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The Liberal 1995–96 federal budget eliminated the CAP and replaced it with the Canada Health and Social Transfer (CHST), which would later be divided into the Canada Health Transfer (CHT) and the Canada Social Transfer (CST). The CHST not only eliminated four of CAP’s five conditions on funding, it cut approximately $7 billion from the federal government’s yearly transfers to provinces. In effect, the 1995–96 budget signaled the federal government was stepping back from provincial social policy. Provinces would have fewer federal dollars to put toward their social programs, but they would also have fewer federal standards with which to comply. This is the model upon which the CST is currently based.
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Since taking office in the spring of 1995, the Ontario government has embarked on a very ambitious welfare reform program. Indeed, cutting the rewards of welfare by 21 percent was one of the Harris government’s first legislative acts (Ontario, Cabinet Office Communications 1995). Effective October 1, 1995, the Ontario government cut $500 million from welfare spending in its first year by lowering welfare benefits to a level 10 percent above the average of the nine other provinces (Harris 1997). These savings were achieved by cutting benefits per person and by imposing stricter limitations on eligibility. At a first pass, this strategy appears to be working. Within one month of cutting benefits, the number of Ontarians dependent on welfare declined by 24,000 (Sabatini 1996). Two years later, as many as 185,000 Ontarians had been removed from the welfare rolls (Globe and Mai
Although the rewards of welfare have been cut significantly, Ontario’s welfare benefit levels are still 10 percent higher than the average of the other nine provinces. Indeed, by any absolute standard, they are still extremely generous. Once taxes and benefits are accounted for, people on social assistance are paid an implied wage of $9.21 per hour, or $2.36 in excess of the provincial minimum wage (Walker and Emes 1996). If individuals—in particular young and unskilled workers—are to be induced to return to the labour market, welfare
Overall, the Harris government deserves credit for reversing the trend of ever-increasing welfare payments in Ontario. For making the first, bold effort to reform welfare in a generation, the Harris government deserves a B for its social policies.
benefits must not be in excess of what these individuals could earn if they were to accept employment in the labour market.