Reduce poverty by retargeting the Canada Child Benefit

The federal Liberals are pledging to increase the Canada Child Benefit by up to $ 1,000 or 15 per cent in the first year of a baby’s life. This modest expansion of their signature 2015 campaign policy introducing the CCB is a missed opportunity for a more substantial reform of the program that could target child poverty much more effectively.

According to several studies, the CCB has already reduced poverty rates among Canadian children. Yet at nine to 12 per cent, depending on the measure, rates remain unacceptably high. The federal and all lower jurisdictions have established poverty- reduction strategies. Most have set ambitious goals for further cuts in poverty, particularly child poverty. How can the CCB best contribute to these goals?

Reforming the CCB could achieve far more poverty reduction than the proposed “baby bump” to benefits. Retargeting existing benefits more effectively could be done with no increase in the program’s $24-billion budget — which makes it the second most costly federal transfer program after pensions. Better to reallocate these large funds more effectively than to expand the program in a relatively ineffectual manner.

A cost- neutral reform would permit an increase of $ 2,000 to $ 3,000 per year for lower- income families— two to three times the baby bump — and would extend it for the first six years of a child’s life rather than just a single year. The total increase in child benefits for families at low and moderate incomes could be 12 to 18 times the baby bump.

Research finds that children in high-income families gain little from extra income so retargeting benefits would put program funds where they would do the most good in terms of child development. Moreover, raising benefits for all of a child’s preschool years rather than just their first year provides financial relief when it’s most needed, while parents are paying high childcare costs or are raising their children at home and thus forgoing earnings. Children’s early years are also typically when parents’ earnings are at the low end of their lifetime path, so raising CCB payment levels for preschoolers makes the most effective use of the program’s funds.

For families with two children, the CCB now pays benefits at incomes up to nearly $ 200,000. Payments for larger families can extend well beyond $ 250,000 incomes. The proposed CCB baby bump would give money to families at still higher incomes, which makes little sense in terms of effective social policy.

My proposed retargeting of CCB payments would increase the benefit phaseout rates for family incomes above the current $ 31,000 threshold. Families at median and higher incomes would still receive benefits, albeit at reduced levels. But the small payments currently made to families at the highest incomes would end.

Unlike the baby bump, retargeting would channel more benefits to sole- parent families, whose poverty rates are four to five times those of two-parent families. Currently, just one- quarter of all CCB payments go to sole- parent families, but under retargeting nearly half of reallocated monies would go to such families.

Another possible reform would extend CCB payments to expectant mothers starting from their second trimester of pregnancy. Like Manitoba’s Prenatal Benefit program, this approach would provide financial resources and parallel medical and lifestyle counselling in order to improve birth and infant health outcomes.

Because the Canada Child Benefit was so central to the Liberals’ 2015 election campaign they may be unwilling to propose its substantial reform. One way to make CCB retargeting more attractive to all political parties would be to let the provinces and territories negotiate cost-neutral changes to the targeting. They already benefit from a similar “reconfiguration” option with respect to targeting of the federal Canada Workers Benefit. Giving them this option for the CCB, too, would avoid cross-provincial shifts in funding and would allow each jurisdiction to tailor the program’s benefit pattern to its own poverty-reduction priorities.

If governments are serious about their pledges to reduce poverty, they need to take more than baby steps. Retargeting Canada Child Benefits offers far greater promise for an effective, affordable, and simple way to reduce poverty among families with children.