Social Policy Trends: Social Assistance and Inflation

Unless incomes increase at the same or faster rate, increases in prices of goods and services erode living standards. Governments can help protect living standards by legislating automatic “inflation indexing” of publicly provided income benefits. When a benefit is indexed for inflation, its value automatically rises with increases in the general price level, usually measured by Consumer Price Index (CPI). Governments index pension benefits in this way to protect seniors from inflation. However, they frequently fail to index income supports provided to people with low income. This has the potential to cause the living standards of individuals and families to fall during periods of inflation.

Recently, social assistance recipients in Alberta joined those in Quebec, as having all components of income support automatically indexed to a CPI. This is rare. In five of the other eight provinces, only federally provided benefits are indexed. Some of the provinces, such as Manitoba, partially index Basic Social Assistance through its Rent Assist benefit.

A preferred way of indexing social assistance income would be to make discretionary adjustments to benefits to account for inflation as it is experienced by individuals and families with low income. Some provinces, such as British Columbia, make such adjustments rather than legislated indexing, resulting in a “No” entry. The problem with this approach, is that protecting families from inflation requires an annual discretionary choice which, as we have reported elsewhere, is not always made. This leaves the well-being of incomes support recipients subject to the choices of politicians. Automatic indexing may not be perfect, but all things considered, it may be the best approach.