Canada’s Social Spending is Still Among the Lowest in the Industrialized World

Canada’s social spending, one of the key guarantors of reducing inequality, is lagging among OECD countries, and that is slowing average health improvements.

According to the most-recent OECD figures, Canada’s social spending was only 17.3% of the national GDP.

As previously noted, that puts Canada’s investments in social programs “near the bottom of the industrialized world.”

Social spending as a percentage of GDP (OECD)

The United States and Britain, neither of which are known for generous social safety nets, spent 18.7% and 20.6% respectively.

York University Health Policy professor Dennis Raphael told PressProgress noted looking at spending as a share of GDP “describes the impact of the spending in relation to the general contours of Canadian society.”

Other metrics reveal similar trends. Canada spent, on average, $7,456 per capita, below the US average of $9,900 and the UK average of $8,292.

Much of what counts as social spending is provincial jurisdiction. But it wasn’t always that way.

Carleton University professor Andrew Jackson noted for the Globe and Mail:

In Canada the tax and transfer system still redistributes significantly from the more to the less affluent, but its impact was greatly reduced from the early 1990s by deep cuts to unemployment insurance and social assistance even as inequality in market income increased. In fact, Canada has shifted from being one of the most redistributive countries in the OECD to one of the least redistributive.

That is reflected in OECD data. Back in 1991, Canada social spending accounted for 20.43% of GDP, about where Britain is now. It hasn’t returned.

The Liberal Chrétien government, cut deep into transfers for social spending to the provinces. The Canada Assistance Plan was eliminated and merged into the Canada Health And Social Transfer, with funding reduced. That forced social assistance cuts, to varying degrees, onto all provincial governments.

Canadian Centre For Policy Alternatives Senior Economist David Macdonald told PressProgress “that big reduction in transfers to the provinces started in the mid 1990s, then it pushed the provinces to cut their own spending, as a result of this reduction. They were and are unwilling to increase taxes to make up difference.”

That, Macdonald said, “took a whole lot of money out of the pockets of low income people.”

Social spending as a share of GDP since 1990 (OECD)

The Martin government set up the current, separate Canada Social Transfer, in 2004.  Not only is funding less but “the current transfer plan is not devoted to social assistance per se. It’s fungible,  it can go into anything, even tax cuts for all we know,” Macdonald said.

University of Saskatchewan professor Haizhen Mou told PressProgress the total amount transferred to the provinces “declined overtime” from 1980-2013 and only picked up slightly “after really declining around 1995.”

A study by the Canadian Medical Association found, across the provinces,  from 1995 on, “social spending remained relatively flat.”

The Trudeau government has increased person transfers, which helped reduce child poverty. Still, Canada’s social spending share declined from 17.628% in 2015, to 17.436% in 2016 and 17.325% in 2017.

That’s bad, partially because several studies from the OECD, RAND Europe and various  journals have noted links between differences in social spending and health outcomes.

The CMA study found for every $0.01 increase in social spending drove a 0.1% decrease in potentially avoidable mortality and a 0.1% increase in avoidable life expectancy for a 95% confidence interval.

Dalhousie University professor Daniel Dutton, told PressProgress that social spending includes social assistance payments, housing, and child welfare, which directly drive social determinants of health. Dutton noted social “stresses,” limit people’s freedom to remove themselves from harms. “Lower social spending means we are fine letting people deal with those environments on their own, which means we accept their health will suffer.”

Raphael noted, since 1995, “Life expectancy has continued to increase. But it’s not increasing as fast as in most other OECD countries. And the converse is that our infant mortality rates continues to decline. But not as quickly as in the other OECD countries. We’re falling behind.”

An earlier study published in BMJ Quality & Safety titled Health and social services expenditures: associations with health outcomes found a significant link, across the OECD, between a higher social spending share and improved life expectancy, infant mortality and “potential years of life lost.”