The key features of the earnings supplement program were:
-- Full-time work requirement. Supplement payments were made only to eligible single parents who worked full time (an average of at least 30 hours per week over a four-week or monthly accounting period, whether in one or more jobs) and who left income assistance. The full-time work requirement ensured that (1) supplement recipients were preparing for self-sufficiency, since most IA recipients would have to work full time in order to earn enough to remain off income assistance; (2) most supplement recipients needed to increase their work effort to qualify, since few IA recipients already worked full time; and (3) earnings were substantial enough so that earnings plus the supplement payment represented a large increase in income for most people receiving the supplement.
-- Substantial financial incentive. The supplement was calculated as half the difference between a participant’s earnings from employment and an “earnings benchmark” set by SSP for each province. The benchmark for each province was set at a level that would make full-time work pay better than income assistance for most recipients. During the first year of operations, the benchmark was $37,000 in British Columbia and $30,000 in New Brunswick. Therefore, for example, a participant in British Columbia who worked 35 hours per week at $7 per hour earned $12,740 per year and collected an earnings supplement of $12,130 per year ($37,000 minus $12,740, divided by 2), which adds up to a total gross income of $24,870. Unearned income (such as child support) or earnings of other family members did not affect the amount of the supplement. When tax obligations and tax credits were taken into account, most families had incomes $3,000 to $7,000 per year higher with the earnings supplement program than if they worked the same number of hours and remained on income assistance.
-- Gradual reduction in benefits as earnings increase. Reductions in the supplement amount occurred more gradually than they do in the case of IA benefits. The supplement was reduced by 50 cents for every dollar of increased earnings, following the supplement-calculation formula described above. The supplement was fully phased out only at the earnings-benchmark levels.
-- Availability to single-parent families only. Recruitment for the study was limited to single parents for several reasons. First, single-parent families make up a substantial proportion of the IA caseload. Second, single parents (particularly those with young children) face considerable barriers to full-time employment and are often considered “unemployable” by the welfare system. Thus, they constitute an important target group for any new policy that attempts to increase self-sufficiency. Third, given the project’s budget constraints, it was impossible to include enough cases of all types of households on welfare to permit an accurate analysis of the supplement program’s effects on each of them.
-- Availability to long-term welfare recipients only. The supplement was offered only to single-parent families who had been on income assistance for 12 months in a 13-month period. Eligibility for the supplement was limited to these relatively long-term welfare recipients for three main reasons. First, long-term welfare recipients account for a disproportionate share of welfare costs, making them a critical group to target. Second, extending eligibility to people who had received income assistance for less than a year would probably have resulted in a large share of program resources being spent on supplement payments to people who, even in the absence of the program, would have left welfare after a short time. Third, the one-year IA receipt requirement reduced the potential that the program would attract people onto the welfare rolls for the purpose of being able to receive the supplement.
-- One-year period to take advantage of the offer. Once an IA recipient was selected to join the program group, she was informed that if she found full-time work within the next 12 months and agreed to leave income assistance, she could sign up for the supplement. If she did not sign up within 12 months, she became ineligible for the supplement. This requirement discouraged delay in responding to the supplement offer but gave people time to consider the offer and to find employment. The 12-month period in which program group members could qualify for the supplement is sometimes referred to as the “one-year take-up window.”
-- Three-year time limit on supplement receipt. A person could have collected the supplement for up to three years from the time she began receiving it, as long as she was working full time and not receiving income assistance. The three-year time limit on supplement receipt eliminated the possibility of long-term dependence on the program.
-- Voluntary alternative to welfare. People could not receive IA payments while receiving the supplement. However, no one was required to participate in the supplement program. After beginning supplement receipt, people could decide at any time to return to income assistance, as long as they gave up supplement receipt and met the IA eligibility requirements. They could also renew their supplement receipt by going back to work full time at any point during the three-year period in which they were eligible to receive the supplement (also referred to as the “three-year supplement receipt period” or “three-year supplement period”).