The Problem of "Stacking"
Oct 20, 2009
A new report by the Canadian Centre for Policy Alternatives (CCPA) examines how federal and provincial benefits actually get wiped out with minimal wage increases, thereby doing more harm than good.
Entitled Now You See It, Now You Don’t, the report gives examples of situations across Canada whereby lower-income Canadian families end up losing disposable income when their wages are increased by modest amounts.
This unintended policy consequence is known as “stacking.” Increases in wages are eroded or erased completely by a combination of increases in taxes and other payroll deductions, in addition to reductions in benefits from government programs that were, ironically, set up to assist low-income people in the first place.
Authors Michael Goldberg and Steve Kerstetter illustrate how most low-and middle-income Canadians are affected by stacking in one way or another. It affects seniors who receive the federal Guaranteed Income Supplement, parents who get the Canada Child Tax Benefit, and people living in subsidized housing.
It appears that there are few government departments or agencies that take a serious look at stacking and the effect it has on lower-income Canadians. Governments instead seem to be more concerned about limiting the cost of individual benefit programs by establishing very low “turning points.” These are the income levels for maximum benefits under any particular program.
While there are no obvious or simple solutions to the stacking problem, there are ways of reducing the negative effect it has on Canadians. Most simply, there must be better ways of delivering benefits to citizens. The intent of benefits is to help, not hinder. Surely governments can find better means with which to approach this.
Some programs that have a positive influence – such as the National Child Benefit – have turning points that are ridiculously low. For example, for this program it’s $21,287 for a family of four. Any family income above that and the program benefits are reduced. It’s pretty obvious that this level is far too low.
People who are doing their very best to succeed at lower income levels need assistance from government in a variety of ways. However, often the programs designed to this end have the unintended effect of punishing those which can least afford it. Governments of all levels need to take a serious look at the problem.
The report can be accessed here.
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