Poverty, percentages and the PST

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This article was published 10/6/2019 (257 days ago), so information in it may no longer be current.

In April 2019, thousands of Employment and Income Assistance (EIA) recipients were sent a letter from the Department of Families informing them they will no longer receive a $25-a-month supplement to help them find work. The job seekers allowance helped single EIA recipients with basic costs, such as printing resumes and purchasing appropriate clothing for interviews.

As noted in Manitoba’s "Pathways to a Better Future: Manitoba’s Poverty Reduction Strategy," single non-elderly individuals are particularly vulnerable: 30.1 per cent lived in poverty in 2016. The explanation in the letter to recipients was this:

"EIA has significantly increased the income supports provided to those who are most in need. From each year between July 2014 and July 2018, monthly income benefits increased on average by 5.4 per cent for single non-disabled households renting in the private market and by 3.9 per cent for non-disabled couples without children. These benefit increases are significantly greater than the increase in general prices in Manitoba over this same period. As well, the government has also announced a one per cent reduction in the PST effective July 2019."

The elimination of the allowance is another program in a growing list of poverty-reduction initiatives being cut by the Pallister government. The job seekers allowance was introduced by the NDP government in 2007 to provide recipients with extra financial support to help them find employment. The idea that the allowance came with no strings attached is a misconception; recipients receiving the allowance were required to develop detailed action plans with their caseworkers, and expectations were clearly outlined. Failure to comply could result in assistance being withheld.

According to the Department of Families, 12,300 individuals received the allowance, at a cost of $3.7 million.

While $25 may not seem like much, it is a lot for EIA recipients who receive a basic income of $195 per month to cover all expenses other than rent. That’s about $6.50 a day to cover the cost of food, transportation, clothing, telephone and other day-to-day expenses. Most EIA recipients live in private-market housing, where they pay rents that far exceed their budgets. Dipping into food budgets to pay rent is common.

In its letter to recipients, the government pointed to two measures that it says justifies the $25 cut.

The first is an increase in income supports of 5.4 per cent between 2014 and 2018. This refers to the Rent Assist program implemented by the NDP government, a program designed to help low-income people cover the rising cost of rent. While it may be true that the increase is higher than the increase in general prices over the period between 2014 and 2018, the increase was long overdue.

Manitoba’s EIA shelter allowance had fallen far behind the cost of housing. Single EIA recipients have seen a marginal increase in shelter benefits since 1994. That year they received $271 each month for rent; at that time the median market rent for a one-bedroom was $440 and it was possible to find housing in line with an EIA budget.

Single EIA recipients received a small increase of $14 in 2008. They continued to receive $285 per month until 2015, when the median market rent for a one-bedroom apartment in Winnipeg had increased by close to 80 per cent, to $782. The current median market rent for a one-bedroom is $950.

While Rent Assist helps, private-market rents have become increasingly unaffordable and EIA recipients typically spend far more on rent than their income provides. On May 30, we learned that additional cuts in Rent Assist will put single EIA recipients further behind.

The second poverty reduction initiative referred to is the highly publicized one-percentage-point reduction in the PST. Manitoba’s 2019 budget estimates "savings" for Manitoba households ranging from $86 for a single person in 2019 to $529 for a household in 2024.

Describing this as a measure that will help people living in poverty is disingenuous.

To save the $86, an individual must spend $8,600 on PST-taxable goods. To save $529, an individual must spend $52,900. Single EIA recipients remind us they receive a living allowance of $2,340 a year, leaving them very little to spend on PST-taxable goods. At best, they will save a few dollars.

Budget 2019 also shows the one-percentage-point PST cut means a significant loss in revenue. The government estimates a loss of $237 million in 2019-20 and $325 million in 2020-21. The total loss in revenue between 2020 and 2024 will be $1.36 billion — imagine what this could do to lift people out of poverty.

The PST cut may seem appealing on the surface, but the cost will far outweigh the benefits as the government looks for ways to make up the lost revenue. Eliminating the $25 supplement is one small example. The Manitoba job seekers allowance was an inexpensive program that made a big difference for single individuals living in poverty. Cutting the job seekers allowance will save the government very little, but it will make life far more difficult for vulnerable Manitobans.

Caitlin Ferry is a North End housing advocate. Shauna MacKinnon is an associate professor and chair of the department of urban and inner-city studies at the University of Winnipeg. Both are members of the provincial working group of Make Poverty History Manitoba.