Family Allowances in Canada: The Origins and Implementation

© Copyright 2013 Mark Palmer.

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isbn: 978-1-4907-1860-6 (sc)

isbn: 978-1-4907-1859-0 (hc)

isbn: 978-1-4907-1861-3 (e)

Library of Congress Control Number: 2013919972

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Table of Contents

Acknowledgements

Introduction

Chapter 1   Foreign and Canadian Origins of Family Allowances

Chapter 2   The Relationship Between Family Allowances and Mothers’ Allowances

Chapter 3   Obstacles To Family Allowances In Canada

Chapter 4   Plans and Recommendations

For Reconstruction: The Economic, Political and Social Setting, 1939-1943

Chapter 5   The Response Of The Liberal Government To Post-War Plans For Reconstruction: August 1943-June 1944

Chapter 6   The Parliamentary And Public Debate On The Family Allowances Bill

Chapter 7   The Administration Of Family Allowances: August 1944 To July 1945

Chapter 8   Family Allowances and The Federal Election of 1945

Conclusion

Bibliography

Acknowledgements

I wish to thank Professor Fred Gibson, my academic Sensei, for helping to shape my thinking around this Masters thesis, which has formed the basis of this book on Family Allowances. Fred Gibson’s impeccable knowledge of Canadian history from the turn of the 20th century to the end of the Mackenzie King era in the late 1940s was indispensible to the writing of this book. Professor Gibson had the added advantage of being hired by Mackenzie King in 1946 to organize his papers, which included his diaries. Without the King Diaries, I would never have attained the vital insights regarding much of the rationale behind the introduction of family allowances in Canada in July of 1945. Kudos to the executors of the King estate for not following the directive to destroy the King Diaries which represents one of the most important Canadian historical documents of the 20th century. Professor Gibson was not only my academic Sensei, but a former Vice-Principal of Queen’s, and he was deservedly the 1985 recipient of the Alumni Award for Teaching Excellence.

My thanks go also to Dr. Laurence Kelly, former Deputy Director of the Centre for Industrial Relations at Queen’s University, and my outside thesis examiner, for his invitation to produce a book to be published by the Centre out of my Masters thesis. Regrettably, I had some editorial differences with the editor assigned to work with me. She graciously cautioned me about my potential difficulty in dealing with pride of authorship, and it seems that she was correct. Where we differed the most was over whether the Centre would include the last chapter of my thesis relating to family allowances and the federal election of 1945. As a compromise, she suggested condensing the 45 pages of this chapter into 12 to 15 pages, to which I stubbornly declared that it was all or nothing. Sadly, each party began to quietly slip away and the book was never published by the Centre in the late 1970s.

In addition, I want to thank Dr. Desmond Morton, one of Canada’s preeminent historians, for his encouragement in pursuing this project. He asked me in 1982 if he could read a copy of my manuscript, and he subsequently provided a meticulous review and invaluable insights as to how to produce a very good book, from a respectable one. He graciously wrote many thanks for the chance to read the manuscript. I found it enlightening and an educational experience. Not having embraced all of his recommendations, I may have to settle for a merely respectable book.

Finally, I would like to thank Colleen Gambier, our Office Manager, for her careful and diligent preparation of this manuscript.

MP

Introduction

This book deals with the social, political, constitutional, moral, and economic developments which led to the implementation of a system of family allowances in Canada in July of 1945. The book focuses on when the idea first became identified in Canada; family allowances in relation to other social security measures of the time; the constitutional, moral, and financial obstacles to their implementation; the affect of family allowance legislation upon political parties; the reaction of the provinces to this legislation; and the timing of the legislation. Family allowances went through three stages in Canada: recommendations, official and unofficial, and subsequent public discussion; parliamentary debate and legislative enactment in August 1944; and the establishment of the administrative machinery leading to their implementation in July 1945.

Notwithstanding his vicissitudes on the subject of family allowance, Mackenzie King and his government rightly took credit for the implementation of family allowances in Canada in 1945. This important piece of social legislation had a profound effect on the Liberal Party’s electability after a very able but underappreciated wartime stewardship. Although the Beveridge and Marsh reports had some influence on the Federal Government in this area, the greatest influence can be attributed to Lord Keynes and the Finance Department in Ottawa, both of which advocated for a system of family allowances as part of a post-war package of social security. The economic brain trust was fearful of a post-war recession, and family allowances proved to be a classic Keynesian pump-priming initiative.

Family allowances became part of the conservative social welfare state in Canada, and their significance on contemporary Canada cannot be underestimated. They proved to be an effective weapon in the war on poverty in Canada and they effectively and permanently changed the role of government in the economy.

Chapter One deals with the foreign and Canadian origins of family allowances. The idea of family allowances had been studied and experimented with in Europe, Australia and New Zealand, for some time before it received serious consideration in Canada. The idea received a flurry of attention in 1929, but it was not until the release of the Beveridge and Marsh Reports in the winter and spring of 1942-43, that anything approaching widespread acceptance took place.

Chapter Two compares the relationship between family allowances, as an essential part of a system of social security, and mothers’ allowances, as a traditional form of social assistance or relief. Chapter Three involves a discussion of the formidable moral, constitutional, and financial obstacles to their implementation. Chapter Four provides the immediate wartime setting for the decision to establish a system of family allowances in Canada. Chapter Five deals with the revival of the Liberal Party organization in the autumn of 1943 following a number of sharp electoral reverses, and the adoption of a new Party program which included family allowances. Chapter Six focuses on the public and parliamentary debate over family allowances in the summer of 1944. Chapter Seven is devoted to the setting up of the infrastructure to administer the family allowances legislation and to the work of the administrative staff during the first year in which the legislation was in operation. And Chapter Eight deals with the important relationship between family allowances and the general election of 1945.

A wide variety of primary and secondary sources are used including extensive use of personal papers in the Public Archives of Canada and the Queen’s University Archives, such as the W.L. Mackenzie King Papers and Diary, Clifford Clark Papers, C.G. Power Papers, J.B. Bracken Papers, R.B. Hanson Papers, and W.A. Mackintosh Papers, to name a few. Other primary sources include Government reports and papers; the reports of Royal Commissions, Parliamentary committees, Departmental and Interdepartmental committees; newspapers and periodicals; political party records, departmental records, and Wartime Information Board records and reference papers; and personal interviews.

CHAPTER 1

Foreign and Canadian Origins of Family Allowances

Although the conception and implementation of family allowance went through a long gestation period in countries such as France, Belgium, Australia, and New Zealand, their introduction in most European countries was primarily a First World War phenomenon. In Canada, however, interest in the principle of family allowance developed more belatedly. Interest coincided with the rapid transformation of Canada into an urban and industrial society.

In a rural and agricultural economy, a large family tended to be self-sufficient and represented an economic entity capable of increased earning capacity as the family grew in numbers. However, as the population in Canada shifted from a rural to an urban setting, and as the factory began to take the place of the farm, the family income consisted of earnings of the head of the family, supplemented, in some instances, by what the older children could earn in the marketplace. Recognition of this societal and economic transformation eventually sparked an interest in the principle of family allowances in Canada.

Family allowances, or childrens’ allowances as they are sometimes referred to, should not be confused with mothers’ allowances which are a specialized type of public assistance or relief administered by the provincial governments and directed to the actual meeting of a particular need, that is, the loss of income to a family arising from the death or incapacitation of the father. To qualify for mothers’ allowances, the family must furnish proof of destitution through the application of a means test. On the other hand, the system of family allowances, as it was subsequently conceived by the Beveridge and Marsh Reports of 1942-43, provides allowances to all children on a continuing basis without a means test. The principle of family allowances recognizes that the maintenance of children is a continuous requirement rather than an unpredictable contingency like unemployment or the death of a husband.

Family or childrens’ allowances were regarded by the Marsh Report as part of a policy to establish a national minimum standard of living—a system of social security including such measures as family allowances, unemployment insurance, health insurance, and disability insurance.¹

FOREIGN ORIGINS AND BACKGROUND TO THE CANADIAN SYSTEM OF FAMILY ALLOWANCES

Speenhamland

The first formalized and widespread system of family allowances was conceived by the magistrates of Berkshire in the village of Speenhamland, England, in 1795.² The Speenhamland system set a basic minimum income for each family, regardless of size. If a worker failed to earn a specified income, his wages were supplemented from public funds to raise his income to the established basic minimum. The progenitors of this system had at first considered introducing minimum wage laws but opted for family allowances. Without minimum wage laws, however, some employers reduced wages knowing that these would be supplemented by public funds. Although the Speenhamland experiment became the basis of the English poor relief system for four decades, it proved to be too costly for the public treasury and was abandoned in 1834.

The Speenhamland system was essentially a rudimentary model for income support, but as a model for family allowances, it was found wanting. It had, people insisted, led to mass impoverishment of the English peasantry, at least in the southern counties where it was applied.

France and Belgium

There was no link between Speenhamland and contemporary family allowance systems; these have their origins in the developments in France and Belgium in the latter part of the nineteenth century.³ The state departments, railways, and banks in these two countries pioneered the principle of supplementary payments to employees with children. There were, however, a few isolated incidents of family allowance payments within industry prior to World War I; these began as voluntary payments by employers to their employees with family responsibilities. Soon afterwards, a new mechanism was developed, referred to as the Compensation Fund. This fund was instituted in order to spread the cost of family allowances equitably among all of the employers within an industry or region, thereby putting each employer in a similar competitive position, irrespective of whether his workforce consisted of family or single men.

Despite considerable theoretical discussion of family allowances, there was no widespread implementation in other European countries until World War I.⁴ With high inflation and the consequent decline in workers’ real income during the period, employers looked to family allowances as a means of alleviating the pressure for higher wages. Although many employers throughout Europe had seized upon family allowances as a temporary measure to be abrogated when economic conditions stabilized, they soon became a permanent feature of the economic system in France and Belgium due to certain legal developments. In many other European countries, they were largely abolished by the mid 1920s.

After 1930, however, the development of family allowances in France and Belgium changed from voluntary to state-run schemes. The fascist countries of Italy, Germany, Spain, and Japan also established family allowance systems during the 1930s as a means of increasing the birth rate.⁵

Ironically, while employers’ attitudes were generally supportive of family allowances during World War I, once the idea of compulsory allowances took hold, most rejected the idea. Workers, on the other hand, who had initially accepted these allowances as voluntary payments from employers, later regarded them as an inviolable right, notwithstanding the apprehension of some trade unionists that family allowances would serve to depress wages and discriminate against single men. During the 1920s, there was a growing recognition among sections of the labour movement in Europe that this was a beneficial concept, provided certain precautions were taken, notably the replacement of the private compensation funds with government operated schemes. Of the two principal labour movements in France, Belgium, Holland and Germany, the Social-Democrats, who tended to be socialist and militant, were generally opposed to the development of the family allowance system. However, the larger Christian Catholic Unions, who were religious and reformist, were adamantly in support of the development of this system.⁶

Australia and New Zealand

During the period that family allowances were gathering momentum in France and Belgium, there were some noteworthy, although apparently unrelated developments in Australia and New Zealand.⁷ Different philosophies and methods of implementation characterized the programs in these countries, reflecting their considerable experience in minimum wage legislation. From Canada’s point of view, the Australian and New Zealand experience with family allowances was important, since our administrative system resembles theirs more closely than those of European countries. Unlike the schemes in Europe during the late 1920s, the New Zealand allowances were paid out of general revenues on a nationwide basis. And although Australia did not provide a nationwide system until 1941, the state of New South Wales enacted legislation similar to that of New Zealand in 1927.

Britain

The development of the principle of family allowances in Great Britain was significant from Canada’s point of view because Canada still tended to emulate Great Britain more than any other country. Unlike the experience in France and Belgium, family allowances in Great Britain did not go through a long developmental period. In 1925, the Independent Labour Party advocated a state run system of children’s allowances, and by 1930, the Joint Committee of the Labour Party and the Trades Union Congress had given their tacit approval.⁸ Any enthusiasm for family allowances from organized labour in Britain, however, died out during the early and mid 1930s. The prevalent attitude seemed to be that there should be equal pay for equal work, and that a worker should be paid well enough to provide for children if necessary. Unions also felt that if family allowances were paid to workers with families, these workers would be less inclined to support the collective bargaining process, and hence the unity of labour would be diminished and wages reduced.

CANADIAN ORIGINS

According to sociologist, Dr. Stuart Jaffary, the first use of family allowances in Canada was in the Mothers’ Allowance legislation. This legislation, he argued, clearly recognized the value of the family to the state, and the principle that family income should be proportionate to need.⁹ Jaffary’s argument is subject to some scrutiny considering that mothers’ allowances were merely a specialized form of public assistance or poor relief provided by provincial governments to a destitute widow with dependent children. At best, mothers’ allowances may have constituted a rudimentary type of family allowance; at worst, they sustained insecurity by providing a barely tolerable subsistence, and offered only a palliative to the financial hardships which confronted a fatherless family. It was brutally apparent that family income, which was either supplemented or wholly-derived from provincial revenues, was never entirely sufficient or proportionate to family needs.

At the federal level, Canada’s first family allowance measure was the Income Tax Act of 1917, which recognized family responsibilities by providing exemptions for dependent children¹⁰. In granting these exemptions, the Act recognized the principle that those who were shouldering the economic burden of children should receive some special consideration. But, since many low-income families did not pay income tax, these exemptions were a limited and unfairly adjusted means of compensating for family size in that they failed to assist those who needed help the most. Income tax exemptions then, did not really constitute anything resembling a system of family allowances.

It could also be argued that the Canadian Patriotic Fund, which was taken over by