VSE Prof. Kevin Milligan acted as a consultant on the design of the Canada Child Benefit.
A point of pride for the Liberal Party of Canada has been its Canada Child Benefit, which provides monthly tax free payments to eligible families raising children, up to an annual maximum of $6400 per child under six and $5400 per child aged six to 17.
According to Statistics Canada data, the country’s child poverty rate dropped by one third between 2015 to 2017. Stats Can credits the drop due in part to the CCB’s implementation in 2016.
One of the people behind the benefit is Vancouver School Economics Professor Kevin Milligan, who acted as a consultant on its design. His research focuses on public and labour economic issues, particularly those that affect children and the elderly.
For Milligan, getting involved was an opportunity to use his expertise to help shape important policy. He talks about his involvement in this extended Q&A.
How did you come to work on the CCB?
I started consulting in 2014 with the Liberal Party who were developing the benefit to replace some tax credits and a universal child care benefit. As an economic researcher, I contributed to the costing, the design aspects, and gave recommendations on the overall structure. It was the most hands-on work I’ve done and the one policy file I’ve had the most influence on.
Why was the Canada Child Benefit a good idea?
It replaced four tax measures of various kinds. I believe there are three main advantages to it. First, it’s a simpler package. Families receive a direct deposit every month, and that method seems more transparent to the recipients. Second, the transparency allowed us to see more directly who was receiving what and that allowed the government to make some choices about targeting by family income. The third advantage of interest to economists is the improved phase out rate. The phase out is like an extra tax rate you pay as you earn more money. As you work more, you lose your benefits, so it’s like walking through quick sand. The new benefit has lower phase out rates than the old benefits.
How much credit should we give the CCB for dropping the child poverty rate?
It’s the right question to ask and the right analysis to do. The answer is likely that the CCB deserves most of the credit. But, if the economy is doing well anyway, that could have put some families over the poverty line absent the CCB changes that were made. That said, the CCB is one per cent of GDP and that also boosted the purchasing power of families with kids. The Bank of Canada Governor has commented the benefit is large enough to be considered a macroeconomic event.
What does the benefit help pay for?
From research I’ve done on previous expansions to child benefits, we know families typically spend it on necessities, like food and rent, and educational investments, like computers or other digital devices. Some parents might use the money for their child to be able to afford to go on school trips, or have new clothes like their classmates. The evidence does suggest the money is spent for the most part on what we consider to be child-centered things that improve quality of life.
I think public policy works best when it’s evidence-based and is informed in part by people who spend their lives studying the issue at hand. – VSE Prof. Kevin Milligan
The StatsCan data shows that roughly 825,000 Canadians, including almost 300,000 children, were lifted out of poverty between 2015 and 2017. How life-changing is it really for a family to go from living below the poverty line to being just over it?
That’s the challenges of poverty measurement in that it’s a head count, and sometimes that can miss that it may only be a marginal change in the quality of life. However, we know that the size of the increase for some families is relatively bigger than what they were receiving before. The biggest increase is for families with an income of $30,000. It’s $250 more a month for a family with two kids, and that’s a substantial boost.
What is the future of the CCB, and should its design influence other policies going forward?
I think it’s steady as we go. I think there is room to learn from the benefit in terms of developing seniors’ policy. From doing this work on the CCB, it’s my belief that there is a gain to be made by simplifying benefits as much as possible. I think public policy works best when it’s evidence-based and is informed in part by people who spend their lives studying the issue at hand.