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SUB-COMMITTEE ON TAX EQUITY FOR CANADIAN FAMILIES WITH DEPENDENT CHILDREN OF THE STANDING COMMITTEE ON FINANCE
SOUS-COMITÉ SUR L'ÉQUITÉ FISCALE POUR LES FAMILLES CANADIENNES AVEC DES ENFANTS À CHARGE DU COMITÉ PERMANENT DES FINANCES
[Recorded by Electronic Apparatus]
Tuesday, May 25, 1999
The Acting Chairman (Mr. Paul Szabo (Mississauga South, Lib.)): Good morning. We are resuming the hearings of the Standing Committee on Finance subcommittee on the study of tax fairness for Canadian families with dependent children.
This morning we have representatives of Statistics Canada with us: Mr. Doug Norris, director of housing, family and social statistics; and Maryanne Webber, director of income statistics.
Welcome to our committee. I would ask you to make your presentation and then I'm sure the members would like to ask you some questions. Please proceed.
Mr. Doug Norris (Director, Housing, Family and Social Statistics, Statistics Canada): Thank you, Mr. Chairman.
We are happy to be here this morning to talk to the committee about the trends and recent developments in Canadian families and their income situation. We've prepared a short opening presentation, which I believe the members of the committee have copies of. To begin, I will describe the basic context of the changing family structure in Canada over the past several decades. My colleague, Maryanne Webber, will then discuss the family income changes.
In Canada today there are approximately eight million families. For purposes here this morning we're using the concept of what we call the census family. That is a couple, either married or living common law, with or without children who have never been married, or a lone parent, with one or more never-married children.
In some of my presentation I'll be talking about families as a whole, that is all Canadian families, although most of the presentation will be directed at families with children under the age of 18.
If we look at page 3, we can see that overall, most Canadians live in what we call census families. Approximately 85% of all Canadians are either a spouse in a marriage or a common law relationship, or a child living with one or both of their parents. That really hasn't changed very much over the 20-year period from 1976 to 1996. However, there have been a number of important changes that I would like to quickly go through.
The first change is that families today are slightly smaller than they were 15 or 20 years ago. In 1996, approximately one-third of all Canadian families had no children living with them at home. At the other extreme, approximately 12% or so of all families had three or more children with them at home. That was a slight shift toward smaller families over the period 1981 to 1996.
A second major change in families is that young people are delaying starting families. On page 4 you can see this reflected in two different ways. You can see, for example, for people 20 to 24 years old, the percentage living at home with at least one parent was getting close to 60% in 1996, up from about 45% or so in 1981. So children are staying at home with their parents for longer periods of time.
The implication of this is that the percentage of young adults who are married or in common-law relationships has shown a downward trend. For example, for those 20 to 24 in 1981, nearly 40% were in relationships, either marriage or common law, and that had dropped to close to 20% by 1996. So people are delaying forming families today.
A second change, if we look at the charts on page 5, is the types of unions people are entering into are changing. Today we see many more common-law unions. Of first unions, either marriages or common-law relationships, between 50% and 60% were common-law unions in the early 1990s. That was up substantially from the unions that were formed in the early 1970s. So there has been an ongoing shift to common-law unions in place of legal marriages. The other chart shows the implications of that. The proportions of persons who are living in common-law union are much higher, particularly at the young ages in 1996 compared to 1981.
Page 6 shows that both common-law unions and marriages have children to nearly the same extent. For example, in 1996 about 43% of all those in common-law unions had at least one child under the age of 18. This was just slightly lower than the proportion of those in marriages, about 45% to 46%, with a child under the age of 18. So those in both marriages and common-law unions now have children at home.
You can see that the trend for common-law unions has been upward over the 10-year period between 1986 and 1996, while the trend for marriages has been downward. The downward trend for marriages is mostly a result of the aging of our population, where married couples tend to be older and children have perhaps left home.
If we look at another important aspect of families, the extent to which families and children are experiencing separations, the charts on page 7 show the trends over the past number of decades. On one chart you see the percentage of women by birth year, that is, women born between 1926 and 1935 up to women born between 1956 and 1965. You can see for the youngest women born between the mid-fifties and the mid-sixties, between 40% and 45% had experienced one separation from either a marriage or a common-law union. That was up from about 25% for the older women born in the 1920s and 1930s.
You can see, however, that following the separation from either a marriage or a common-law union, there was a tendency for people to enter a second union, perhaps by remarrying or forming a second or subsequent common-law union. You can see that for younger women born between the mid-1950s and mid-1960s, nearly 40% had actually been in two unions, either marriages or common law relationships, during their lifetimes. That was up substantially compared to the older women.
The net result of all of this can be seen on page 8, where we show a snapshot of the changing makeup of Canadian families. This divides families into married couples, with and without children, common law couples, with or without children, and lone parent families. We can see over the 15-year period between 1981 and 1996 a shift to more lone-parent families—14.5% of all Canadian families in 1996 were lone parents. Nearly 12% of all families were common-law couples, about half with children and half without children. The proportion of married couples with children over that period declined from about 55% to 45%.
You can also look at families from the point of view of children and what the children are experiencing as a result of these various changes I've just gone through. The next two or three charts show family situations from the point of view of children. The first, on page 9, shows that an increasing proportion of births are occurring to common-law couples. In fact in 1993-1994, nearly 30% of all births were to either common-law couples or single mothers—about 8% or so to single mothers and a little over 20% to common-law couples.
The Acting Chairman (Mr. Paul Szabo): Can you define single mother, please?
Mr. Doug Norris: That's a mother who is not living with a partner at the time of the birth; that is, not in a relationship at the time of the birth of the child.
You can see that's about double the level from a decade earlier, in 1983-84.
If we look at the incidence of parental separation—
The Acting Chairman (Mr. Paul Szabo): Just following on that point, are divorced or separated women part of single mothers?
Mr. Doug Norris: She could possibly be divorced if she were in fact divorced at the time of the birth of the child and living on her own. It's not single in the sense of never having been married. It's not in the marital status sense. It means not with a partner at the time of the birth of the child.
Mr. Rey D. Pagtakhan (Winnipeg North—St. Paul, Lib.): Could it also mean a widow or widower?
Mr. Doug Norris: It's possible if the pregnancy had occurred and subsequently the spouse had passed away. I suspect there would be very few cases of that, but they would be included in that.
The charts on page 10 show the incidence of parental separation from the point of view of children. One chart looks at the proportion of children who experience parental separation through three different types of unions. These unions are defined at the time of the child's birth as either a common-law union, a marriage that was preceded by a common-law union with the same partner, or a married union that was not preceded by a common-law union. You can see that over 40% of all children who had been born into common-law unions had experienced separation of their parents by the age of six. In contrast, for marital unions that figure was below 10%
The other chart shows the net effect of that and the changing incidence of parental separation over time. It looks at separation at the different ages of five, ten, and sixteen. If we just focus on age five for a minute, we can see that of children born between 1987 and 1988, approximately 20% had experienced parental separation by the age of five. That was an increase from about 7% or so of children born in the early 1960s. So there was an increasing trend between the 1960s and the 1990s for children to experience parental separation.
If you look at age 16, we don't yet have the information for the children born during the late 1980s. They haven't reached 16 yet. But one could project those trends, and those projections would suggest that by about the age of 16, approximately 30% to 40% of children born during the late 1980s will have experienced the separation of their parents.
Mr. Rey Pagtakhan: You have indicated here the percentage of children who have experienced parental separation. Could you perhaps also indicate the bonding that exists between married couples and common-law couples?
Mr. Doug Norris: Are you asking about the explanations of why there is parental separation?
Mr. Rey Pagtakhan: No. Could this possibly be used to interpret that the occurrence of separation from married...that the bonding is more lasting?
Mr. Doug Norris: Well, the data certainly show that the marriage is longer-lasting. We don't have any direct information on why that is. But the data certainly show that the marriages are longer-lasting.
The final piece of information on the overall family context, shown on page 11, shows the result of second or subsequent families that people are forming after a first separation. This shows that approximately—this is looking at children of age zero to 11 from our national longitudinal survey of children in 1994-95—16% of young children were in a lone-parent family, but 8.6%, nearly 9%, were in what we call step-families. These are essentially second families that are formed by the remarriage or a second common-law union of one or both of their parents. These families, in some cases, involve children from another union, what is sometimes referred to as a blending of two families or a blended family. We expect that given the patterns of separation and remarriage—second unions—that we've seen, the proportion of children in step-families will increase in the future.
So in summary, the nature of families is changing. The basic change is toward more of a diversity of families—more common-law unions, more second families. We tried to show you the implications in terms of all of this for children.
At this point I'll turn it over to Maryanne Webber, who will talk about the family income situation of families.
Mr. Rey Pagtakhan: Before you leave that, if I may, Mr. Chair, you have no data about same-sex relationships, unions, partnerships.
Mr. Doug Norris: No. Up until now we have not been able to collect accurate data on same-sex unions and partnerships. It is something that we are testing as a possibility for our 2001 census. But we have not been able to collect accurate data up to this point.
Mr. Rey Pagtakhan: Thank you.
Ms. Maryanne Webber (Director, Income Statistics, Statistics Canada): Thank you. What we're going to look at now is family income. We'll look at questions such as how many families have one income versus two, where do different types of families get their income, what impact does the number of earners have on low-income rates, how much are different family types paying in taxes, and what about spending on child care?
I'll just go over a few definitions first, on page 13. These are the main family types that we've looked at here. First off are dual-earner couples, that is two parents both earning, and as a subset of that, two parents working full year, full-time. Full-time means 30 or more hours per week. And that's really the group I've concentrated on in the charts that follow for dual earners. I'm comparing them to two-parent families where there's one earner, and then contrasting those two to lone-parent families with earnings and without earnings. In all cases we're talking about census families here, as Doug did, and it's restricted to families with children under 18 at home.
The Acting Chairman (Mr. Paul Szabo): Just as a clarification, are the earnings you're referring to earned income, or can they be inactive income?
Ms. Maryanne Webber: It's earned income. It can be self-employment income, or it can be wages and salaries.
The Acting Chairman (Mr. Paul Szabo): So in interest income, they would still be without earnings.
Ms. Maryanne Webber: Yes, they are.
The Acting Chairman (Mr. Paul Szabo): Okay.
Ms. Maryanne Webber: On the income concepts on page 14, we've used some summary information on income. The first important concept is market income, which includes wages and salaries, self-employment income, investment income, earnings, interest on bank accounts—anything from the marketplace. That's in contrast to government transfers, primarily child tax benefit, employment insurance, worker's compensation, and social assistance. The third concept is income tax, and finally, there is disposable income.
If you take market income, add in government transfers, and take away income tax, you're left with disposable income, or, as it's also known, after-tax income. These are the concepts we'll be looking at.
On page 15 there's information on the actual growth in family types.
Mr. Rey Pagtakhan: In terms of the income tax and income concepts, is it the income tax that you pay?
Ms. Maryanne Webber: Yes.
Mr. Rey Pagtakhan: It's not the tax credit you get from income tax?
Ms. Maryanne Webber: No, it's what you're paying out in income tax.
Mr. Rey Pagtakhan: Okay, thank you.
Ms. Maryanne Webber: On page 15 there's a chart that shows the growth in families from 1981 to 1996. The line at the very top is all dual-earner families, regardless of how much earnings or how much paid work the couple, both members, are getting. So I'm not concentrating on them. I'm looking at the four lines at the bottom. And you can see the green line, the two-parent families with one earner, was the most common type of family in 1981, but the number dropped by about a third from 1981 to 1996. At the same time, two-parent families where both parents are working full-time is crossed by the dark blue line, so that by 1996 you have basically 50% more couples where both parents are working full-time, full year, than families with one parent earning.
The other type of family that's growing quite considerably is the lone-parent family. The red line, lone-parent families with earnings, increased by about 50% over the period and lone-parent families without earnings, the mauve line, more than doubled over the 1981 to 1996 period.
On page 16, Doug pointed this out also, family size has changed over time. It's also different when you look from one family type to the next. The second row shows two-parent families with one earner. Those tend to be the largest families. There are 4.2 people, on average, in those families, as of 1996. It also shows up in the number of children: 24% of those families have three or more children, compared to 14% for families with two full-time, full-year workers.
You see a similar difference, also, when you're looking at the lone parents. Nine percent of lone parents with earnings have three or more kids, compared to 19% for the lone parents without earnings. So family size varies by family type.
Turning to page 17, another important point is that families are not static. The trends may move slowly, but underlying that there's a lot of individual change, because marital status changes, work status changes, and the presence of dependent children can change. So you if put all that together, you get quite a lot of change occurring.
For instance, on this page what we're seeing is that if you take families that were two-parent, two full-time earners in 1995, from 1995 to 1996, 29% of them changed their status. In other words, in 1996 they were not two full-time-earner families; they were something else. If you run down the different family types, you can see that in every case there's a substantial amount of change in families going on there.
Mr. Rey Pagtakhan: Excuse me, Mr. Chair. In looking at the chart on page 16 and then back at page 15, which shows the distribution in any given year, the figure on page 15 reflects the status change. Is that right?
Ms. Maryanne Webber: On page 15 what you are seeing is a long-term trend, how many families year by year are in a particular category. The other table on page 17 is telling us that there's a lot of turnover. So if you want to look at families that have lone parents without earnings in one year, there may be pretty much the same number as the next year but the people in question will be different.
Mr. Rey Pagtakhan: Okay. Thank you.
Mr. Serge Cardin (Sherbrooke, BQ): On page 17, there are numbers about families whose circumstances have changed in 1996. Does that include families which became two-earner families as well as families which are not any more two-parent, two-earner families?
Ms. Maryanne Webber: That's it. There are a few things...
Mr. Serge Cardin: It includes changes both ways.
Ms. Maryanne Webber: In the case of two-parent families, the biggest change occurred among one-earner families which became two- earner families and vice versa.
Mr. Serge Cardin: So it goes both ways.
Ms. Maryanne Webber: Page 18 shows the average market income for the different family types. Market income is, as I mentioned earlier, wages and salaries but also investment income. Wages and salaries is by far the biggest component. This shows that in 1996 the average for two-parent families where both parents were earning full-time was about $78,000, roughly 80% higher than for two-parent families with one earner. So that's market income.
On page 19 we see the government transfers, and this is taking all transfers together, including employment insurance, child tax benefit, and social assistance. Since both transfers and taxes tend to make the distribution of income more equal across families, it's not surprising to see that the group with the highest market income has the lowest government transfers, namely, the families with two parents working full time. Obviously, at the other end are the lone parents without earnings, who have the highest government transfers. This also shows that if you compare the average government transfers, for two parents working full-time it's about $1,600 and for two parents with one earner it's about $5,800.
The next chart shows the income taxes paid by family type. Income taxes also help to reduce inequality, but unlike transfers, which tend to raise the floor of the income distribution, income taxes lower the ceiling. So, again, we see that the family types with the highest market income are the ones with the highest income tax. Essentially, the two-parent families with both earning full-time paid about twice as much in income tax as two parents with one earner.
Turning to page 21, if you put all that together and look at disposable income after taxes and transfers, the average ranges from about $60,000 for families with two parents where both are earning full time to $13,000 for lone parents with no earnings. So the distribution is much more equal than when you look at market income.
The next chart shows a little bit more clearly the relationship between market income and disposable income for the different family types. The left-hand side of page 22 shows two-parent families where both parents are earning full-time. You see that market income is relatively high, government transfers are low, and income tax is relatively high, so that disposable income is about 78% of what those families receive in market income. Looking at the right-hand side, in the case of two-parent families with one earner, market income is considerably lower and government transfers tend to offset the impact of income tax, if you can look at it that way, and the net effect is that disposal income is about 91% of market income.
Page 23 has similar charts for lone-parent families. On the left-hand side it shows lone-parent families with earnings. You can see that the market income is quite a lot lower than in the case of two-parent families. Government transfers and income tax pretty well net out, so that disposable income is almost equal to market income. It's actually 99%.
The last chart there shows lone-parent families without earnings. In that case market income is very low, and the biggest component of disposable income is government transfers. They actually make up close to 90% of disposal income.
Page 24 shows the trends in disposable income from 1981-96. It doesn't say so but it is in constant dollars. This is in 1996 dollars. What the chart shows is that, apart from some slight wiggles in the line, basically the relationship has remained pretty much unchanged over the 15-year period. There's no growth in real disposable income and not really much decline either. It has remained pretty flat.
I'd like to talk now a little bit about low income.
Mr. Rey Pagtakhan: Excuse me, Mr. Chair. On page 23, just for my information, when we look at the left-hand graph, would it be the classical example of full clawback?
Ms. Maryanne Webber: I'm sorry, on page 23—
Mr. Rey Pagtakhan: Yes. When you look at the government transfers and the income tax, does it mean, then, that there's a full clawback?
Ms. Maryanne Webber: The income tax is being paid on the market income.
Mr. Rey Pagtakhan: I realize that, but then, essentially, the government transfers had all been eliminated.
The Acting Chairman (Mr. Paul Szabo): No.
Mr. Rey Pagtakhan: In effect.
Ms. Maryanne Webber: They're about the same. They're about equal.
Mr. Rey Pagtakhan: In other words, it's a full clawback, if I can use that word.
The Acting Chairman (Mr. Paul Szabo): All government transfers aren't subject to clawback, I don't think.
Mr. Rey Pagtakhan: No, I was using it in a loose way. In other words, when you reach a certain level of about $25,000 or $27,000 market income, you have some government transfers. Then following your income tax on that income, the income tax is equal to or higher than the government transfers. So in effect the government transfers have no more value.
Ms. Maryanne Webber: I was looking at it in comparison with the previous page. If you look at, for instance, the families that tend on the whole to have higher market income, what you see is that income tax considerably exceeds government transfers.
Mr. Rey Pagtakhan: I'm just trying to clarify my thinking there. Thank you.
Ms. Maryanne Webber: Everything we've done up to now has dealt with average income. We've looked at the fact that different types of families have different levels of income and different sources, but the averages can conceal a lot, and distributions are obviously very important as well. There are lots of measures of income distribution I could have used, but I thought it would be perhaps helpful here to concentrate on low-income rates. These are our after-tax, low-income rates based on disposable income. What that essentially shows is the proportion of families where the income level is such that covering the basics of food, shelter, and clothing up to the level of the average Canadian family is going to be a struggle.
So page 26 shows the low-income rate by family type, and it shows quite clearly that having two full-time earners in a house is pretty good insulation against low-income: the low-income rate is very close to zero, about 2%. Of the two types of families here that have one earner, the two-parent family with one earner, versus the lone parents with earnings, there's a difference in low-income rates there: one is 17%, the other 26%. And of course the highest low-income rates by far are for the lone-parent families without earnings, at about 80%.
The next page is the absolute number of families in low income. I just thought that might be useful for you for reference, so I'll skip that.
On page 28, the low-income rates are a fairly well-known measure, but they just classify families as being above or below a certain line. It's also important to know how much would it take to get a family in low income out of low income. We call that the low-income gap, and if you look at that measure for a group of families, it's called the average gap. So one of the things that's interesting here in this chart is that although there aren't very many families with two full-time earners that are in low income, for the few who are in low income, the average gap is basically $5,000 and not that much less than any other family type.
The other thing that's interesting here is that for the two-parent, one-earner families, their gap is essentially equal to those of lone parents with no earnings.
Page 29 shows the impact of the second salary on low income. Essentially, for the two-earner families what we did here was we recalculated the low-income rate, excluding the second salary. And I think the important point here is you can see there in the two bars right on the extreme left, the dark blue is the actual low-income rate for families with two parents working full-time, and the lighter blue immediately to the right is what the rate would be if you just took the first salary into consideration. I think the important message is that for these families a second salary in many cases is helping to avoid low income.
The next chart is from our spending surveys, our survey of household spending, and it shows the average spending on child care by family type. We set it up two ways. The first one just takes the family group as a whole, two-parent families with two full-time earners, and averages out spending over that whole group of families.
But the proportion reporting child care expenditures in this survey differs quite a lot by family type. It's actually about 40% for the families with two full-time earners. If you compare them to the two-parent families with one earner, only 11% report spending anything on child care. So the chart on the right-hand side is restricted to those families where there is some reporting of child care expenses.
They may be of some use to you. I think it certainly shows there's quite a substantial variation in the amount spent on child care. This is out-of-pocket spending; it wouldn't include subsidized day care, the subsidy part.
To summarize what I've gone over, families with two parents working full-time now outnumber couple families with one earner by 50%. But lone parents without earnings are actually the fastest-growing family type. Two-parent families with one earner tend to be larger than other family types. And a large proportion of families have a major shift in their circumstances from one year to the next. There are a lot of dynamics going on there.
Two-parent families with one earner receive three times more in government transfers than families with both parents working full-time. But the average disposable income of two-parent families with one earner is about two-thirds the income of families with two full-time earners. Disposable income is about 91% of market income for couples with one parent earning, versus 78% for couples where both parents are working full-time. And finally, for families with two full-time salaries, the second salary often helps to avoid low income.
Mr. Rey Pagtakhan: With respect to your summary, do you have data or did you pursue questions on why the person decided to have the particular calling at that point? Did you ask why they wanted to be married, why only one should work, why two should work, and why should one be depending on government transfers? Did you pursue those questions?
Ms. Maryanne Webber: I don't know of any data sources that actually get at the reasons why they would take a leave of absence, parental leave, or simply stop working in the paid labour market in order to raise children.
Doug, do you know of any?
Mr. Doug Norris: No, I don't believe we have asked people why they make those kinds of decisions.
Mr. Rey Pagtakhan: Do you know of data in the literature?
Mr. Doug Norris: Not myself, no.
Mr. Rey Pagtakhan: If there is no data, everything we hear as potential arguments about why one chooses to be in a particular calling, whether it's because it is more beneficial or because it is the way they would like to raise their families, would be at this point anecdotal.
Ms. Maryanne Webber: I don't know of any other data sources. What we do have, though, is information on patterns. We can produce more information if it's needed on the actual patterns—for example, on how many parents change their status when a child is born, decide to work no longer. We can produce the patterns. The reasons I think are more difficult to get at.
Mr. Rey Pagtakhan: And there has not been any attempt to get to the causation?
Ms. Maryanne Webber: Not as far as I know.
Mr. Rey Pagtakhan: Thank you, Mr. Chair.
The Acting Chairman (Mr. Paul Szabo): We've had the first round of questioning already, reverse order. That concludes your presentation?
Ms. Maryanne Webber: It does, thank you.
The Acting Chairman (Mr. Paul Szabo): I'm sure the other members would like to engage you on some of the information. It's been very interesting and certainly it's a lot of information.
Mr. Cardin, do you have a few questions?
Mr. Serge Cardin: Yes, if I can find them.
There is a lot of information and I appreciate it. It's clear enough.
On page 26, you talk about low income rates. How do you define "low income"? Did you establish a benchmark to do your calculations?
Ms. Maryanne Webber: It varies according to the size of the family and of the community. There are several benchmarks. The amount is established based on the average expenses for food, housing and clothing, with a little margin above that.
Mr. Serge Cardin: So, in the case of a family with one child, you establish a benchmark for low income; in the case of a family with two children and two working adults, there is another benchmark taking into account work-related expenses. So what you consider as being a low income varies from one family to another.
Ms. Maryanne Webber: Yes. If you wish, I could send you a table of benchmarks for families and communities of all sizes.
Mr. Serge Cardin: It would be interesting.
Ms. Maryanne Webber: Okay.
Mr. Serge Cardin: You say you are doing your calculations on the basis of the average costs for each category of family. When we went across Canada, several witnesses told us that basic deductions should be established based on real costs, including the cost of raising children. You have done all these analyses on the average cost of raising one child or two children.
Ms. Maryanne Webber: Yes.
Mr. Serge Cardin: It would be interesting.
Ms. Maryanne Webber: Okay.
Mr. Serge Cardin: We are looking forward to getting this information.
As you know, we are the Subcommittee on tax equity for Canadian families with dependent children. On one of your tables, we can clearly see that families where both parents work pay, overall, much more tax than those where only one parent works.
There is not necessarily any inequity at the start. Why is there this gap at the collection stage? Let's take, for example, the case of a one-earner family with a $60,000 income and of a two- earner family with the same total income. In this case, the two- earner family pays a little bit less tax than a person living alone, but it is because the income is the same. It's as if two people earning $30,000 each, for a total of $60,000, decided that one of them would stay at home. It's as if these people could automatically earn $60,000 instead of the $30,000 they had before. Is it a wrong interpretation of the information we got? Your own calculations show very clearly that a two-earner family pays, on average, much more tax than a one-earner family. Does our approach reflect a presentation problem?
Ms. Maryanne Webber: It's a bit difficult for me to talk about equity because it's a question of interpretation and of policy. I can comment in a little more detail on the differences.
What we are talking about here are averages. For instance, on page 22, we show average income. In general, within the population, families with the largest incomes pay higher taxes. We assume that this is the principle on which the tax system is based, that it's what we want to do. Let me give you some facts.
There is one thing I found quite interesting. It's the fact that there is very little change in the available income, as you can see on page 24. Over a period of 15 years, the income has remained remarkably stable; there has been very little change. You can see that as good news, but maybe it's not as good as we think. In fact, people expect their income to grow with time. However, in constant dollars, there has been no change. It might be a reason.
Mr. Serge Cardin: It seems to me that the number of two- parent, two-earner families tends to go down, while the number of two-parent, one-earner families tends to go up. Over time, we will see what the trend is going to be in this regard.
Ms. Maryanne Webber: Up til now, the change has been very slow.
Mr. Serge Cardin: On page 23, you analyze the average income of lone-parent families with earnings. There is nothing about the impact of having children. I am talking about the general category of lone-parent families with earnings. There is no indication about whether these families have one, two, three or four children. The only thing which is indicated is the average income for these families, as a whole. The tax on the average income, compared to government transfers, is relatively high. However, the information is sketchy. I am sure it's important to know whether a family has three or four children when it comes to develop more specific policies for low income people. It would be useful to have that information at some point. It would be good to know whether more specific research is being done.
Thank you, Mr. Chairman.
The Acting Chairman (Mr. Paul Szabo): Thank you, Monsieur Cardin.
Mrs. Dockrill, do you have some questions?
Mrs. Michelle Dockrill (Bras d'Or—Cape Breton, NDP): I have a couple, Mr. Chair. I apologize for my tardiness, but I took Air Canada and I got here when they got me here.
The Acting Chairman (Mr. Paul Szabo): Fashionably late.
Mrs. Michelle Dockrill: This was maybe asked and answered, but I'll ask it.
I'm looking for clarification with respect to the reference to both full-time earners and then dual earners. Can you clarify that for me?
Ms. Maryanne Webber: The dual earner is a broader—
Mrs. Michelle Dockrill: It includes part-time?
Ms. Maryanne Webber: Yes. It includes everybody. The reason I decided to focus in on the full-time and full-year earners is because it's a more clearly defined group. If you think about all dual earners, there are all sorts of combinations—for instance, people who are unemployed part of the year, and people who systematically work part-time while their partner is full-time, full-year. There are all sorts of combinations. We have data on them. But I think that in order to make sense of it you have to get down into the nitty gritty of the different work patterns. That's why I thought for the purposes this morning I'd focus on full-time, full-year.
Mrs. Michelle Dockrill: And dual earner I assume is inclusive of one parent earning some income, whether it's part-time—
Ms. Maryanne Webber: That's right.
Mrs. Michelle Dockrill: —at home, producing a product, a craft...
Ms. Maryanne Webber: Wages and salaries or self-employment income.
Mrs. Michelle Dockrill: I have one other question. You talk about the average government transfers in your chart on page 19. I'm wondering if you have any data on the percentage of parents receiving provincial assistance who have some of their benefits clawed back by the provincial governments.
Ms. Maryanne Webber: Not that specifically. I do have information on the composition of government transfers, how much of it is employment insurance, how much of it is child tax benefit, how much of it is social assistance, which are the big three, and they tend to vary.
Mrs. Michelle Dockrill: But that would be just how much is being sent out, shall we say. You wouldn't have any figure in terms of once it gets there, it's taken back.
Ms. Maryanne Webber: Unless you're referring to the total amount of taxes. I can do it that way.
Mrs. Michelle Dockrill: Thanks, Paul.
The Acting Chairman (Mr. Paul Szabo): Thank you.
Mr. Pagtakhan, do you have any further questions?
Mr. Rey Pagtakhan: Yes.
On page 22, when you have an amount increased in terms of income for two-parent families of say... I'm trying to gross the figure. If you look at the right-hand graph at say $40,000, and then you look at the left-hand graph and call it $80,000, when you have an increase of about $40,000, your disposable income is about $60,000 on the left-hand side and on the right it's about $40,000, almost essentially the same as before. So in a sense you lose half of your market income when you end up seeing the concept of disposable income between the two graphs of one earner and two earners. Am I right in that interpretation? You literally lose about about half, or close to it?
Ms. Maryanne Webber: The comparison I was trying to draw was that after taxes and transfers the two-parent, two-earner family loses about one-quarter—they have about 78% left—whereas the two-parent, one-earner family loses about 10%. But of course the amount of market income they have in the first place is lower. That was the comparison I was trying to get at there.
You may wish to focus on the disposable income in the two cases. In the one case it's $60,000 and in the other case $40,000.
Mr. Rey Pagtakhan: This is what I was looking at. In other words, one earner, two families exactly the same. The other one is two earners. You increase by being two earners to say $20,000 from $40,000, from one earner to what's close to $80,000 and the two earners. Right?
Ms. Maryanne Webber: Yes.
Mr. Rey Pagtakhan: Then you have, out of the $40,000 increase, let's say $18,000 or $16,000. From $38,000, you only retain about $20,000 of that, from $40,000 to $60,000 in terms of disposable income.
Ms. Maryanne Webber: Yes.
Mr. Rey Pagtakhan: Whereas you only lose maybe $2,000 or $4,000 if you have one earner. I wanted to be sure I am giving the right interpretation.
Ms. Maryanne Webber: I think so. It sounds like it to me. The parents with two full-time salaries are tending to lose more, if you want to put it that way, because of the fact that together they have a higher fair market income.
Mr. Rey Pagtakhan: But am I right in saying that their loss is about 40% to 80%, almost—Paul, help me here. Is the loss about 50% or half of what you have increased? Am I seeing your figures correctly? Close to one-half of what you have increased you lose from whatever situation, income tax or what have you.
Ms. Maryanne Webber: Yes, I guess that would be a reasonable interpretation, because for market income you have $43,000 versus $78,000, something like that, and for disposable income you have $60,000 versus $40,000. Yes.
Mr. Rey Pagtakhan: I just wanted to be sure, because it has implications in terms of how I look at the data later on in terms of the potential policy change. I just wanted to be sure I'm basing my potential recommendation...
On page 24, you were mentioning the constancy of this disposal income over the years, and you mention the term “constant dollars”. What exactly do you mean by that? Just refresh my memory.
Ms. Maryanne Webber: It's adjusted for inflation, so it's showing all of the income levels back to 1981 as if they were in 1996 dollars.
Mr. Rey Pagtakhan: Okay. When you say you have corrected for inflation, does that mean you have maintained the same buying power of the dollar?
Ms. Maryanne Webber: Yes.
Mr. Rey Pagtakhan: Okay, thank you.
Those are my two questions at this point, Mr. Chair.
The Acting Chairman (Mr. Paul Szabo): We may come back to you if you have phrased a couple more. We may have some time.
Maybe what I'll do is jump in here while Mr. Solberg is getting his questions framed.
Going back to page 9, I need some help with this chart. It shows, for instance, that in 1993 approximately 9% of some population of families are single-mother families. First of all, what is the population we're drawing this from?
Mr. Doug Norris: On page 9 the chart shows that the population is the births that occurred in 1993-94. Of all the births that occurred that year, about 9% of them were births to what is labelled here as a “single mother”, that is, a mother without a partner at the time of the birth. So it's the births occurring in that year. It's not looking at families; it's looking at the births.
The Acting Chairman (Mr. Paul Szabo): Okay. I think we have dwelt on this a little bit, but this is separate and apart from the typical unwed mother, where they don't know who the father is?
Mr. Doug Norris: In some of these cases they certainly might know who the father is. They may have been together and separated before the time of the birth. There is a variety of circumstances. As was mentioned, it's even possible that the partner would be deceased. But at the time of the birth the woman was not in a marriage or common-law relationship.
The Acting Chairman (Mr. Paul Szabo): Okay. On page 15...maybe we'll deal with page 14 first of all. I think it's very relevant to our work to distinguish between earned income and non-earned income, but we've put it all together here. It appears in the charts. It tends to make the numbers skew a little bit, because if you have a situation where one spouse, maybe through inheritance or whatever, is earning substantial investment income but in fact is a direct parental caregiver, it would show up here as a dual-earner family, because the way you've defined “earnings”, that includes market income, and market income includes investment income.
Ms. Maryanne Webber: As a clarification, the earnings label means that they either had wages or salaries or they had self-employment income. So I think it's the definition that you're interested in. The only thing is that market income is a slightly broader concept in terms of how much they got out of the marketplace. But you had to have been working for pay in order to show up as a dual earner.
The Acting Chairman (Mr. Paul Szabo): Okay. In a two-parent family where one earner had only investment income and the other had employment, do they show up on the chart on page 15 as two-parent, one-earner?
Ms. Maryanne Webber: That's right.
The Acting Chairman (Mr. Paul Szabo): On page 19, the transfers that you referred to, this is all levels of government?
Ms. Maryanne Webber: Yes.
The Acting Chairman (Mr. Paul Szabo): Okay. So welfare is included.
Ms. Maryanne Webber: Yes.
The Acting Chairman (Mr. Paul Szabo): With regard to federal contribution, the question before us has to do with the tax equity, not only of the tax system but of the tax and transfer system, and we're probably going to have to look at certainly how we deal with EI and the child tax benefit, which are the two principal direct federal transfers.
On page 21, what I've written down here is this whole question of one versus two earners in this particular chart on page 21, and therefore we would ostensibly just be looking at the first three bars. It shows that, by disposable income, a two-parent, one-earner family averages less than $40,000 of income. Two-parent, dual-earner families or full-time earners are somewhere between $50,000 and $60,000, as much as 50% more income for a dual income-earning situation. Does this conclude that if you were going to do tax comparisons, analysing families on an equal family income basis doesn't track reality, one- versus two-income earners?
Ms. Maryanne Webber: You mean because there are many dual-earner families that aren't two full-time?
The Acting Chairman (Mr. Paul Szabo): No, because one-earner families make only two-thirds, at most, of what dual earners make, so that any comparison between the two should take into account that the prevalence is that, one earner versus two, the two-earner family always makes more. I mean the prevalence of the numbers.
Ms. Maryanne Webber: You mean how would they look if you actually looked at a distribution—how many make $10,000, how many make $20,000, how many make $30,000, that sort of thing?
The Acting Chairman (Mr. Paul Szabo): When you start dealing with averages, etc... All I'm suggesting is that to compare a $60,000 one-earner family to a family that has two at $30,000...is this a typical representation, comparing the situation of a one-earner versus two-earner family? Your chart seems to say no.
Ms. Maryanne Webber: Yes, unless you find the right benchmark for comparison, the two-parent families with both full-time. They're both available.
The Acting Chairman (Mr. Paul Szabo): Okay. On page 30, low income, this is not quite LICO that you've referred to as low income?
Ms. Maryanne Webber: Yes, it's after-tax low-income rates based on after-tax LICOs.
The Acting Chairman (Mr. Paul Szabo): So you are using the LICO measure as a low-income benchmark?
Ms. Maryanne Webber: Yes.
The Acting Chairman (Mr. Paul Szabo): Okay.
I was really fascinated by the average spending for child care. We had testimony from others—I think HRD as well as Richard Shillington—that showed average spending to be quite a bit less than you show here. In fact, the average for 1996...even the income statistics produced by Revenue Canada showed that in 1996 the total deductions claimed were only $2 billion spread over less than 800,000 claimants, which means that the average claim is somewhere in the range of about $2,000.
Ms. Maryanne Webber: Probably the difference is due to the fact that this is actual out-of-pocket spending, so we're looking at situations where claims aren't being made, or where more is being spent than can be claimed, because this is out of a spending survey.
The Acting Chairman (Mr. Paul Szabo): Okay. That's helpful, because the numbers need some analysis or some explanation, which I don't think we're going to find out without in fact doing survey information. In some of the terminology presented to us the reference was “unreceipted child care”, which is a novel way to describe a situation. I didn't think it was an option in terms of income declaration. In any event, we'll have to deal with that.
The last thing is that you made a statement that we really want to get down to the nitty-gritty so we can get down to work patterns. One of the things I haven't been able to glean from here is this family situation where one of the parents is not working full-time, where there's only a part-time or casual attachment. The proportion of families that in fact are providing direct care and still have some level of earned income really is relevant to us, I think. They could do that by working mirror shifts to a spouse, or in fact the amount of earned income could be very modest; it could be maybe only one hour of earned income and they fall into this category, which would tend to really distort the reality.
Do you have any information about the distribution for those who have only part-time income? How many in fact are notional levels of income as opposed to something that shows there really is a demand or a need for third-party care because of that income?
Ms. Maryanne Webber: We can put some data together for you that look at the income of one spouse compared to the income of the other spouse or the hours worked during the year by one spouse compared to the other spouse. That would be a way of getting at all of those situations where they're not both full-time, full-year and just what the patterns are—
The Acting Chairman (Mr. Paul Szabo): You define full-time as 30 hours a week or more.
Ms. Maryanne Webber: Yes.
The Acting Chairman (Ms. Paul Szabo): I would assume that if somebody was making, say, $5,000 a year of earned income, even using a nominal $10 an hour, that could translate into a full-time care situation.
Ms. Maryanne Webber: Actually, I was quite surprised that the proportions reporting out-of-pocket spending on child care were so low. Even for the two-parent families where both are earning full-time, it's only 41% who are reporting it. A lone parent with earnings—it's only 31%. It's quite surprising; I don't know if these are informal arrangements that are being made or, in the case of the two parents—
The Acting Chairman (Mr. Paul Szabo): There doesn't seem to be a lot of good reason why one would not take a deduction that's available to them when they have a legitimate third-party care arrangement that they've made. However, some have suggested that the informal arrangements, which are basically agreements or understandings that I won't claim the income if you don't declare the deduction, mean that people who possibly are on social assistance or collecting EI benefits or even old age security, which are subject to clawbacks for every additional dollar of income they might earn, would tend to be an inducement to maybe share the thing. That's a possibility.
Certainly the other would be, as we've discussed about the casual or the part-time, there may not in fact be a need for the care, or the kinds of spending are for specialized things, like a nursery school, or respite care, or something where it would be hard to tie to the earned income aspect. I suspect there's a range of considerations, but I think initially it appeared to us, from the analysis of the 1996 income statistics, that for those taxpayers who had taxable income, only one-third of dual-income-earning families who could have claimed a child care expense actually did.
If you look at all families, I think it's below 20% of all families in Canada claim this child care expense deduction. As you've shown in one of your charts, for two-parent, full-time-earner families, the average spending in 1996, when the upper rate was $5,000 for a pre-school child and $3,000 for a school-age child, the average claim was about $3,700 or $3,800. I suspect if you looked at it over income distribution, we would probably find that higher income earning, dual-earner families are purchasing more expensive care than lower, and that would certainly be an interesting one, because the child care expense deduction by its very nature is a regressive deduction, in that it benefits higher-income earners over low. So there is certainly a broad range of benefits here.
I've hogged enough time here. Mr. Solberg, have you got some questions?
Mr. Monte Solberg (Medicine Hat, Ref.): Yes, I do. Thank you, Mr. Chairman. My apologies for being very late. I really do apologize.
The first question I have, and perhaps the chairman asked this... I missed it if he did, but he kind of talked around it, and he maybe asked it too. There is no graph here that compares single-income and dual-income families making the same total income. Why is that?
Ms. Maryanne Webber: At this point what I was looking at were averages for the population as a whole. If you're interested in picking two families that have the same market income, where one is one-earner, the other is two-earner, and looking at their disposable income, that sort of data could be provided. At this stage what I was doing was kind of a broad brush—if you look over Canadian families as a whole, this is what it looks like.
Mr. Monte Solberg: I think that would be helpful if you could provide it. And to be fair, it would be good... I don't know if you have things like expenses as well that could go along with that. That would be a helpful thing to have.
Ms. Maryanne Webber: Okay.
Mr. Monte Solberg: On page 20, the average family with both parents working full time paid $18,500 in income tax, about twice the amount of two-parent families with one earner. First of all, do you know offhand what those numbers actually are? What would that be, $18,000—
Ms. Maryanne Webber: It's $18,500.
Mr. Monte Solberg: And the other one, the two-parent, one-earner?
Ms. Maryanne Webber: I think it's $9,700.
Mr. Monte Solberg: Okay.
Ms. Maryanne Webber: I believe so, yes.
Mr. Monte Solberg: Okay. On page 19, can you tell me what is the nature of these transfers? What types of transfers are we talking about on page 19?
Ms. Maryanne Webber: The three most common ones, or most important in terms of their impact on income, are child tax benefit, employment insurance, and social assistance. Those are the three most important ones. But depending on what family type you look at, one will be more important than the other.
Mr. Monte Solberg: Right. Have you done a breakdown of the composition of the transfers for two parents, full-time earners, versus two parent, one earner?
Ms. Maryanne Webber: Yes.
Mr. Monte Solberg: Is that in here somewhere?
Ms. Maryanne Webber: It's not in here.
Mr. Monte Solberg: Okay.
Ms. Maryanne Webber: I can give it to you after or I can summarize it right now, if you wish.
Mr. Monte Solberg: Well, sure, if you could just summarize it.
Ms. Maryanne Webber: Okay. For two parents where both are working full-time, about 58% receive child tax benefits. The average amount they receive is $1,300. For two parents with one earner, 91% receive the child tax benefit. The average amount received is $2,200. But as I mentioned earlier, the average family size, or the number of children in two-parent families with one parent earning, tend to be larger.
Mr. Monte Solberg: Right.
Ms. Maryanne Webber: So that explains that. Then if you look at employment insurance for the two-parent families where both are earning full-time, 11% receive employment insurance. The average they receive is $4,500. For the two-parent families with one earner, 21% receive employment insurance. The average they receive is $6,400. I can give you these numbers after if you like.
Mr. Monte Solberg: Sure, that's great.
Ms. Maryanne Webber: When it comes to social assistance, there are 13% of the two-parent, one-earner families who are receiving social assistance, which is lower than in the lone-parent families. You know, it goes up to 19% for lone-parent families with one earner with earnings, and 77% for lone-parent families with no earnings. That's where the bulk of the social assistance is going.
Mr. Monte Solberg: Okay. Now, I have another question just about the composition of these numbers. I'm wondering, when you look at the single-income families versus the dual-income families, I would suspect what you would have on the single-income families would be a small number of people with very high incomes, single-income earners—probably not a large number. And there would be a whack of people who are low-income earners who really drive the average down. Would that be correct?
For instance, I would imagine there would be a lot of doctors, who might be people who would drive up the single-income-earner average, and a lot of other folks who pull it back down the other way. I guess what I'm saying is I suspect there would be a difference between single- and dual-income families in the make-up of that average, quite a difference. Would that be correct?
The Acting Chairman (Mr. Paul Szabo): You're talking about the family income situation.
Mr. Monte Solberg: Yes, I'm talking about family incomes here.
The Acting Chairman (Mr. Paul Szabo): Actually we had some pretty extensive testimony from HRDC as well as from Richard Shillington on this. It showed that given the distribution of a husband's income, right across the full spectrum, including right up to over $100,000 of income, the choice to have full-time, part-time, or stay at home was the same right across the whole spectrum of husband incomes. In fact the decision whether to provide direct parental care was ostensibly insensitive to family income—one-third, one-third, one-third.
Mr. Monte Solberg: That's interesting.
The Acting Chairman (Mr. Paul Szabo): Yes, it was.
Mr. Monte Solberg: Yes, that is interesting.
The final thing I want to just note more than anything was on page 23. I thought this was really interesting.
The first graph shows that income taxes are higher than the government transfers. So here's somebody, a lone-parent family, making $27,000, the average income, and those people are not making a lot of money and they're being taxed more heavily just through income tax, let alone GST and the rest of it, than they're given back in transfers. So they come out as net losers, which to me is quite striking, because I would have thought somebody making $27,000 as a lone-parent family would be regarded as being pretty low-income.
Now, what would be the low-income cut-off for somebody who's a low single-income earner like that, a lone-parent family?
The Acting Chairman (Mr. Paul Szabo): It's the average of these lone-parent families, so whatever you used as the...
Ms. Maryanne Webber: It's just a bit complicated, because the low-income cut-off varies by family size and it varies by size of community.
Mr. Monte Solberg: But you must have chosen a model, because you have the government transfers on there, so you must know how many children are in this family.
Ms. Maryanne Webber: What you see here is the average for all lone-parent families with earnings. That's what you're seeing there.
Mr. Monte Solberg: Okay. So any idea what that would be, what the average—
Ms. Maryanne Webber: What the average cut-off would be? I can't tell you off the top of my head. But I certainly will provide a table afterwards.
The Acting Chairman (Mr. Paul Szabo): For a family of four in Ottawa it would be $32,000. If you assume a family of two, it would be somewhere around $24,000 or $26,000.
Mr. Monte Solberg: So this would be pretty close to the low-income cut-off, but obviously by the time they tax you, you're actually going to be worse off even with government transfers, even if you're right around the low-income cut-off.
Ms. Maryanne Webber: Yes. The low-income rate for that group of families is 26%. The chart on page 26 gives you an idea.
Mr. Monte Solberg: Oh, yes. Okay. Thank you. That's helpful. That's all I need for now.
The Acting Chairman (Mr. Paul Szabo): If I may, I want to slip one in here. On page 31, the very first summary point you have is families with two parents working full-time outnumber... I think there's a word missing here. I assume two—
Ms. Maryanne Webber: No, what I meant was families that are a couple. “Two-parent families” would have been clearer.
The Acting Chairman (Mr. Paul Szabo): Okay, two-parent families—
Ms. Maryanne Webber: With one earner.
The Acting Chairman (Mr. Paul Szabo): —with one earner, by 50%. If I understand that, you're saying two parents, two full-time earners, is 50% higher than two-parent, one-earner.
If the Shillington data is right, two parents, two earners of any amount is two-thirds; only one-third have one full-time caregiver—no, only one earner. So in fact the Shillington data says it's 100% bigger.
Ms. Maryanne Webber: I was basing that on the chart on page 15, where you can see the relationship between them. Was Richard Shillington talking about the same families, the two full-time, full-year earners compared to families with—
The Acting Chairman (Mr. Paul Szabo): Two full-time earners was one-third of the cases; one full-time, one part-time, some earned income, was also a third; and one where one was full-time and the other had no income. So if your broad statement says families with two parents working full-time outnumber two-parent families with one earner...
Ms. Maryanne Webber: I was looking at the 1996 figure for the chart on page 15 and comparing the dark blue line, which is the families with two full-time earners, to the green line, the families with one earner, and just looking at the proportion of all families that those two make up.
The Acting Chairman (Mr. Paul Szabo): I think the area we have to get into, and it's kind of what you suggested in your statement about getting down to work patterns, is to look more carefully at the data with regard to those who do not have full-time earnings to find out what the distribution is there. If the information we've been given so far is correct, the conclusion is that more than half of families in Canada with children under age 18 provide direct parental care.
That is in stark contrast to the generalizations that have been floating around quite a bit that the vast majority, almost two-thirds of families, are in the paid workforce. It's not that black and white. If the analysis of the earnings—and I'm talking about active income as opposed to investment income—if that distribution is provided we'll get a better idea of how many families have arranged their affairs so they can in fact meet their child care responsibilities and still have some earned income.
Ms. Maryanne Webber: We can provide that for you from the spending survey.
The Acting Chairman (Mr. Paul Szabo): That would be very helpful.
Mrs. Michelle Dockrill: I just have a comment. I've got Richard's presentation here, and it's full-time, full-year, some work, and then did not work. It's not full-time, part-time, no work. It's full-time, full-year, some work; and then no work.
Ms. Maryanne Webber: That was the break-up of the third, the third, the third?
The Acting Chairman (Mr. Paul Szabo): Yes. The “some work” is what we're trying to get more information about. In your presentation it's basically “works less than 30 hours a week”.
Mr. Solberg, a final question.
Mr. Monte Solberg: It's just a question with respect to government transfers. Does that include GST credit?
Ms. Maryanne Webber: Yes.
Mr. Monte Solberg: Well, how is it that on page 23 you have GST credit included in income as a government transfer but you don't take GST out as a tax? Doesn't that kind of skew the results? For instance, on page 23 you show them getting more income than they would really get in disposable income if you don't take out what they pay in GST.
Ms. Maryanne Webber: Oh, what they pay—yes.
Mr. Monte Solberg: It comes after disposable income. So this disposable income then is not disposable income in the sense that most people—
The Acting Chairman (Mr. Paul Szabo): It's for consumption purposes.
Mr. Monte Solberg: So that's a little bit misleading in a sense—
The Acting Chairman (Mr. Paul Szabo): You couldn't say that in the House, but okay, you can say it here.
Mr. Monte Solberg: Well, no, I'm not suggesting you're doing this on purpose, but I mean if people are getting a GST credit back but it's not reflected that they're paying it out in the first place for their purchases, then obviously people get the wrong impression about how much money people are...
The Acting Chairman (Mr. Paul Szabo): In the sense of Statistics Canada I would suggest that since everybody does not qualify for the rebate, it's better to show the amount that is received by those to come up with disposable income. In the vast majority of cases of families with income over $30,000 a year there is no GST rebate. However, it's an interesting thought.
Mr. Rey Pagtakhan: In the summary, the fastest-growing family type are lone parents without earnings. Are you able to estimate the rate of growth?
Ms. Maryanne Webber: Not off the top of my head. Well, I think I had in here that from 1981 to 1996 they more than doubled. It's the smallest group I was looking at but the fastest-growing one.
The Acting Chairman (Mr. Paul Szabo): It's tracking the family breakdown rate when you combine divorce and breakdown of common-law relationships.
Mr. Rey Pagtakhan: The average investment income when you graduate, from earned income to market income, is about $4,000?
Ms. Maryanne Webber: I can't tell you offhand, but I can find out. I don't know what the average is.
Mr. Rey Pagtakhan: I saw one graph here. When you only look at earned income, it would be about $38,000, and when you go to market income it's about $42,000. It's about a $4,000 differential.
Ms. Maryanne Webber: I didn't present any data in here on market income separately, what is earned and what is obtained from investments. I haven't dealt with that here. Basically, wages and salaries are 80% of total income overall. They drive everything for the vast majority of families.
Mr. Rey Pagtakhan: Thank you, Mr. Chair.
The Acting Chairman (Mr. Paul Szabo): Thank you very much, Mr. Norris and Ms. Webber, for your presentation. I think it's helping us to paint the picture of what we're dealing with here. I thank you very much for your participation.
Ms. Maryanne Webber: Thank you.
[Editor's Note: Inaudible]
Mr. Rey Pagtakhan: ...you promised Mr. Solberg and Mr. Szabo?
Ms. Maryanne Webber: Certainly.
The Acting Chairman (Mr. Paul Szabo): If members will please stay in their places, we'll move on to our next witness.
I'd like to welcome at this time Judith Maxwell, who's the president of the Canadian Policy Research Networks, who has appeared before the finance committee on a number of occasions on a broad range of matters, particularly prebudget consultation issues.
We welcome you here today, Mrs. Maxwell, on our subcommittee, which ostensibly is dealing with tax fairness for Canadian families with dependent children. As we have found throughout our hearings, fiscal policy and social policy are inextricably linked, and continuing to have that fibre in front of us makes sure we don't violate what I suspect is a truism. In any event, welcome to our committee. We look forward to your comments.
Ms. Judith Maxwell (President, Canadian Policy Research Networks): Thank you very much, Mr. Chairman. Good morning to all.
I'd like to try to do two things this morning in my opening remarks. First of all, I want to comment briefly on the fluidity of family structures and working patterns. Then I have circulated a handout, which gives you a brief overview of the models of family policy we've identified in some of the comparative works we've published recently.
My main message is that we should not create a conflict between one-earner and two-earner families. The substantive issue we have to address as a society is the way the tax transfer system treats families with children relative to families without children.
Let me just describe briefly what we can see emerging from our research with respect to the fluidity of family structures. I wasn't here for the full StatsCan presentation, so I don't know if they've already dealt with these issues or not, but I'll only take a couple of minutes.
First of all, when a couple forms a family unit it's likely that both will work for a period of time. Then, as career changes happen and as children arrive, it's quite frequent that one adult will stay at home for a period of time that may vary from a few weeks in some cases to a few years in others. As you've just been discussing, one adult may choose part-time work for a period of time and then return to full-time work when the children become more independent.
In short, one-earner families or one-earner couples are not, by and large, a separate breed of Canadians. They are an ever-changing mix of people at different places in their life course. They're making social and economic choices about balancing work and family responsibilities.
Another interesting fact about one-earner couples is that in 20% of those couples it's the woman who is the breadwinner. So even when we do have a so-called breadwinner couple, they don't conform to some of the traditional thinking.
Another important consideration, as you've just discussed, Mr. Chairman, is that one-third of the couples, whether they're one-earner or two-earner couples, will break up while the children are still at home and will create a lone-parent situation. During that period, six out of ten families will be living in low incomes, most of them in deep poverty.
Finally, as Boessenkool has documented in a study he did with Davies for the C.D. Howe Institute, a high proportion of one-earner couples are earning low incomes. It's interesting to try to figure out cause and effect. Are they low income because they're one earner, or are there other elements in their lives that lead to this?
We've recently published a study that looked at only a small sample of 25 families, but looked in depth at the choices they were making about whether to be in the labour market or not. It was quite clear to us that many of those families do have a social bottom line: that to meet the needs of their children or to meet their own needs for further education, they will opt for one of the parents to stay at home and obviously opt for a lower income for a period of time. But when you look at the market choices these families face, that social choice may also not be so surprising from an economic point of view, considering the very high rates of marginal effective tax rates that prevail at the low-income end of the spectrum, the low wages that are offered in many of the so-called non-standard jobs that many of these families would have had to contemplate, and the high cost of quality child care.
In summary, in most cases the one-earner couple is not a static lifetime choice as far as we can see. We don't very often now encounter the model of the man as the breadwinner and the woman as the lifetime homemaker the way we did in earlier times. Having said that, though, I know the reason this committee was formed was because of the particular challenges the one-earner family faces. That includes higher tax burdens, the loss of current income while not working, and the loss of future income while not working because of the loss of pension rights and the lost chances at promotions further down the road.
What most one-earner and two-earner couples have in common, if they have children, is what we call the time crunch, or the conflict between work and family responsibilities. In our work on this project I'll talk to you about in a moment, we've spent a lot of time talking to Canadians in a variety of different models, from community discussion groups to organized focus groups, about their values and preferences around policies for families and children. There's very strong consensus within that group around the need for flexible work arrangements, for better and more accessible child care, and for better parental leave arrangements that make it possible for parents to spend more time with their children and to find the kinds of child care choices that are adaptable to their needs.
I know you've heard this often from many interveners in these hearings, but I think from a tax fairness point of view, the principal tax problem in Canada is that the tax system no longer recognizes either the non-discretionary costs of raising children or the benefits to society as a whole when parents bear children and then nurture them to become healthy citizens, workers, and parents. Thus, while it's important not to discriminate against one-earner couples, it is critical that the solution to that problem not take away from the tax treatment of the two-earner couple, because both of them really face the same challenge. They have taken on the responsibility of bringing children into the world, and they clearly, from all the evidence that we can see, are quite prepared to meet that responsibility and make the necessary sacrifices, but they do need what I would call supportive arrangements from society as a whole, whether that's the employer or the tax system or the education or the health care system or community services of various kinds.
With that brief discussion on the fluidity of family structure, let me take you very quickly through the highlights of this short handout I've provided for the committee.
The project the Networks are now involved in includes a study of models for family policies. We did several analyses to compare the systems used by other countries. It's important to note that in every country, there are changes which have an impact on the structure of the family, the labour market, the role of the State, etc. So there is no reason to believe that all countries should choose the same kind of policies. There are several models which can be taken into consideration.
The models we've identified as being most prominent in the countries that we studied are, first of all, the one we call the breadwinner model, shown in the third box on the first page, which is a model that encourages women to stay at home with their young children. Both Germany and the Netherlands would be examples of that kind of model.
Other countries in Northern Europe, particularly Sweden and Norway, have pursued a gender-equality model, and there the effort is to create a level playing field for men and women whether they are at home or at work. What tends to flow from that is a set of policies that are very child centred and focused on healthy child development.
Other countries are more neutral about who does what and whether parents work or not. France and Australia would be examples of what we call the choice model, where there is quite a wide array of policy supports for children in families that do not prescribe any particular set of behaviours. This too is a child-centred model.
The fourth model we've highlighted we call the paralysed model, because it's a model that is caught between different ideologies and ends up very drastically limiting the role of the state and the contribution that society as a whole makes to the support of families and children.
Which models might inform Canada? I would argue that it would not be a good choice to use the United States as our model, because it is a paralysed model. I think that while we don't necessarily need to adopt the European models, we can certainly learn from them.
What I've given you here in the handout is a brief comparison of the Norwegian and Netherlands models. The Norwegian is the gender-equality approach, very focused on solidarity in society, whereas the Netherlands has more of a breadwinner model, although it is in transition these days. There is a much more modest role for the state in the Netherlands, but there's a key role for employers as supporters of children and families.
If you look at the first box on page two, you can see a rough comparison of the two on four headings. First of all, there's the universal family allowance. Secondly, there are much better maternity and parental leave arrangements than we have in Canada, and a stronger commitment to child care than we have here. There is a lot of emphasis through both regulation, and in Norway through the time account, that supports flexible working arrangements. And in Norway there is advanced maintenance, which means guaranteed maintenance for lone parents in custody of their children.
In both countries the tax structure favours families with children over families without children, but there's no particular difference between single- and two-earner couples.
Now, the reason I picked Norway and the Netherlands is that when we compare outcomes for children, those two countries rate very well compared to Canada and the United States. So if your objective standard is that you want to grow healthy citizens for future parents and workers, then it seems to me that judging a country by its outcomes for children is a good benchmark.
Overall, Canada falls short for a number of reasons. We have a high percentage of women who have children and who work full-time. We have a long work week and a long work year in this country, compared to Europe. Services and supports are very limited in most provinces, very fragmented, although Quebec is clearly ahead of the rest of the country on this.
The targeting that has been introduced in our programs means that a lot of people fall through the cracks. We have very limited pressure on employers to provide flexible working arrangements or parental leave, and I'm sure you've been told many times in these hearings about the shortcomings of our child care system.
Perhaps I should stop there, Mr. Chairman, so that I don't talk too long. I would certainly be glad to talk to you about any of these models or any other questions that members of the committee might wish to pose.
The Acting Chairman (Mr. Paul Szabo): Thank you very much, Mrs. Maxwell.
I'm sure the members have some questions and comments to make. We'll start with Mr. Solberg.
Mr. Monte Solberg: Thank you very much, Mr. Chairman.
Thank you, Ms. Maxwell, for coming back again. It's good to see you again. As always, you bring a very interesting presentation.
I would start by noting what you already said at the beginning, which is that the big question is to what degree the policies influence people and cause them to act as they do, and how that would change if you changed the incentives. That's what we're struggling with here.
I want to ask you specifically about the Norway and Netherlands models. You mentioned that according to outcomes, they do well. What do you mean by their outcomes?
Ms. Judith Maxwell: As you may know, Mr. Solberg, here in Canada we have the national longitudinal survey of children and youth, which surveys a cross-section of Canadian children every two years. It has in it a number of questions that give you information on the health of the child, the behaviour of the child, the performance in school—the overall sense of well-being of the child. So there's emotional functioning, physical functioning, learning functioning, etc.
What Shelley Phipps, who did the study for us, did was look at other countries where similar questions had been posed in surveys. Norway was one of the other countries where there were similar data. There are a lot of cautions about comparing one country with another, because of different cultures, different traditions, etc., and although you have objective information, you have to be very careful about the context in which it's been created. Nonetheless, there is a quite wide range of functionings. The Norwegian children do better than those in any of the other countries for which she had data.
Mr. Monte Solberg: Okay. I'm glad you attached that caveat, because it would strike me that Norway being, in a way, hived off, with a completely different language, and not stuck on the border with the U.S. as we are... I would think all those cultural factors would make a difference.
Ms. Judith Maxwell: The interesting thing about Norway, Mr. Solberg, is that average incomes are lower than in Canada. The average family disposable income is lower than in Canada. So while we would rate higher on income, we're not rating as high on the well-being of children.
Mr. Monte Solberg: No, I appreciate that. Thank you. That's a good point.
Now with respect to the tax structure, you said, in the little box here, that tax structure favours families with children in both Norway and the Netherlands, and that there is no difference between single- and two-earner families. How do they manage that? Is that some sort of tax credit that they would use? How would that work?
Ms. Judith Maxwell: I have the study here with me, Mr. Solberg. I don't think I could give you the details here, but I would be glad to leave the study with the committee so you could make the comparison.
Mr. Monte Solberg: Okay. Sure.
I have a question that flows from that. You stated that the U.S. model is paralysed. Can you just run through briefly what the big problems are with the U.S. system?
Ms. Judith Maxwell: Well, in the United States there are... I can't make a direct comparison with the two tax systems for you, but what I was thinking about in terms of the supports for families and children is that the only nationally available programs that support children are those that are aimed at the very poorest families. For example, there is only welfare available to the poorest families where the husband is absent, etc.
Mr. Monte Solberg: Right.
Ms. Judith Maxwell: It's really a very narrowly defined sphere of influence for the public sector. There is little or no publicly provided child care or organized child care; that is left entirely to the market and to the private sector. And there is no organized framework for maternity or parental leave. So there is no system that supports families in making their own savings in that direction. There's no payroll deduction system and there's no contribution on the part of employers unless they choose to do so.
Mr. Monte Solberg: How do their outcomes in the U.S. compare to Canada?
Ms. Judith Maxwell: They're even worse than Canada.
Mr. Monte Solberg: So there's a similar longitudinal study then?
Ms. Judith Maxwell: There are a number of parallel questions. In fact in many ways it's easier to compare Canada with the U.S. than it is Canada with Europe, because there are more common databases, if I can put it that way.
Mr. Monte Solberg: I'm going to leave it at that for now, Mr. Chairman.
The Acting Chairman (Mr. Paul Szabo): Okay. We might be able to come back.
Mr. Serge Cardin: Thank you, Ms. Maxwell, for your presentation.
Of course, I want you to ask the same question as Mr. Solberg regarding the tax structure which favours families with children but which doesn't make any difference between one-earner and two- earner families. You just mentioned that information is given in the abstract of your study which will be made available to us.
In the course of our consultations, most witnesses told us that they didn't want the government to influence the choices people have, whether they decide to stay at home or to go back to work after a while. They don't want the government to influence their decision or to encourage them to decide one way or the other. They want to have the choice. They want the government to support them to some extent, whether they decide to stay at home to raise their children or to remain in the work force.
You give us facts. You give us an assessment of the various models, but you don't recommend anything.
Ms. Judith Maxwell: I'm not in a position to make a direct recommendation to you on that question today, although I would note that it does cost more to provide the choice. It's very attractive to be neutral and to give parents the choices whether to work, whether to stay at home, etc. But in that case, you need better parental leave arrangements than we have now, so people have jobs to go back to when they finish caring for their children, and you would need better child care, so if people do choose to work, quality child care would be there for them to use.
What we can see if we look at the Quebec model is that it really is very close to this model, although not all the pieces have yet been implemented where the government has now introduced much more comprehensive access to child care and is working to try to create better arrangements with respect to parental leave.
In Canada we clearly, because we are a decentralized federation, like to maintain systems where provinces have choices about the mix of policies they would like to pursue, and we do see quite significant differences from one province to another at this point in Canada. We have a project in progress, which will be completed in the fall, which is comparing in more detail the policy approaches of six of the provinces, including Quebec.
Mr. Serge Cardin: There is another issue which was raised by a number of women who were staying at home, and that's the recognition of unpaid labour. Was that included in your research? I am talking about people who stay at home to raise and to educate their children.
People who work outside the home are entitled to a child care expense deduction. With a rather sophisticated child care program, parents who work outside the home clearly have an advantage. So parents who stay at home to raise their children want this unpaid labour recognized. Has your research group studied this issue of unpaid work?
Ms. Judith Maxwell: I think the principal instrument we've used in the past to support parents who work is the child care expense deduction. In effect, rather than have a policy with respect to children and families, we've taken a very narrow work-related approach in tax policy and created the child care expense deduction, which is an absolutely essential support for the people who do work, but it does create this imbalance with those who choose to stay at home.
It seems to me that one of things the committee might wish to consider would be some way to redress the balance without taking away from two-earner couples finding a way to support the one-earner couples. One obvious thing to look at is the recommendation in the Boessenkool-Davies article to create a universal deduction for children and perhaps moderate the size of the child care expense deduction by comparable amounts so that we don't make the two-earner couple worse off, but you have recognized that there are sacrifices being made and that supports are required for the one-earner family.
It seems to me it's important to always look at the balance between the two and not see them as being in conflict with each other, if I can put it that way, because each type of family structure is carrying a serious burden and actually carrying on a very important societal responsibility.
Mr. Serge Cardin: It appears that it's the treatment of one- earner and two-earner families, who have the same income, which is inequitable. Basically, that's not what the main problem is; the real issue is how we can support children and people who stay at home. For instance, we could have a basic deduction according to the spouse's income or deductions, credits or benefits according to the average cost of raising a child, depending on his or her age. We know that this cost varies according to the age of the child.
We could then have a policy which will not require necessarily modifying the basis of the Canadian tax structure, which is the individual. We could have additional benefits reflecting the real costs families with children have to meet.
Ms. Judith Maxwell: Yes.
Mr. Serge Cardin: Thank you.
The Acting Chairman (Mr. Paul Szabo): Thank you.
Mrs. Michelle Dockrill: Thank you very much, Judith.
As has been clear to the members of the committee for the last few weeks, there is no easy solution. Correct me if I'm wrong, but what I hear you saying is that there are a number of issues if we clearly want to deal with the inequities.
It was suggested, Judith, by one of our presenters when we went across the country that they felt that targeting parental activity is futile, and this subcommittee should focus on children instead. Is it safe to say you would agree with that?
Ms. Judith Maxwell: I do agree with it, but I do it with the understanding that children live in families and that there's no other way for us, as a society, to support them effectively. But because there are still a lot of value conflicts in Canadian society around issues to do with family, it's much easier to achieve consensus on the issue of the children.
If you look at the second page of my handout, the third box is labelled “State of the Debate”. This is a very brief summary of a very considerable amount of work that we've done on values and preferences of Canadians. And I'm not talking here about ideological conflicts between one group of Canadians and another. A lot of these contradictions are actually inside the head of any individual. And being a working mother, I can attest to the fact that we do have to live with a lot of those conflicts ourselves.
We believe strongly that women should work—most of us do. And also, more than half of Canadians believe that when women work, the children will suffer. So this is the kind of guilt we all have to carry with us as we go about our work, and it affects both the men and the women.
There is a very deep concern about child poverty. I suspect you've heard a lot about that in these hearings. But there isn't a lot of debate about child development, about doing the best we can for all our children. Clearly the ones in poverty are the most at risk, but there is an investment to be made in children that is very important for their future, whatever the income setting in which they live.
We have a double standard about whether lone parents should work. We think they should work, but we think they should care for their kids. We think both of those things at the same time, and yet that's physically impossible to do.
While we have this very strong belief in the work ethic, we have not balanced that with the kinds of supports that are essential, child care being the most obvious example. But we find in Europe examples of much better maternity leave and parental leave arrangements that make it possible to balance the work and the family in much better ways than we do here in Canada.
Where there is the common ground is that Canadians do feel a collective responsibility for children. And if you ask them—and we've done it in a variety of different ways—to really say what are the core things that are the most important to them personally, they will very frequently put investing in children, children are our future. Those kinds of topics come up near the top of their list on a consistent basis.
I think there is a growing recognition among Canadians that while parents will take full responsibility and will make a very considerable personal investment in children, parents have to live in a friendly setting, if I can put it that way, and that they can't function in a vacuum. You cannot function well as a parent if the education system doesn't work well; if the child care is not there; if the health and recreation systems in your community aren't functioning well; if the streets aren't safe; if the housing is substandard, etc. All of those things are a wider collective responsibility.
I think that's why people coming to these hearings have had so much difficulty separating the fiscal from the social, because they are so closely interconnected.
Mrs. Michelle Dockrill: After reading the presenter who made that comment, I think, as we've seen, there is no one answer, given the fact that Canadian families have various configurations and, as we've heard this morning from Stats Canada, continue to change. So certainly from my perspective I thought it was an interesting statement, because if you're dealing with children, if you're targeting children, then the family configuration really doesn't matter. I just wanted to know your views on that.
Ms. Judith Maxwell: Yes, it does give you more neutrality.
The Acting Chairman (Mr. Paul Szabo): Thank you.
Mr. Rey Pagtakhan: Thank you, Mr. Chairman.
Thank you also, Ms. Maxwell.
An earlier statement was made that the policy would affect behaviour. Is that true?
Ms. Judith Maxwell: Yes, if policy is leading, but sometimes it's not. Policy has not supported women to go out to work, but they've gone.
Mr. Rey Pagtakhan: That is the point I'm trying to establish, that there are instances perhaps where choices would be independent of any existing policy. Is that a fair statement to make?
Ms. Judith Maxwell: Yes, but I'm pretty sure that if we had a more comprehensive system of parental leave that would enable the mother or father to stay at home with a newborn child for a more extended period of time, if that option existed, behaviour would change. People really worry about losing their job, losing their chance of promotion, etc., and therefore they end up making really second-best choices because policy is not there for them. I'm sorry to give you a two-handed answer, as usual, but—
Mr. Rey Pagtakhan: No, that's excellent.
You did allude to the Norway and Netherlands models, and the latter is to encourage women to stay at home.
Ms. Judith Maxwell: In the Netherlands, yes, but not in Norway.
Mr. Rey Pagtakhan: Has it succeeded in that goal?
Ms. Judith Maxwell: But there, I think, the policy was constructed out of a fairly large social consensus. What we see now is that some of these countries are beginning to let their policies evolve further because of the transformation in family structure and in the role of women in those societies.
In Norway and Sweden, which have chosen the gender-equality models, they have really tried to change the behaviour of men by encouraging them to stay at home more and to be more actively involved in the family responsibility, as opposed to assuming that the man would be the one who would go to work. But the men have been only slightly responsive to those incentives, so they keep ratcheting up the incentives. There are some aspects of the parental leave and of the time account that are only available if the man takes them, because that was a way of just putting a little bit more of an edge on the incentive.
Now, I'm not arguing that we should follow that policy here in Canada, but there are times when policy has difficulty leading behaviour.
Mr. Rey Pagtakhan: It is fair to say, though, that there are more women staying at home in the Netherlands compared with Norway.
Ms. Judith Maxwell: Yes. The rates of full-time work are dramatically different. Norway is at about the same level as Canada, and in the Netherlands it would be about half the rate we have.
Mr. Rey Pagtakhan: The Netherlands and Norway have excellent outcomes with regard to children in their society. Both Norway and Australia are child-centred, but the policy objective is different. Do both countries have the same excellent outcome on children?
Ms. Judith Maxwell: We didn't have any outcome data for Australia. I didn't include them here because I didn't have that more comprehensive picture.
Mr. Rey Pagtakhan: You will know that in the beginning I thought that was a very sort of visionary statement in terms of policy change not creating conflict between two subject groups. Then you indicate about the need for balance, and I just wanted to be clear that I understood it correctly, that the need to balance is in a sense a consequence, because the ethic of work on its own merit and the ethic of nurturing children are more or less, we can say, of co-equal value in society. Is that a fair summary on my part?
Ms. Judith Maxwell: Yes, I think that is a fair comment that they are co-equal, and in the current situation we force people to make very difficult trade-offs.
Mr. Rey Pagtakhan: You alluded to a universal child deduction and the levelling of child care expenses as the two areas where balancing the approach would be most meaningful with regard to our sort of reference study.
Ms. Judith Maxwell: I'm reluctant to go into a prescription mode today because we are in the middle of a major project and we won't be producing the major policy piece on this until next fall.
But my main point was that you shouldn't fix the situation of the one-earner couple by stealing from the two-earner couple. In fact, they are facing common challenges. Therefore, any option the committee recommends needs to be at least neutral for the two-earner couple as it tries to find a solution for the one-earner couple. I think my most important message is that both are underserved in the current policy environment.
Now, you can't fix all of that with tax policy, by any stretch of the imagination. But I think there is a very strong analytical case to be made for having the tax treatment of families with children differ from the tax treatment of families without children, because of the sense of collective responsibility we have for growing healthy citizens.
Mr. Rey Pagtakhan: You indicated that a major report on your policy study will not be available until this fall. Knowing the work your group has done in the past, it's very likely that it would be a major reference for the type of work this committee is now engaged in. Would it be reasonable to say that we should wait for the results of the full study from your group before we make a definitive recommendation?
Ms. Judith Maxwell: What I've tried to do today is to give you the benefit of some of the work in progress, and I'd be glad to continue to share all the pieces as they come forward. I don't think that even our final report will have the depth of analysis on the tax and fiscal side you will need to solve some of your problems. So our contribution is more to try to put forward the challenges you face because of the specific question that has been posed to the subcommittee and to put that in the context of the wider choices governments across the country, federal and provincial, are going to have to deal with in very substantive ways in the next couple of years.
Mr. Rey Pagtakhan: Conceptually, how should we look at tax fairness? What constitutes tax fairness? When you refer to levelling the payments for child care expenses, should it be really truly identical irrespective of the income of the family?
Ms. Judith Maxwell: I think our system rests quite heavily on an ability-to-pay principle.
Mr. Rey Pagtakhan: But in terms of deductibility.
Ms. Judith Maxwell: That's why it's very interesting to have some sort of mix of a universal deduction of some sort—universal family allowances are very common in the countries that have good child outcomes—and having the recognition built into the tax structure, which in a sense is another way of recognizing the non-discretionary costs associated with rearing children.
The predicament of low-income families is clearly much more severe in Canada than for higher income families. So I think what you want to do is to make some sort of test of any recommendation on the basis of need and ability to pay.
Mr. Rey Pagtakhan: Thank you.
The Acting Chairman (Mr. Paul Szabo): Thank you very much, Dr. Pagtakhan.
Thank you very much, Judith. Your comments with regard to the linkages, the fiscal and the social, are certainly very important. You mentioned a couple of points that we've heard from many witnesses.
There were a couple of issues, and maybe I'll start with principles. If we're going to have policy, it has to be rooted in principles to guide the thinking or the philosophy. You talked quite a bit about outcomes of children. I think even the national forum on health dwelt on this and talked about horizontal equity and the need to invest in children, and that the challenges of both one-earner and two-earner families are much beyond what we're talking about here. The cost of raising children pales in comparison here.
As a principle for our report or for the government, should the interests of the children be the primary focus—a child-centred policy? What about the statement that given that parents are the primary caregivers and given the complexity of the structure, their circumstances and the availability of options, they are probably in the best position to determine the best possible or available care arrangements for their children? Would you subscribe to that?
Ms. Judith Maxwell: I certainly believe that parents not only have but want to have the prime responsibility for the way in which their children will grow up. We need to always not only recognize that but reinforce it in the way we construct policy. The condition on that is that parents can't function well in a vacuum.
The Acting Chairman (Mr. Paul Szabo): Sure.
A third principle is that our policy should generally promote as much flexibility and as many options or choices for parents as possible, to deal with the complexities or the realities.
This one is kind of interesting, where it says our policy should neither penalize nor compel caregiving choices. In other words, the system of taxation or transfers should generally be neutral, or some have suggested social engineering as a concept shouldn't be our motivation.
Ms. Judith Maxwell: Yes. You would not want to penalize the couple because they both chose to work, but you wouldn't want to penalize a couple because one parent has chosen to stay at home for a few years.
The Acting Chairman (Mr. Paul Szabo): You have to respect choices.
Ms. Judith Maxwell: But then you have to distinguish what a penalty is. Clearly, where one person decides to stay at home, the couple is making an economic choice to do without income. I don't think we can leap to the environment in Canada where we would be able to replace that income, for example, in Canadian society.
Then the question is, have we at least recognized the non-discretionary costs associated with the child care and are there options or choices? Are there ways we can enrich that choice through parental leave, maternity leave, or flexible work arrangements?
The Acting Chairman (Mr. Paul Szabo): Okay. In your presentation, I think you even noted that where there is a one-earner situation, the consequences are loss of income, pensions, advancement, etc.—all those things that the paid labour force provides.
I'm not sure if you have any basis for making an opinion, but are you aware of whether or not there is a correlation between the amount of charitable, volunteer, or other community-type work contributed by someone who has withdrawn from the workforce, compared to their level of participation if they were substantially working in the paid labour force?
Ms. Judith Maxwell: I have only anecdotal information on that, but clearly among my personal friends who are full-time homemakers, the contribution they make to the community is enormous. During my own spells of unemployment, I have also tended to get more involved in community work. But we also see full-time working mothers who make a remarkable contribution, in spite of the lack of time they have.
The Acting Chairman (Mr. Paul Szabo): I asked the psychiatrist and chief from Sick Kids Hospital if she had one bit of advice to give parents where both were working and had preschool children, what it would be. She said the best advice she could give them was to take a course in time management. I'm sure that's probably the wisest recommendation anyone could make to parents who are trying to juggle those responsibilities.
The final guideline I pose to you—and I think this is probably an automatic in any event, given lone-parent situations are a growing component and one out of six families in Canada is a lone-parent family—is that our policy should obviously be sensitive and inclusive of those social realities. We have to include them, as opposed to being biased by the traditional family concept. I suspect you do not disagree with the inclusiveness aspect.
Having said that, one of the issues that I think has been very difficult for us to get everybody to buy into is that we shouldn't be pitting certain groups against each other, certainly with regard to their parental choices, but also with regard to interests.
I have to tell you I was a little surprised about the number of references you made to women and the fact that women must work. There was something about forcing parents to make trade-offs. It sounded a little harsher to me than maybe I was hoping to hear, in terms of being respectful of families or parental choices, as opposed to pitting men against women.
I guess in the context of our work and the recommendations we have to make, I'd be really interested in your opinion. Should we try to disassociate ourselves from gender issues?
Ms. Judith Maxwell: I do try to avoid putting this in gender terms. I've tried very hard to talk about one-earner and one-parent families throughout the conversation, but you asked me some direct questions about women, and I tried to respond to them.
We found something very interesting in the work we did on values and preferences. We reviewed the public opinion polling evidence for the last 20 years and did our own small poll. We had focus groups across the country and used a public dialogue process called “The Society We Want” to engage in conversation with a lot of community groups. So these are soundings from quite a cross-section of Canadians, and the polling gives you comparisons over time.
Both men and women in the polling evidence say that women should work. That's from the point of view that women have something to offer at work, but also because the family needs the income. At the same time, the same people worry that the children will suffer. I think 68% of men and women believe that both the man and the woman should work, but 54% or 55% believe the children will suffer if the mother works.
I think this shows we are all living with the sense of what the past was like and what we would like for the future, and we're all struggling with these conflicting perceptions of what's the right thing to do.
The Acting Chairman (Mr. Paul Szabo): Specifically, with regard to our mandate, we're looking at some of the ways in which we can deal with equity, or, some would suggest, discrimination. The C.D. Howe Institute appeared before us and basically outlined that the substantive differences between the tax burdens for one- and two-income-earner families were due to progressivity and had nothing to do with children. It exists when you compare any one- versus two-earner situations, regardless of whether there are children.
They also suggested, as you pointed out, a universal deduction, say, of approximately $2,000, but concurrently you would reduce the child care expense deduction provision so that you maintain parity with the current situation, but allowed yourself, I guess, the funding, or whatever, to create equity.
It seems to me... I'd ask your opinion: Is C.D. Howe in fact suggesting that there is not equity, by virtue of the fact that they want to give a universal deduction and offset some of the child care? It's the before and after. It seems the net result is they're suggesting a tax expenditure for the benefit of those who are not claiming the child care expense deduction, and by virtue of that they must be declaring there is an inequity.
Ms. Judith Maxwell: My understanding of the study was that they're recommending this deduction for all families with children, and then, in order to balance the cost and also to correct the imbalance between one-earner and two-earner families, they suggested the adjustment in the child care expense deduction.
The Acting Chairman (Mr. Paul Szabo): Okay. Overall it's not going to be universal, because there would be two tax expenditures for a two-income-earner family, one being the child care expense deduction, the other being the universal deduction, whereas a one-earner family would only get the $2,000 deduction.
Deductions are regressive by their nature. If we're going to be inclusive of social realities, including lone-parent situations and those who have no income, why would you support, or why do you think C.D. Howe would support, a deduction that would only benefit those who have income to be able to use it, and in fact would benefit higher-income earners over low? It's not only regressive, it's not even inclusive.
Ms. Judith Maxwell: The other complication you need to fold in, from a point of view of tax policy—and I'm not on my strong suit here—is the child tax credit. So the design issues, it seems to me, must be very complex in knitting all these pieces together.
The Acting Chairman (Mr. Paul Szabo): Certainly with the clawback on the child tax benefit, ostensibly it's not a major driver when you consider the value of the benefits or of deductions in the scheme of things.
The child care expense deduction, which currently is $7,000 for a preschool child and $4,000 for a school-age child, and we found this very interesting—I'm not sure whether you're aware and whether or not you can shed some light on it—is only claimed by less than half, and we suspect less than a third, of two-earner couples who are in fact eligible to do that.
On top of that, if we were to suggest somehow a level benefit for all families with children, it would be very difficult to nail down the value or the number that equates to the value of the child care expense deduction per child, simply because it depends on whether it exceeds two-thirds of your earned income, how much you actually spent, and what the marginal rate was of a lower-income earner. In fact, the number could range anywhere from zero to $3,500 for a preschool child.
Do you have any information as to why the child care expense deduction is used by so few families?
Ms. Judith Maxwell: I have some speculations. One of them is the point you were actually making in your earlier conversation with Statistics Canada, which is that couples have staggered work schedules. They might actually both be working 40 hours a week or close to full-time, but one works nights and one works days, or one works weekdays and the other works weekends, and they therefore are taking full responsibility for the child care and providing it directly.
The other possibility is that the children have reached the age where the parents are prepared to take the risks of latchkey children, and we know there are large numbers of latchkey children who, as young as nine or ten years old, get home from school and let themselves in and check in with their mother or their father by telephone, and everybody keeps their fingers crossed until someone gets home from work. There are probably large numbers of situations like that.
Then there would be the other combination, which is the one full-time worker and another part-time worker, who manage their schedules in such a way that one person is still there until the kids go to school and one of them gets home in time to be there with the kids. Or you may have, and I've seen that happen, a neighbour who watches over until a parent gets home.
So people are making trade-offs, in some situations trade-offs that will be quite scary for them. Worrying about your kids while they're at home alone is not a nice feeling, and probably isn't highly conducive to productivity while you're at work. Then also these systems, as we know, when a child gets sick fall apart completely and leave a state of panic on the part of everyone in the family.
The Acting Chairman (Mr. Paul Szabo): In your general assessment and general knowledge about the issue before us, other than maybe some modifications to EI or potentially pension entitlements or connection to pension, talking strictly with regard to the tax and transfer system, would it be your observation or opinion that there is an inequity that should be addressed?
Ms. Judith Maxwell: It appears from my reading on the issue that there is an inequity. But I confess to you that this is not an area where we have done our own in-depth research. I guess my bottom line is that I think it's very important to treat the two-earner family with neutrality, even as you make some moves to redress the situation with respect to one-earners.
The Acting Chairman (Mr. Paul Szabo): Thank you.
Mrs. Michelle Dockrill: I just wanted to follow up on something Mr. Szabo had mentioned with respect to the amount that's being claimed for the child care expense deduction.
Judith, I'm wondering what role—if in fact there is a role—is played here with respect to the child care that's being provided by the underground economy.
Ms. Judith Maxwell: I missed that other option, and it's clearly an important part of the whole puzzle, which is that there is non-parental care being paid for, but it's being paid for under the table, and therefore is unrecorded across the system. We know that exists, but I don't think we can presume it's the full explanation. I think these other coping strategies, as I call them, are also quite evident in society, and what the relative balance of the different scenarios would be I can't give you any guidance on.
Mrs. Michelle Dockrill: Do you think there's a connection with what you see as the inaccessibility to affordable child care to that underground economy?
Ms. Judith Maxwell: Yes. What we're seeing in Quebec now with $5-a-day care for four-year-olds and three-year-olds is a transformation in many ways that will, if you want, surface a lot of income that maybe hasn't been reported before. But at the same time, it's an extraordinary policy for child development, because the access to that kind of child care is not dependent on income, and you will find that there are middle-class children and working-class children in the same day care.
So you're getting, I should think, a much richer array of experiences on the part of all of those children, and probably from a long-term solidarity point of view, you're getting pay-offs for society that go well beyond the very specific objective of having children well cared for.
The Acting Chairman (Mr. Paul Szabo): Thank you very much.
Mr. Cardin, do you have another question?
Mr. Serge Cardin: You are talking about child care services in Quebec. You also mentioned, in your presentation, that support services and programs were limited in most provinces. However, Quebec is more advanced in this regard. Do you think we should extend to all provinces the child care model they have in Quebec?
Ms. Judith Maxwell: In my opinion it's a very enlightened policy in Quebec, but it may not suit every region of Canada. What we can see now is that in New Brunswick there are early childhood centres that are more focused on poor children, but the notion of having a centre in the community for children to go is developing in New Brunswick, and we've recently seen the McCain-Mustard report in Ontario, which recommends moving in a similar direction.
So I think the other provinces have a lot to learn from the depth of thinking that's gone into the Quebec policy, but also as I understand it, the depth of engagement with citizens. I mean, this is not something that's been thought up by government. It's a result of very considerable consultation, and that's a response to a very broad consensus in Quebec society that this is the right direction for public policy.
Mr. Serge Cardin: There are, in fact, differences from one region to the other. It's not the same thing across Canada. However, we can still say that Quebec is in a better position to look after its own family support programs, since it stems from a different approach. If the federal government decided to have a broad early childhood and child care program, each province should be able to decide whether to participate or not and of course, be entitled to a financial compensation.
Ms. Judith Maxwell: As far as I understand, that is definitely the spirit and the principle of the new social union framework, and the provinces will be recognized for efforts they make in similar directions, and the federal government can only consider moving in the direction of a national approach to things after it's had a very considerable consultation and engagement with provincial governments about the directions they wish to take.
The Acting Chairman (Mr. Paul Szabo): Dr. Pagtakhan.
Mr. Rey Pagtakhan: Ms. Maxwell, along the same line, do I have to infer then that in terms of the outcome on children, the outcome on children in Quebec is far superior to the rest of the country?
Ms. Judith Maxwell: No, you couldn't conclude that, because Quebec has very high rates of poverty, so many children in Quebec are facing more difficult circumstances than the average in many other provinces.
You have to be careful to look at the context in which the province is operating. But what would be very interesting to see over the next 10 to 15 years is the improvement in child outcomes in Quebec, if there are any, in relation to the changes in policy that have been introduced in the last few years, in the context of whatever direction we see on the rate of change in poverty.
Mr. Rey Pagtakhan: So when you say the model, if I may interrupt, is better in Quebec than others, we base that on what criterion then?
Ms. Judith Maxwell: It's based on a very strong broad consensus among Quebeckers that this is the right direction to go, and it's a very child-centred approach to public policy.
It takes, if I can put it this way, a more comprehensive approach to assuring healthy child development across the income spectrum. So it has avoided the risks associated with if you target some programs here and some programs here, then all the children in the middle may not qualify for either. They've adopted more of a solidarity approach.
The limited evidence we have in the international comparisons would suggest that this child-centred approach does produce better child outcomes, but you're still always constrained by the fact that the socio-economic circumstances in one society will be different from those in another and you can only move your children along in relation to that broader... From a policy point of view, you're always working against that socio-economic background.
The Acting Chairman (Mr. Paul Szabo): Thank you, Dr. Pagtakhan.
Mr. Monte Solberg: Thank you, Mr. Chairman.
Now that we've gone down this road, I simply have to say something. When we talk about day care, there are some people who believe that institutionalized day care is actually not good for children, and irrespective of whether or not you believe that, if we believe in neutrality in the system, then we shouldn't necessarily believe in expanding that at the expense of people having less income to look after their children as they choose. So how do you square the two? How do you square having more support for institutionalized day care and having neutrality in the tax system when some people may not want to put their children into day care?
Ms. Judith Maxwell: We do have to respect the choices of parents around the form of care they wish to provide for their children. You're absolutely right on that, and that's why I believe different regions of the country would make different choices with respect to this.
But there are other dimensions of the Quebec policy that are truly child centred as well. There is the way they've structured their family allowance system, for example, and the proposal they have for parental leave, which would make it easier for parents to stay home with their children in the early years.
So I wouldn't base it only on this. It's a policy approach that is far wider than $5-a-day day care.
Mr. Monte Solberg: Okay.
The Acting Chairman (Mr. Paul Szabo): Thank you. And of course we know the subcommittee of HRDC looking at youth at risk is dealing more specifically with some of these issues that we're at least aware of, and certainly integrated approaches with regard to fiscal and social policy are not only desirable but probably necessary.
On that note, Judith, thank you very, very much, on behalf of the subcommittee, for taking the time to appear before the committee and provide your insights. We hope that once our report is out—and it will be still on the table with the main finance committee during the pre-budget consultations—should we have a more focused opportunity, maybe we can talk about some more specific suggestions on how we deal with that. Thank you very much.
Ms. Judith Maxwell: I'll leave this study with the clerk, Mr. Chairman, and if you wish to have more copies, I'd be quite happy to send them over.
The Acting Chairman (Mr. Paul Szabo): Thank you. I'd appreciate that.
Colleagues, before I adjourn the session, I want to quickly confirm with you what our plans are for the rest of the week. We do have a meeting this afternoon with the Canada Family Action Coalition and the Evangelical Fellowship of Canada, as well as another economist from the University of Toronto, and that meeting starts at 3.30 in Room 701, Promenade.
Tomorrow, Wednesday, May 26, the main finance committee is meeting in the afternoon after QP, at 3.30. This subcommittee has scheduled a session in 253-D in the Centre Block with the Honourable Hedy Fry, Secretary of State for Multiculturalism and the Status of Women. That starts at 5.30.
On Thursday, May 27, we have EGALE, Equality for Gays and Lesbians Everywhere, as well as CUPE, the National Council of Women of Canada, and one other individual witness. So it's just three witnesses on Thursday. We will try to have all of those three witnesses in the morning session rather than having a Thursday afternoon session.
Today at some point, the preliminary work that has been done by the researcher staff on some of the boiler plate information for our report should be available to you. Hopefully, at the end of our Thursday session you will have had an opportunity to peruse it and to provide any further input to the researchers.
On Thursday as well, it is our hope to provide any further thoughts to the researchers as a result of this week's witnesses as to items, whether it's new information or any other matters that the members of the committee may feel it would be necessary to raise, so we can determine the extent to which that content should be incorporated into the next draft.
So for the following week, the week of May 31, we will in fact have our first full draft of the report available and circulated to you. We will be scheduling a meeting subsequent to your receipt of the thing and then, having had an opportunity to look at it—it will probably be mid to late week—to in fact discuss that report and determine what we're going to do with that report.
So it looks as if we're on schedule in terms of presenting the report to the main committee for the week of June 7, which is basically two weeks from now. It would then be available to be received by the main finance committee and in fact become a public document.
So the committee continues to be, I think, on schedule and available for discussion of content points. I think we have the opportunity to continue to discuss the points of content and what our report is going to look like. I encourage you all to be available for these as we go through this last fairly tight schedule. When you get your reports—and we'll make sure you get them with a red flag on them for your attention—you will have the opportunity to read the material and come to our meetings prepared to discuss the points.
I gather that the work Marion Wrobel, our key researcher, has done is probably going to be e-mailed to our offices this afternoon, so it will be available through your office. That way you don't have to wait.
Ms. Michelle Dockrill: I have a question, Paul. I apologize that I didn't hear you. Did you say Wednesday, 5.30, 253-D Centre Block?
The Acting Chairman (Mr. Paul Szabo): Yes.
Mrs. Michelle Dockrill: Okay. I just wanted to check to make sure.
The Acting Chairman (Mr. Paul Szabo): C'est ca? Thank you.
This meeting is adjourned.