Proponents of welfare reform have struggled for nearly three decades to design programs that would increase work, reduce poverty, and reduce dependence on welfare. Initiatives to increase work have reduced welfare dependence, but have often had little effect on poverty. Initiatives that reduce poverty by providing more income have made recipients better off financially, but have discouraged work. In an effort to address all three of these welfare reform objectives, the Canadian government is testing a new approach. The Self-Sufficiency Project (SSP) is a research and demonstration project that offers an earnings supplement to welfare recipients who leave welfare for full-time work. The primary objectives of SSP are to increase economic self-sufficiency through work and to reduce welfare dependence. A secondary objective is to reduce poverty.
Conceived and funded by Human Resources Development Canada (HRDC) and managed by the Social Research and Demonstration Corporation (SRDC), SSP offers a temporary earnings supplement to selected single-parent families receiving Income Assistance (welfare) in British Columbia and New Brunswick. To collect the supplement (a monthly cash payment based on actual earnings), a single parent must work full-time and leave Income Assistance. She can then receive the supplement for up to three years, as long as she continues to work full-time and remains off Income Assistance.
The supplement roughly doubles the earnings of many low-wage workers (before taxes and work-related expenses). SSP addresses a dilemma faced by many welfare recipients: Although they are troubled by their continuing dependence on welfare, work is not a financially attractive alternative, because entry-level wages are too low to make them better off than they would be if they were receiving Income Assistance. Nor would combining work and welfare raise their incomes significantly, because Income Assistance benefits are reduced by nearly the amount they earn. This situation discourages welfare recipients from obtaining jobs and leaving welfare, and many of those who do leave welfare for work eventually return to welfare. By offering a substantial, temporary supplement to earnings, SSP provides an incentive for welfare recipients to enter the full-time labour force and acquire work experience that may eventually lead to higher earnings and economic self-sufficiency.
In developing this initiative, HRDC recognized the importance of testing the program prior to larger-scale implementation, since substantial program costs were at stake and, in times of tight budgets, the cost of a new program could be justified only if the program had significant benefits. Because many people leave welfare for work on their own, it was not known whether an earnings supplement program would lead to a significant increase in overall work effort above the level of employment that would have been reached without such a program. HRDC therefore decided to test the efficacy of an earnings supplement The feminine pronoun is used throughout this report because the vast majority of single parents receiving Income Assistance are women program under real-world operating conditions, using a random assignment evaluation design.
Between November 1992 and March 1995, more than 6,000 single parents who were long-term Income Assistance recipients were invited to join the SSP research study. Each of those who accepted was assigned at random to one of two groups: Members of the program group were given the opportunity to participate in the earnings supplement program; members of the control group were not. Because the two groups are similar in all respects except whether they were allowed to participate in the program, the “impact” or effect of SSP can be measured by the difference between the program and control groups’ subsequent experiences. This report examines SSP’s impacts on employment, earnings, Income Assistance receipt, family incomes, poverty, and living conditions during the first 18 months after random assignment (that is, after sample members were randomly assigned to the program and control groups). (author abstract)