The Effect of Asset Thresholds on Income Assistance Flows in British Columbia

Abstract

Across Canada, provincial social assistance programs (also sometimes referred to as “welfare”, or “funders of last resort”) impose asset tests for both applicants and recipients. The “good policy” argument argues that asset tests contribute to better program targeting, ensuring that those with high assets cannot access nor continue on social assistance. The “bad policy” argument argues that asset tests force applicants to spend down assets and keep asset levels low, reducing their ability to permanently exit from social assistance. Exploiting a policy change that increased asset thresholds for social assistance recipients in British Columbia, Canada, we test these hypotheses using recipient-level social assistance data. We find that increasing the asset threshold did not motivate people to enter social assistance nor did it help those leaving social assistance to leave permanently. There is some evidence that increasing the asset threshold did reduce the probability of exit from social assistance. From a policy perspective, these findings suggest that further increasing the asset threshold is unlikely to result in non-vulnerable persons accessing social assistance, but it could reduce the burden on those who are vulnerable and do require access to social assistance.