Press Releases

For Immediate release
September 02nd, 2009

Time for a “Made in Ontario” Working Income Tax Benefit

Institute for Competitiveness & Prosperity and Open Policy Ontario call for improvements to Working Income Tax Benefit design in Ontario to help low-income earners escape welfare.

Toronto – The government of Ontario should accept the invitation from the federal government to modify the design of its Working Income Tax Benefit (WITB). WITB benefits should be re-oriented to support low-income earners when they work more, thereby easing their move from social assistance onto full-time employment when welfare benefits are lost.

These are the main recommendations in a report released today by the Institute for Competitiveness & Prosperity, an Ontario-based economic think tank, and Open Policy Ontario, a consultancy led by John Stapleton.

There is some urgency to address the issues of low-income earners. According to John Stapleton “In these turbulent economic times, we know that within one year, every EI claim that is currently being paid will be exhausted. Many ‘exhaustees’ will reluctantly face the difficult choice of working at low-paid jobs or making an application for welfare. Let’s get ahead of this and help them in their decision to work.”

In 2007, the federal government introduced the Working Income Tax Benefit (WITB) to remove barriers to work, often termed collectively as the “welfare wall.” The WITB is a refundable tax credit offered to low-income earners as a supplement to low earnings from employment. Its initial aim was to encourage low-income earners to break out of welfare by seeking more employment hours – by making “work pay.”

However, the current WITB program is not doing the job as well it could here in Ontario because it doesn’t fit well with the structure of our welfare programs.

In Ontario, the WITB benefit combines with Ontario welfare to maximize total benefits at approximately 14 hours a week of minimum-wage work for single earners and 20 hours for single parents. As Stapleton observed, “after that point, WITB benefits begin to reduce and disappear well before 32 or 40 hours while the worker continues to receive welfare benefits. If we want to help low-income earners gain more hours of work we should modify WITB so that it reaches its maximum at higher number of hours worked.”

James Milway, Executive Director of the Institute for Competitiveness & Prosperity, concurs: “The other significant challenge faced by low-income earners is that, as they gain full-time work, their welfare benefits are eliminated. By making WITB benefits available at higher hours of work, we can help low-income earners ease the transition from social assistance to full-time employment.”

The report acknowledges that its proposals won’t solve the hardships many Ontario families face. But the proposals are a step in the right direction to help low-income earners overcome the welfare wall and encourage more people to achieve full-time employment.

The complete report can be downloaded directly from:

http://www.competeprosper.ca/images/uploads/WITB_September09.pdf

For more information contact James Milway, Executive Director of the Institute for Competitiveness & Prosperity at 416-920-1921 ext. 222 or John Stapleton, Principal of Open Policy, 416-298-0963 or 416-988-5936 (Mobile)

About the Institute for Competitiveness & Prosperity

The Institute is an independent not-for-profit organization established in 2001 to serve as the research arm of Ontario’s Task Force on Competitiveness, Productivity, and Economic Progress. The Institute and the Task Force are supported through the Ministry of Economic Development and Trade.

About Open Policy Ontario

Open Policy Ontario is the consultancy of John Stapleton, Metcalf Innovations and St Christopher House policy fellow and an expert on social policy and income issues. For more information, visit http://www.openpolicyontario.com