Welfare Fraud… Who’s Really Committing It?

“Anyone who by deceit, falsehood, or other deliberate means defrauds the public of any property, money, or other valuable security, is guilty of an offense under the Criminal Code of Canada.”

-Expected to Work/Not Expected to Work Glossary of Terms

The rate of fraud in the income tax system is approximately 20 times higher than the rate of fraud in the welfare system. A study conducted by a national auditing firm estimated fraud to be in the range of 3% of the Ontario welfare budget. A 2002 report from the Ontario Provincial Auditor noted: “of the 763,000 corporations with active accounts on the Ministry’s tax roll, 355,000 corporations – or one in two – did not file required returns.”

-Welfare Myth and Reality, Pay the Rent or Feed the Kids

Prior to 1995, the Canadian federal government partnered with provinces to provide social assistance programs to citizens under a program called Canadian Assistance Program (CAP). In exchange for the federal assistance, the Canadian government would regulate the program, setting rules for how assistance would be provided. These regulations were intended to be beneficial to the citizens in need, and ensure income-based rights were protected.

In 1995, the as a cost-cutting measure, the Canadian Assistance Program was done away with, as were the rights of those living in poverty. Furthermore, a few provinces at this time, such as Alberta, were already using welfare programs that violated the CAP regulations. Many others, such as Ontario, were preparing and re-organizing programs that would violate CAP had it continued to exist.

With the de-regulation of social assistance, the provinces were allowed to regulate government social agencies as they see fit. Most of the changes that occurred were “cost-saving” measures, aimed mostly at fraud prevention. Alberta was ahead of the curve, making most of its changes while CAP was still in place. In the first year of changes (1993-4) welfare caseloads dropped from 94,000 to 35,000. Roughly ten percent of those cases were investigated for fraud, and again, roughly ten percent of those resulted in charges being laid. In other words, only one percent of total welfare cases were actually found to be fraudulent (367 charges laid out of 34,959 total welfare cases).

However, the vast majority of the cuts were not meant to prevent fraud. They were meant to reduce caseloads. Alberta achieved this (ironically enough, for a government that believes in “Less Government”) by increasing the layers of beaurocracy in the social service agencies. Re-organizations were pushed towards reducing eligible benefits or denying services completely. However, if you were ineligible for social assistance, one could easily be placed in a job skills program.

With an increase in beaurocracy, comes an increase in costs. These increases in costs were justified as a measure to be accountable to taxpayers, AKA fraud prevention. However, many incidents of fraud could have been preventable if governments actually were to reduce beaurocracy and increase caseloads.

Fraud does not occur when a person decides to maliciously attack taxpayers’ wallets. Fraud occurs when a person desperately needing assistance is unable to receive it. Welfare fraud is the North American equivalent of a starving boy in a third world country stealing a loaf of bread.

A report from Daily Bread Food Bank (A local food bank serving the Greater Toronto Area) shows that most recipients are able to work. In fact, most do, with 77% having worked in the past year, and 20% being currently employed (As of 2001. I admit, these are not the most recent statistics… if anyone could find more recent stats please PM me). Of those who are able to work but do not, the most commonly cited cause of not working is childcare costs. It is also noted that in 1998 the province of Ontario eliminated rent controls. Between 1998-2001, rent increased twice the rate of inflation. Adding even more for those burdened is the stagnant wages in Ontario. When there is a greater demand for labour, wages remain suppressed. With many of the workforce going to Alberta (Which until 2005 had Canada’s lowest minimum wage at $5.90/hr, despite being the richest province in the country), there came to be a labour shortage. The way wages are suppressed is explained by Daily Bread this way: “when there is a need for more workers wages are suppressed because the competition for work between potential workers is not great.”

Ontario and Alberta both continue to cite laziness and fraud for the way their welfare systems are run, but at least in Ontario, full time employees can still receive benefits when working full time if it can be shown that the recipients are earning a low wage. This is non deductible for the first year, and Ontario is moving to place a maximum of five years onto this benefit, and encourage recipients to enter a skills upgrading program instead. Still, even with skills upgrading, most persons still earn less than enough to make ends meet, and end up quitting work in order to qualify for additional welfare benefits, seeing that employment inevitably places them further backwards into achieving financial independence. Yet Ontario continues to push for a “workfare” model for social assistance, without doing anything to address the fact that employment wages low, and the cost of living is rising.

Worse yet, in 2002, The City of Toronto then evicted an entire tent city of over 10,000 persons in Nathan Phillips Square, compounding a problem in that province as well, and leading up to many hypothermia related deaths when there is no shelter space available.

Back in Alberta, where minimum wage has increased to $8.40, the situation is even more dire. Like Ontario, there are no rent controls, but because of a migration of potential workers, rent has skyrocketed significantly more than anywhere else in the country, in some cases, doubling in one year. While there exist some rules in place for landlord conduct, they are rarely enforced, allowing some landlords to increase rent as much as they want without any prior notice – regardless of the legally mandated 90 days – without consequence. In fact, at minimum wage, it would take 2.1 persons working full time to pay for a single bedroom apartment at Calgary’s market average.

Furthermore, these full time workers are not eligible for government support. Since Alberta had made it’s sweeping changes, under the promise of “making a job, any job, better than welfare,” Calgary’s homelessness has grown 6.5x faster than the total population of Calgary. In Alberta, the homeless are not eligible for any welfare benefits – including short-or-long term disability – since welfare is only for those who pay rent. 60% of the homeless population is employed, and that is greater than the number of homeless persons involved in active addiction. This is further compounded when all of the housing programs are meant for those who have a currently existing income. So the most chronically homeless population (which by definition, have to have a physical or mental illness) cannot possibly receive housing, because they are unable to work (I emphasize, not able to work – NOT too lazy) and do not qualify for disability pay because they are not housed.

In other words… a person who has a disability cannot get housing through social programs until they have an income, and they cannot receive an income until they are housed. With a catch-22 system, it’s a wonder only 1% of recipients are actually willing to cheat to receive much needed services.

So there we have it: in Ontario, the leading cause of “fraud” is that people forced into employment programs live in worse poverty, and in Alberta, it is committed likely by persons who cannot receive the services they need, especially to those on disability who would otherwise be unable to obtain stable employment. In both cases, this fraud is not so much an act of malice that should be brought down with a strong government arm, but rather a cry for help. In Alberta, regulations should be relaxed for those needing either welfare or housing (including rent controls), and in Ontario, instead of focusing solely on reducing welfare benefits, try increasing employment benefits, such as a living wage, and tax breaks for businesses that provide benefits such as health services not covered by the Canada health Act (prescription, dental) and other benefits such as child care and transportation.

These would not be a one-time fix all solution for poverty, but fraud in the welfare system is not a criminal act. Rather, it is a cry for help. Addressing these concerns at the personal level would bring fraud in the welfare system down to zero. Should these respective governments continue to cite “fraud” as a justification for “workfare” programs and reduced benefits? Well, with a 1% fraud rate (lower in Ontario, as only 3% of fraud investigations resulted in actual charges), I don’t see a need.

The person who deliberately falsifies information to obtain much needed help, or the government who deliberately falsifies information to justify cutting costs at the expense of human lives, who is really the one committing fraud?