to escape the high wages.
For Canada, as for all industrial countries, the coming of
the global economy has meant relatively less corporate
tax and declining wages and so a declining social wage.
North American Free Trade
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Pressures arising from the Canada-United States Free
Trade Agreement (FTA) and North American Free trade
Agreement (NAFTA) are involved with global demands
and policy reflections that are cutting back Canadian
social programs.
These treaties, which are intended to create single
continental economy, present two areas of threat to
Canadian welfare state.
The Decline of the Welfare State
in Canada
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By the late 1970s, the attack on the welfare state in the
United Kingdom, the United States, and Canada had
become visible.
By 1980, it had become government policy in the U.S
and in Canada.
Provincial wage restraint laws were also promulgated.
By the early 1980s gradual improvements in employment
standards came to a halt and many began to cut back.
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Of the welfare state, the principal component for
preparing the working class for the labour market is the
educational system.
The federal funding in 1996 opened the possibilities for a
wider range of cutbacks at a quicker pace. (The
introduction of the Canada Health and Social Transfer
(CHST) combined the federal Canada Assistance Plan
(CAP) and the established Programs Financing (EPF)
into one fund).
Globalization, brought pressure to transform the entire
sphere of public property into corporate property.
With the coming of the CHST in 1996, federal funding for
health and post secondary education and the sharedcost social assistance programs would be combined in
one block fund.
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Tax concessions advanced to RRSP contributors each
year nearly equals the total amount spent on welfare in
Canada.
There is a different treatment of welfare receipts vs.
RRSP contributors.
Unemployment system first promulgated in the 1940s
and expanded in the 1960s has suffered from continuous
tightening of the rules for eligibility and declining benefits
relative to the cost of living.
Employment insurance (EI), as it is now called, is moving
more or less rapidly toward a system of minimal income
protection against unemployment.
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The Canada Pension Plan has always been structured
mainly as a pay-as-you-go system, relying on the
premiums of present-day workers to finance the
pensions of the retired.
In 1997, a law was passed to put the accumulating CPP
fund more decisively into the hands of the corporate
sector.
In 1998, an investment board was set up to take over
this investment of a large and growing fund.
The pensionable earnings of the working class had been
put at the disposal of the corporate sector, whose only
morality is that of the marketplace.
What is Welfare?
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Social assistance (welfare) is an income program in
Canada.
It provides financial assistance to individuals who do not
have the necessary means to provide for themselves.
Welfare was paid under the terms of the Canada
Assistance Plan (CAP), but was recently replaced with
Canada Health and Social Transfer in 1996.
There are twelve different welfare systems in Canada one designated to each province and territory.
Despite the existence of twelve different national welfare
systems, there are key commonalities between them all.
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There are complex rules that regulate all aspects of the
system, which include:
 Eligibility for assistance.
 Rates of assistance.
 Amounts recipients are allowed to keep from outside
earnings.
 The way applicants and recipients may question
decisions regarding their cases.
Eligibility
 Based on general administrative rules that vary
throughout the country.
 Applicants must be of certain age, usually 18-65.
 Full-time students with post-secondary education may
qualify in some provinces only if they meet strict
conditions. In other provinces, they cannot apply without
leaving their studies.
 Single parents must obtain all court-ordered
maintenance support that they are entitled to.
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Individuals with disability require medical certification of
their conditions.
Strikers are not eligible in most provinces.
Immigrants must try to obtain financial assistance from
their sponsors.
Once applicants meet these administrative conditions
they must take a “needs test.”
This test compares the budgetary needs and any
dependents with assets and income of the household.
Welfare is granted to applicants whose non-exempted
financial resources are less than the cost of basic needs,
such as food, shelter, household and personal needs
(and sometimes special needs).
Official Alternatives
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As a result of the cutbacks to the public-sector provisions
of social welfare, there has been effective support of
private-sector provision in the form of charitable
donations or volunteer services and through
privatization.
The Rise of Charities
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There are hundreds of charities in Canada with many
more added each year, including educational facilities,
hospitals and social services previously funded by the
state.
The size and role of organizations such as the United
Way has immensely grown since the late 1970’s.
There are several important trends that account for this
vast growth, which entail,
 The rapid increase in social needs like long-term
structural unemployment, among other forms of
social deterioration.
 Growing limits on further expansion of social wage
 The planned reduction of services of the welfare
state.
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As these trends increase, the area of social reproduction
involving aspects of health, education and social
services, will be moved into the private market sector.
The promotion of such institutions and agencies is a
method of “privatizing” public facilities, in an attempt to
shift the responsibility for the human cost of an inhuman
system from the state to the individual, and to shift the
method of restoration from the “social wage” to private
“gifts.”
Charitable donations act as a central function in society
as it will eventually replace state provisions which
evidently illustrates society as a marketplace does not
provide basic needs of life, such as employment,
housing, food, health care, etc., for all of its members.
With the decline of the welfare state and the growth of
charities, the marginalized will become increasingly more
dependent on the good will of others.
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In the form of charity, social redistribution becomes a
voluntary matter and a tax deductible, which means that
the more that is given to charities, the less that goes to
the state for redistribution.
With charitable organizations becoming fundamental
forms of social redistribution, the existing “social rights”
and universal entitlements to state-funded social
services will be lessened.
Systematic Privatization
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Policies of systemic privatization are becoming more
common aside from charitable organizations.
One process of privatization is the policy of incremental
degradation of benefits and services.
Public services are increasingly restricted by rising
eligibility criteria, cancellation, disentitlement, contracting
out, redefinition, transferred responsibility or declining
quality.
Income benefits are taxed back or allowed to fall behind
the rate of inflation.
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The objective of such policies is that, over time, pressure
to meet minimum standards will be met by the private
sector.
One example is that universities have experienced
restrictions on grant increases, causing a rise in student
fees, larger classes, declining facilities and the need to
pursue private enterprises.
The government also make use of incentive policies.
The use of tax deductions is a widely employed form of
inducement to move to the private provisions of benefits,
as well as the privatization of pension plans and medical
insurance.
These incentives involve a form of subsidy to those who
can afford private provision at the expense of those who
are and will be completely reliant on state provision.
The Poor and Transfer Payments Excerpt.
Implications
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In general, the three levels of government are moving
away from state provision of social services and
programs, especially those characterized as social
rights.
Canada is increasingly illustrating a re-enactment of the
concept of the “deserving” v.s. the “undeserving” poor
and “targeting the needy.”
The more these principles are practiced the more
universal and social rights will be undermined, as well as
the shift in responsibility of the individual rather than the
state or corporation.
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Reasons for changes in policy and the encouragement
of charities and privatization of social services and
benefits, are as follows:
 To downsize the role of the government by reducing
state responsibilities and the number of employees.
 To “open up” state sectors to private accumulation.
 To divert the revenues spent on health, education and
welfare.
 To attempt to “discipline” working classes by
undermining union achievements and eroding their
social security with rising permanent unemployment.
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There are material causes, of course, behind these
changes as well.
 The decline in state revenue.
 The shift in tax burden.
 The greater demand for capital.
The global context of these changes is the economic
necessity to “harmonize” national social security reforms,
which constitute barriers of varying degrees to the needs
of the international market.
An apparent visible consequence for our society not
providing for those without work is the high rate of
unemployment (10% of the population – much higher in
the Maritimes and Quebec).
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Due to free trade, new technology and global production
the unemployment rate will not decrease.
Currently, over two million Canadians receive social
assistance payments (8% of the population), not
including the homeless and working poor.
Social assistance is not granted to everyone and does
not even provide the basic cost of living, and for that
reason food banks emerged.
The rise in food banks were developed to supplement
welfare and provide to those who have no other means
of income.
In 1991 there were two million individuals that received
food, while 600,000 were regular monthly recipients –
the number increases every year.
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Another issue is the high rate of homelessness that has
enormously risen in the past decade.
With attempts to make matters worse, the federal
government continues to cut back affordable housing.
Unemployment, welfare retrenchment, abolished social
programs and privatized social services, just to name a
few, have contributed to social disintegration.
Conclusions
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The development of privatization and the shifting of
social services and income security programs to
charitable organizations undermine the principle that the
state has social obligations to its citizens, and avoids the
existence and fulfillment of state social responsibilities.
This is the primary achievement in the long attempt to
improve capitalism.
These developments represent the systematic abolition
of the forms of collective property represented by the
welfare state and its limited achievement of social
citizenship, replacing these with the principles and
practice of private property.
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Aside from global capitalism, there are alternative modes
of production and new forms of resistance to capitalist
expansion have begun to develop around the world.
Resistance and co-operative alternatives will necessarily
grow as economic inequality deepens and the ability of
capitalism to provide for the material, let alone the
human, needs of the populace declines and the
experience and recognition of this inability expands.