Social Security in Canada--the Challenge Ahead
AN ADDRESS BY The Honourable Marc Lalonde,
MINISTER OF NATIONAL HEALTH AND WELFARE
CHAIRMAN The President,
Sir Arthur Chetwynd
SIR ARTHUR CHETWYND:
Chers invites, mesdames et messieurs: C'est toujours un plaisir de souhaiter la bienvenue a un orateur invite au Club de I'Empire du Canada pour la premiere fois. Aujourd'hui, c'est la premiere visite de notre orateur invite. C'est donc pour moi un plaisir tout particulier, Monsieur le Ministre, de vous souhaiter la bienvenue parmi nous aujourd'hui.
It must now be abundantly clear to all in this room that the years I spent on staff at the University of Toronto were devoted to the teaching of physical and health education-not in the study of romantic languages.
On your behalf, I do welcome to The Empire Club of Canada--most warmly--the Hon. Mare Lalonde, on this, his first visit as a guest speaker.
I hesitate to say that our speaker has a high profile. I heard somebody use this term recently on the platform, and a chap down front said, "So what! At our age, our hair isn't what it used to be!"
But in terms of the media, our guest does have a very high profile. A day does not pass without seeing his face or name in the printed media, or hearing or seeing him in the broadcast media. His is an all-pervading ministry--and he speaks out.
He tells us that we are too fat, we eat the wrong kinds of food, and we do not partake in enough physical activity. Bluntly, we are in bad shape. Personally I can only agree. However, I want to assure you that the report is not true--that his wish to reduce our intake of cholesterol inspired Mr. Whelan's department to keep large quantities of eggs off the market!
We do not know, either, whether our guest has co-ordinated his philosophy with that of the Minister of Finance, to ensure that the upcoming budget will provide the kind of austerity which history has shown people don't want, but which (if it doesn't go too far) always results in plainer diets, less disease and better general health for most people.
Mr. Lalonde's ministry is also responsible for the "Status of Women"-not necessarily their present status--but a concern for their present status and an ongoing interest in their playing a full and rewarding role in the life of their country.
Mr. Lalonde is concerned with health and welfare. He contends, and rightly so I think, that we do not have enough health. The contention of many others is that we have too much welfare-although it is probably much too simplistic to put it in these words. His ministry, therefore, must walk the tightrope between compassion for those who cannot look after themselves and maximum opportunity and freedom for those who can.
A review of his record to date must lead any unbiased observer to conclude that our guest is eminently qualified to carry out the duties and challenges of this very sensitive ministry on behalf of the citizens of Canada. Born in Quebec only forty-five years ago, he had an outstanding academic career, holding degrees from several universities including a master's degree in Law from the University of Montreal and a master's degree in Economics and Political Science from that well-known institution of higher learning, Oxford University in England.
After completing his formal higher education, he was a professor at the Faculty of Law, University of Montreal, and also a lecturer in Administrative Law at the same university as well as at the University of Ottawa.
He was also in private law practice. His name has appeared on numerous boards of directors, government committees and commissions.
One small aberration appears in our speaker's career. He was special assistant to the Honourable E. D. Fulton, Q.C., the then Minister of Justice. Davie Fulton was known as a "gritty" performer, but could never be considered as one who welcomed "grits" with open arms!
After this one somewhat conservative experience, our speaker took a Diploma of Superior Studies in Law at the University of Ottawa.
It was in 1967-68 that his name began to be well known in political circles in his capacity as policy advisor to the late Honourable Lester B. Pearson. Following this he served as Principal Secretary to Prime Minister Pierre Elliott Trudeau. Since then his career has soared to its present heights.
I suggest that at least part of his outstanding professional, political and personal success must lie in the fact that he has the guidance and support of his wife and his four children.
Ladies and gentlemen, I have great pleasure, indeed, much honour, in introducing to speak on the subject of "Social Security in Canada--The Challenge Ahead", the Minister of National Health and Welfare, the Honourable Marc Lalonde.
THE HONOURABLE MR. LALONDE:
Mr. Chairman, Mr. Michener, dear colleagues from the provincial government and from Metro, distinguished head table guests, ladies and gentlemen, mesdames et messieurs: I wish first of all to thank you, Mr. Chairman, for your very kind words. If I may, in my turn, say a kind word, I will say that your French is at least as good as that of Mr. Diefenbaker. I am conscious of the great honour you have paid me in inviting me to speak to you today. The Empire Club, as one of Canada's most prestigious organizations, has had as its guest speakers a long line of Canada's leading public figures. Whether I can hope to qualify as one of these, or whether I should rather think of your invitation as being one to a person who has curiously diverse interests, ranging from football and beer ads to social security, the status of women and physical fitness, I don't quite know.
But you did not invite me here to jest about the hazards of political life or of political responsibility. In any event I want to talk to you today seriously about one of the most important subjects in the life of our nation, namely the social well-being, in the most complete sense of that term, of individual Canadians.
Most of you probably recall that a federal-provincial review of Canada's social security system was undertaken some eighteen months ago, with the objective of reforming and rationalizing that system. The need to do so was well recognized: social security in Canada had become a hodgepodge of unco-ordinated measures; all too often there was little incentive for people on welfare to seek to return to employment, even though the benefits in particular areas were pitifully small; and disputes as to the respective roles of the federal and provincial governments had reached such a point that social security was the rock on which the Constitution Conference foundered in Victoria in 1971.
When the Prime Minister asked me to take on the Health and Welfare portfolio I resolved that, with my provincial colleagues, we would together undertake the reforms that Canadians believed were required in the welfare system, and find a way of harmonizing federal and provincial measures so as to harness our energies to the service of individual Canadians, instead of dissipating them in empty jurisdictional disputes.
We began the review with the Orange Book, the Working Paper on Social Security, which I tabled in Parliament and discussed with the provinces in 1973. With this as a starting point, we launched a series of studies to be done jointly by federal and provincial officials, under ministerial direction, on the main strategies outlined in the Orange Book-employment, income maintenance, and social services. Concurrently we set out to introduce those immediate reforms which clearly were required, and which would necessarily constitute a part of any reformed social security system. These included the improvement and rationalization of social security for older people, brought about by improvements in the Old Age Security Act and the Canada and Quebec Pension Plans; a first step towards meeting the inadequacies of family income that arise due to family size, effected by an increase in family allowances; and the guarantee of the purchasing power of all federal pensions and allowances, by indexing them to the cost of living. May I say, by way of digression, that I sometimes find myself wondering what the state of the weakest members of the Canadian community would be today had Canada's governments not combined to introduce these measures when they did.
By now, however, the first stage of the social security review is over: we have implemented the immediate reforms, and we are completing the basic initial studies. From here on federal and provincial ministers will increasingly confront the critical decisions which will have to be made if we are to achieve the rationalized social security system which is our goal.
There will be a lot of decisions, and they will be difficult ones. What, for example, is the best way-the most humane and most efficient way-of meeting the income needs of those who are unable to work: the physically and mentally handicapped; the single mothers who must remain at home to raise and care for their children; and the older people with no skills, a record of chronic unemployment, and no prospect of a job? And what is the best way, through income supplementation or otherwise, of ensuring that Canadians who are working, but at very low wages, receive incomes which are adequate to meet their basic needs? How do we ensure that these incomes from work are superior to the benefits which would be available to them through welfare? Above all, how can we design the social security system so as to provide adequate income support, and increasingly a combination of income support and income from employment, to people who are handicapped and otherwise unable to achieve full independence, while at the same time ensuring that people who are able to work are found employment, thus enabling them to achieve income security through income from employment?
These are some of the decisions we shall have to make decisions about the design of a better social security system. 'But the decisions I want to reflect about today are the moral or ethical ones--the income levels which we as Canadians believe our less fortunate neighbours should be expected to live on, and the distribution of income which we believe to be fair as between higher and lower income people. To be more precise, what is a fair income in terms of basic needs or acceptable living standards, for the poorest members of the Canadian community? And what is a fair distribution of income between the highest and lowest income Canadians, given the economic impulses which drive our economy and given the social ethics of the community?
I recognize that these are touchy questions at times like these, particularly when every Canadian is deeply concerned about the protection of his own income in the face of excessive price increases and in the face of international economic uncertainty. But it remains that they are fundamental questions-all the more so because disputes over the sharing of income may contribute to further price rises, and because it is the weakest, the poorest members of the Canadian community who are suffering most as a result of the erosion of the purchasing power of their incomes.
So despite the hazards, I should like to talk to you about income distribution and basic income levels in Canada today.
The Facts of Income Distribution
First, some facts about income distribution, using the latest family income data available (1972). There were a total of five million families, including couples without children, in 1972. If you divide the incomes they received into five groups, here is what you find. Twenty per cent of the families, one million of them, received less than $5,516 a year. Of these one million families, 345,000 received less than $3,000 a year. Another twenty per cent received incomes from $5,516 to $8,941 per annum. Still another twenty percent received incomes from $8,942 to $11,698. The highest income Canadian families, forty percent of them, received more than $11,698, with half of them having incomes from $11,699 to $15,432, and the other half more than $15,432. Of the one million families earning more than $15,432, there were 190,000 who received more than $25,000 a year.
Each of us can draw his own conclusions from these data, but here are some hard facts as they impressed me. Twenty per cent of the families in this country were living on less than $5,516 in 1972. This figure was forty-nine per cent of average family income in Canada, which means that one fifth of all Canadian families were required to live on incomes of less than one half of the national average family income. Even more striking is the fact that the share of total Canadian family income being received by this bottom twenty per cent of families was less than six per cent: twenty per cent of our families received less than six per cent of all family income. Compare this with the fact that the top twenty per cent of Canadian families in 1972 received thirty-nine percent of all family income.
I could go on giving figures-figures which, for example, would indicate that the distribution of the income of individuals is biased even more in favour of higher income people than is the distribution of the income of families. But I mustn't weary you with numbers. My point, my first point, is simply this: that there are a very large number of individual Canadians and families receiving a very small share of total income.
My second point is that the situation would be worse, very much worse, if it were not for the social security (or transfer) payments presently being received by lower income families, and for the progressive income tax being paid by people on high incomes. Do you know, for example, that without these measures the twenty percent of Canadians receiving the lowest family incomes in 1971 * would be receiving not six percent of total family income in Canada but only 3.4 per cent? Do you know, to look at this another way, that for families actually receiving $4,000 or less, over fifty per cent of their income came from transfer or social security payments?
Looking at the tax side of the picture, one sees the extent to which higher income Canadians are contributing toward the well-being of their less fortunate neighbours. Do you know, for example, that Canadian families earning $10,000 and more in 1971 contributed just under twenty percent of their total family income to governments in the form of income tax? And do you know, to speak in terms of shares of income, that the income tax reduced the share of the total family income being received by the highest income families-the top twenty percent of all Canadian families--by only two percentage points in 1971: from about forty to thirty-eight percent?
Again, it is possible to draw any number of conclusions
*The latest available data on the incidence of transfer payments and of personal income tax by income class are for 1971.
from these bare facts. But the point which impresses me is this: the distribution of income today, however small the share being received by the lowest income families, is vastly more equitable than it would have been without the tax and social security measures which governments have put in place. The price of doing this, of course, has been an increase in government expenditures--that is inevitable--as well as the equally inevitable taxation of the more fortunate families in Canada.
My third point about income distribution in Canada will seem almost to contradict my second one. It is this: despite the redistribution measures governments have undertaken, that is despite the increases in social security payments and despite the progressivity of the income tax, income distribution in Canada has changed very little in the past twenty years. The share of family income going to the bottom twenty per cent of Canadian families has not increased; nor has the share going to the top twenty percent decreased; and similarly, the shares of the middle sixty percent have remained relatively constant.
Here are a few facts again, if you will bear with me. In 1951 the families in the bottom twenty percent of the income scale received 6.1 percent of total family income; in 1972 they received 5.9 percent. Their share did not increase. Taking the families in the top twenty percent of the income scale, their share of total family income went from 41.1 percent to 39.1 percent over the same period. And the share of the forty percent just below that went up from 39.8 percent to 42 percent.
So the "shares" of family income enjoyed by these several income classes have remained remarkably stable over twenty years, despite the enormous increases in social security payments. If anything the relative position of the lowest income group has deteriorated. For whereas in 1951 the families on the bottom twenty per cent of the income scale had to live on 58.5 percent or less of the median income, in 1972 they had to live on incomes of 53 percent or less of the median. This is not to say that the absolute incomes of the poor have not risen: of course they have. But they have risen less rapidly than have average incomes.
Again you can draw any number of conclusions from these facts. But the main point, to me, is that the nature of the economic system is such that, despite the large increase in income transfers to families in the lowest income scales, those in the middle and upper income scales have been maintained at approximately their same share of total family income.
These, then, are three of the central facts of income distribution in Canada as I see them.
1. There is a remarkably large number of individual Canadians and families receiving a very small share of total income; 2. The share of income going to the lowest paid individuals and families has been increased enormously by the improvements in Canada's social security system, relative to what it would have been without these changes; but 3. Nonetheless, the share of income going to the several income classes (speaking in terms of five income classes) has remained remarkably constant over the past twenty years.
What do the Community's Values Suggest?
Bearing these facts in mind, may I come back to the question I posed at the beginning: "What are the basic, or minimum, levels of income, or ranges of income, upon which you believe Canadian families of different sizes should reasonably be expected to live? What is your view, what is the community's view, about income distribution?"
Note how I phrase the questions: what do you believe; what does the community believe? I do so intentionally, for in the final analysis it is the community's values which will decide these questions--not what someone thinks the community ought to believe. Put in terms of the federal-provincial social security review, the question will not be whether politicians ought to believe in a more or less egalitarian society, but rather whether they are able to "read" the community's values correctly, and express them correctly in terms of basic income levels, and in terms of income distribution generally.
I am not by any means saying that politicians should refrain from preaching for a more or, if they want it, a less egalitarian society. As for myself, my work in the Department of National Health and Welfare over the last two years should tell you where I stand on the matter. Politicians like all public figures and institutions-churchmen and churches, community leaders and voluntary organizations, individual spokesmen at the national and local levels-all have the right and frequently the responsibility to try to shape or to sharpen the values of the community. But when the time for government action arrives, governments will be forced to act within the broad bounds of the community's judgments. And so it must be, if the ballot box is to mean anything in the political process of this country.
So the job for governments, in the course of the social security review this fall and winter, will be to try to determine what kind of income distribution or redistribution would be consistent with the community's values.
We must be realistic about this, of course-as all the politicians involved in the social security review will surely be. In point of fact the community, taken as a whole, probably doesn't know what it thinks about income distribution. Individually we may grieve for the poor, or individually we may gripe about our taxes. But we haven't really been asked the question, as I have tried to put it in this paper: what are the basic, or minimum levels of income or ranges of income, upon which we as Canadians think other Canadians ought to be expected to live? And if these basic levels of income should be raised, should they then keep pace with increases in family incomes generally? When we reach an answer to these questions, will we be prepared, if it is necessary, to forego a part of the pay increases we might otherwise expect from the growth in the nation's income in order to raise the minimum or basic income ranges to the levels we think are more appropriate?
Those are the questions we must put, if we are to define a national conscience in the field of social security. It is not that they have never been put. A special Senate Committee suggested that "poverty levels" should be defined, and that family incomes should be guaranteed at seventy per cent of these levels. The level for a family of four, at today's prices, would be $5,040 I believe. Statistics Canada has attempted to define what they called "low income levels": their 1961 figure up-dated to July 1974 by the price index comes to some $5,826. Governments, too, have set minimum wages and, with them, family allowances, which imply--only imply, I emphasize--minimum income levels for a family of four of between $3,900 and $5,300, depending upon the province in which you live. Provincial social assistance allowances, another expression of some "minimum", ranged in July 1974 from about $4,000 to $5,400 a year for a family of four, including family allowances. The OAS/GIS income guarantee for a couple, aged 65 or over, in the same month was about $4,400 (which implies when combined with family allowances a figure of $4,880 per annum for a family of four). And the Report of the Task Force on Social Security recently prepared for the Canadian Council on Social Development suggested a "poverty line" of some fifty per cent of the median income--which today would come to something like $6,500 for a family of four.
You will notice two things about these numbers: first, that there are different ways to choose them, and that there is a wide range of choice. One way to choose the number, or numbers, is to define a "poverty level"--some absolute figure which is determined to be the minimum amount required to feed and clothe and house and provide personal care to a typical family. How much more should be included in such poverty, or subsistence, levels is a matter of judgment again, the community's judgment. I suppose it is a question as to whether we want to choose a bare subsistence level, or something better than that-say a "basic income level". Having decided that, we would then have to decide how to keep the chosen figure realistic, that is to say, how to up-date it.
Another approach is to say that the basic income levels should be chosen in relation to the average income actually being received by families of different sizes: that, for example, no family should be expected to live on an income of less than x per cent of the average income. Still another approach, and the one I am inclined to favour, I think, particularly when considering the wide variety of income needs to be met across the country, is the choice of a range of income over which income supplements should be paid. For the choice of a single "poverty number", particularly in a country like Canada, and particularly where the price of at least one necessity, accommodation, varies so much, seems to me a bit artificial.
As to the choice of the basic, or minimum levels, or ranges, of income upon which families of different sizes could reasonably to be expected to live, you will see from the numbers I have recited that there is a wide range of choice. How this choice will finally be made is a tough moral question, but I suspect when it comes right down to it, the final decision will be based upon three considerations.
First, the public will want to be assured that the system under which incomes are supported, or "guaranteed", for those who are unable to work or who are retired, and under which the incomes of the lowest paid working families are supplemented, is both fair and equitable. Is the system designed, for example, to ensure that governments do their utmost to find employment for people, those who have exhausted their abilities to find jobs, rather than simply resorting to guaranteed or supported incomes for them? To put this another way, is the system designed upon the assumption that everyone should do his best to help himself, before seeking the help of his neighbours? To be even blunter, is the system designed to avoid "rip-offs"?
With these assurances, and I believe governments must be prepared to give the public these assurances, the public will then want to know another thing. What standard of living would different levels or ranges of income guarantees, or supplementation, provide? What is required to provide the basic necessities of food, clothing, and shelter and personal care? What then would be required to provide something more than these basic necessities? And what would be required to provide a standard of living which represents some fraction of the average standard of living enjoyed by Canadian families?
With the answers to these questions, the public will then want to know what it would cost to achieve these different levels of income support. What proportion of the increases in national income in the next few years, to be more precise, would have to be allocated to achieve these different levels? And would these allocations of the increases in national income imply any material reduction in savings, and hence in investment, and hence in economic growth?
These are difficult questions, but they are the ones which will have to be answered, I should think, before we will gain a national consensus on this central issue of basic income standards in the social security review. And gain a national consensus we must. For one thing is surely clear to each and everyone of us: we cannot simply impose upon the Canadian people the moral judgment as to what they should contribute towards the support of their less fortunate neighbours. It is a judgment which they in the final analysis must make themselves. It is indeed, the national purpose which they, which we as Canadians, must declare for ourselves in the field of social security. This, I think, is what income security and income distribution are all about.
And in reaching our decision, I hope we will not simply think in aggregate numbers and figures, as I may have done already in this address, nor that we will easily allow ourselves to have clear consciences by merely continuing on our way while writing off all those "welfare bums". We are talking about real people, individuals, some more wealthy, some less fortunate, some very poor, and about how they will share.
Elections, especially frequent ones, are often seen as a nuisance by many people, including politicians. But one thing I have discovered about them is that they do bring politicians back in touch with the daily problems of people. I crossed this land a few times during the last election and my most vivid memories are not those of large rallies, or of big policy statements, but of a few faces here and there: those of that couple in the Gaspe area reduced to welfare after the husband became crippled with arthritis, who said that their welfare payments were reduced by $90 a year, because the wife took the trouble of growing a small garden in their backyard for their own needs; the face of that farming couple in Western Ontario, with the husband completely incapacitated in a wheel chair following a working accident on the farm, and the exhausted and desperate look in the eyes of his wife who was trying in vain to run the farm and raise a young family-they could see nothing before them but the vanishing of everything they had worked for, and eventually ending up on the welfare rolls; the beautiful face of that young Montreal woman, unable to use her arms because of cerebral palsy, who had learned to write, to draw, and to do needlework with her toes, who told me that her dream was to be given the opportunity to teach other handicapped people the things she had learned to do; the face of that other woman, handicapped in a car accident, subsequently abandoned by her husband and left with her two sons to care for without any support. Those faces, and many others like them, I promised myself I would not forget.
I am sure many of you know or have known similar faces. But we tend to forget fast, in our busy lives in an environment where poverty appears non-existent. I hope that at least the natural solicitude that Canadians, as a whole, are showing vis-a-vis our senior citizens, is going to be extended to all those in our midst who are in need, whatever their condition.
Mr. Lalonde was thanked on behalf of The Empire Club of Canada by Mr. Marcel Desautels, a Director of the Club.