Social assistance is a means tested provincial income support program for people living in deep income poverty. It is meant to function as a safety net, providing for a person’s requirements for food, shelter, personal items, medical and other benefits that are essential to their health and well-being. However, social assistance programs have been widely criticized in all provinces for their failure to meet these requirements. In Alberta for example, a single person on social assistance receives a monthly income of less than 50 per cent of Calgary’s poverty line as demonstrated in figure 1.

Figure 1: Changes to income support benefits for a single person expected to work in 2000-2022.

Indexation of income supports refers to the practice of tying benefits to inflation, i.e. when inflation increases benefits increase. Although the starting point is far from adequate, indexation is essential to preventing further erosion of the purchasing power of social assistance recipients. Indexation was first proposed in the final report of the 2001 Alberta MLA Committee to Review Low-Income Programs. The committee identified several issues with Alberta’s income support programs including the need to index benefit levels to the cost of living. However, indexation did not make it into the committee's final list of recommendations. Almost two decades later in November of 2018 the Alberta NDP government passed Bill 26 “An Act to Combat Poverty and Fight for Albertans with Disabilities,” which resulted in modest increases to the benefit rates of AISH and income support, expanded eligibility, and most importantly, indexed benefits to inflation. Less than a year later in 2019, under a newly elected UCP government, benefits were de-indexed and no longer tied to inflation. This change was compounded by the negative impacts of the pandemic and record high inflation rates in 2022.  

“Benefits eroded during the time of rapid inflation in 2021 and 2022, income support recipients could no longer afford the same basket of goods and services as inflation increased and they had to make do with less.”

In November 2022, amid rising affordability concerns, the Alberta government announced that, along with increasing income support benefits by six percent, it would resume indexing provincial income supports as of January 1, 2023. Indexation would be calculated using the Alberta Consumer Price Index (CPI). Although most of the affordability measures were intended to help people “weather the storm” of rapid inflation, the government stated indexation would be a permanent change, ensuring benefits rise with the rate of inflation.

On November 4, 2024, the government introduced Bill 32, the Financial Statutes Amendment Act. If passed, among other things, the Act will introduce changes to indexation in the form of a new legislative framework for the indexation of income supports and provincial taxes and transfers. This new framework, referred to as the “Alberta Escalator,” would increase income supports by the minimum of the change in Alberta CPI or two percent. That is, if inflation is 1.7%, income supports will increase by 1.7%. However, if inflation is 2.3%, income supports will only increase by 2%. If the Alberta Escalator is implemented, a one-time inflation of greater than 2% will reduce the real amount of income benefits, or the income available to purchase goods in perpetuity. Figure 2 illustrates the gap between income support benefits for those expected to work if supports were fully indexed (blue line) versus the Alberta Escalator if Bill 32 is passed (red line) and figure 3 illustrates the same for those on AISH. All use inflation estimates from the Conference Board of Canada.

The figures above show that the blue and red lines diverge in 2025 and stay apart. In 2024, the estimated Alberta inflation is 2.4% which is applied to income support in 2024 to calculate the 2025 benefit amount. In 2025, benefits only increase by 2.07%, following that, estimated inflation is 2% or less. Thus, the fully indexed benefits and the Alberta Escalator benefits increase by the same amount (the estimated inflation amount). However, the gap between the fully indexed benefits and AB Escalator benefits remains consistent due to the divergence in 2025.

While the difference in income may appear minor, it is significant, particularly when current income supports are already inadequate. Also, we cannot say with certainty how inflation rates will change in the future.

Alberta CPI Estimates

There are multiple estimates for Alberta CPI available, including the Alberta budget, the Conference Board of Canada (CBC) and, the City of Calgary’s Fall outlook. The consensus from these sources is that in 2024, Alberta’s inflation will be higher than Canada’s inflation (which is estimated to be about 2%), before declining.

The next two figures show how the gap in income will differ based on inflation. Figure 4 shows the dollar gap between the fully indexed benefits and the Alberta Escalator benefits for a single person expected to work on income support, and figure 5 shows the same for a person on AISH. Three different estimates of inflation are used including the Alberta budget, the CBC, and those estimated by the City of Calgary for Alberta in their Fall 2024 Outlook statement.

Figure 4- Gap in dollars between fully indexed and AB Escalator by CPI Estimate, ETW, Monthly.

These figures illustrate that under the Alberta escalator indexation framework, the purchasing power of a single adult on income support will be 0.3% per month lower in 2025 than had the benefits been fully indexed. The purchasing power decreases further to 0.5% per month in 2026, 0.7% per month in 2027, and 0.9% per month in 2029. The gap between fully indexed benefits and Alberta Escalator benefits increases yearly because the Alberta Budget estimates Alberta inflation to be 2.2% every year—greater than the 2.0% cap under the Alberta Escalator as table 1 shows.

The “Alberta Escalator” framework aimed to create more predictability however if increases to benefits are limited to the lower of Alberta’s CPI or 2% then we are trading predictability for a decline in the real value of all income supports that will be carried forward into future years. This represents a change that will leave people further behind at a time when half of Albertans are only $200 away from being unable to meet their financial responsibilities, which include housing and food costs. Indexation was a step forward—let’s not turn back now.   

I would like to acknowledge Dr. Gillian Petit, Senior Research Associate at the Department of Economics with the University of Calgary for the estimates and figures used in this blog post.