Posted: March 18th, 2023

Development of modern Canadian welfare state

Public Policy

The Canadian welfare state arose in the 1930s as a response to the poverty of the era, and was bolstered in the subsequent decades to include numerous elements of the social safety net. Prior to the development of the modern Canadian welfare state, the country relied on a classic liberal economic model, with few restrictions on enterprise and the commoditization of labour. Workers had few protections, the central government exerted limited taxation power and provided little in the way of social services. Anderson (1990) argues that Canada constitutes a modern liberal welfare state, one characterized by “means-tested assistance, modest universal transfers and modest social-insurance plans” (p.26). The role of government in such a state emphasizes the promotion of commerce, with social welfare elements often ranking as a lower priority. In the middle decades of the 20th century, Canada shifted more towards a welfare state, instituting elements such as universal health care, subsidized university tuition, and a national pension plan. Other assistance remained means tested and most governments continued to focus their energies towards building the economy. Anderson further argues that “the welfare state caters essentially to the working class and the poor,” as opposed to the middle class. The way that the Canadian welfare state has been structured has not delivered as many over benefits to the middle class to encourage them to vote for something more akin to a European model. In Canada, the welfare state model is simply to function as a safety net. The elements of this that benefit the large voting middle class — the CPP and universal health care — have been retained by many other elements are resisted by voters (p.31).

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The forces that have impacted the development of the welfare state in Canada have been primarily the forces of self-interest among the country’s large body of middle class voters. These voters have a model to the south for a lower-tax regime with fewer public services, and they can be envious in particular of the opportunities provided by that higher level of dedication to free market capitalism (Cameron, 1978). Yet, Canadians are intent on retaining the basic elements of a social welfare system, not so much that there will be no poor, but only to the point where a middle class Canadian need not fear, too much, falling out of the middle class. In essence, Canadians are as a culture more risk averse than Americans, so social welfare has some appeal to the voting masses. However, the country’s collective work ethic — derived from Anglo-Saxon Protestant tradition — makes imperative that individuals not be given too much help. There is a rejection of a Scandinavian-style welfare state, in that hard work is a virtue, implying that the chronically indigent lack this ethic. This can be a powerful force, and it manifests itself in objections to taxation. But the Canadian welfare state is primarily forged from the balance between an expressed admiration for the virtues of free market capitalism and the risk aversion that demands a social safety net remain in place, at least to ensure that one does not slip from the ranks of the middle class.

Part I — Conceptual Overview

There are a number of developmental models that can be used to assess the changing nature of the Canadian welfare state. Stages heuristics is one framework that can shed light on the processes and influencers that have guided the shifts in Canadian welfare state policy. The stages heuristic breaks down a policy into the problem, the policy options, the implementation, evaluation and any subsequent changes that are made. The stages heuristic can be valuable in understanding the evolution of public policy because this process is undertaken in multiple iterations. A regime might implement one policy, and then evaluate and refine it. More commonly, subsequent regimes may opt to revisit policies that have been put into place. They might filter the evaluation process through their own political lens, or may wish to ensure that the policies are still meeting the needs of constituents in a new time.

This framework aligns fairly well with the concept of punctuated equilibrium. The equilibrium stages are those times when a given policy is not being evaluated, but there are moments when circumstances have changed — or at the very least that the perception of circumstances having changed holds — and the result is that the policy comes under the microscope again. Baumgartner and Jones (n.d.) outline the case for punctuated equilibria. This model argues that governments have agendas, that policy monopolies emerge. In Canada, with respect to the welfare state, there is evidence that shifts in such policy monopolies have served to engage the cycle described in the stages heuristic.

In the 1930s, the Canadian welfare state began to take shape. The predominant interest at the time was with the large mass of unemployed and underemployed. They became the policy drivers, and this generation continued to be the policy driver through the decades after World War Two. Baumgartner and Jones note that every group seeks to have a monopoly on public policy, so that their interests can be advanced. The interests of the Canadian public, therefore, should reflect, more or less, the majority interest of each successive voting bloc. A policy monopoly, to the extent that such a thing exists, should have some formality in its nature. It should have “a definable institutional structure” and “a powerful supporting idea associated with the institution” (Baumgartner & Jones, p.7).

The balance of power, where it can be established, breaks up the equilibrium. When a policy is enacted, it goes through the heuristic stages. There is typically an underlying interest that drives implementation, for example, guiding the form that the policy takes. Thus, when the desire for socialized medicine is born, there is a policy monopoly that allows this idea to become manifest in law, and influences how the concept will be implemented. Once a policy is in place, an equilibrium state sets in. It could also be termed inertia — the situation is stable and difficult to change unless there is some strong, overwhelming rationale.

As the Canadian social welfare system was being built, the wealth of the country was relatively high. Further, Canada was more homogenous back then, and there were prevailing cultural values that acted as constraints for the extent that the social welfare state could be implemented. There were fewer overt interest groups at that time in Canadian politics, but unions were fairly strong, and their influence as a voting block brought social benefits to the realm of public policy. Over time, however, the influence of the unions has waned, bringing changes to the policy monopoly with respect to the welfare state. New interests have emerged — business interests driven by free market think tanks. These institutions — be they industry lobbies or groups like the Fraser Institute — have gained in political power. They are not yet a clear policy monopoly, but they have sought to manifest their ideas in different, smaller ways, while perhaps influencing the dismantling of elements of the social welfare state.

The policy monopoly with respect to the social welfare state still belongs with the Canadian voter. However, this influence is waning, and the voter can no longer be said to have a monopoly. The structure of government being what it is — the current Prime Minister has the power of a monarch after winning only 19% support of voting-age Canadians — the political actors are free to allow other influences into policy, to grant monopolies on some areas. There will be no overnight dismantling of the social welfare state, but there is a battle over influence. Unions do not have the power they once did — arguably squandered on persistent public sector strike that punish the public more than anybody else — and a more concerted informational campaign from free marketeers has also contributed to a shift in public sentiment. The current state of equilibrium found in the Canadian social welfare state reflects that Canadians are committed to what they have established, but are starting to be more willing to put certain aspects of the social welfares state on the table, should there be a convincing argument to do so. Thus far, the elements that have been challenged have been at the fringe, where a policy monopoly can be achieved — getting government out of the liquor business in Alberta, reduced funding of the arts, and reduced funding for post-secondary education. But the shift is occurring, as shifts in policy influence have resulted in a repeat of the stages heuristic, leading to old policies being revisited for a little bit of modernization.

Another framework through which the changes in the Canadian social welfare state can be analyzed is the Institutional Model. Institutions have long held significant influence in public policy, because they are able to define issue in a meaningful way for the public. This is important, because as Thelen and Steinmo (1992) point out, “institutional configuration shapes political interactions.” The structure of Canadian government is such that the voter is the largest stakeholder, and holds the balance of power. The role of the institution, then, is to convince the voter of an idea or set of ideas. Convince the voter that they need universal health care, and they will push for it. Convince the voter that the cost of the social welfare system is too high, and they will vote against tax increases to fund it, or look the other way when bits and pieces of it are dismantled. The norm during the rise of the social welfare state was a two-party system, with the NDP as the also-rans. They influenced the dialogue, however, but the other two parties represented a balance between capitalist ambition and risk aversion that appealed more to Canadian voters. Take away something valued, and your party will be punished. In more recent years, more parties with more ideas have emerged, a situation that from an institutional perspective puts more ideas on the table. This actually makes it more difficult for the voter to parse — institutional complexity can benefit those seeking changes to things that the voters do not want changed. This shift in the political structure appears to have favoured, in recent years, the erosion of the social welfare state.

Coleman and Skogstad (n.d) frame Canadian public policy through the institutional lens, arguing that the “Canadian state must be disaggregated and that attention be paid to variation in the strength of the Canadian state across sectors.” Institutions exist to “structure political reality and define the terms and nature of political discourse.” Institutions, therefore, have the ability to guide the discourse in a manner that promotes their specific ideas. Changes in policy occur, under the institutional model, when an institution’s power changes. An institution that gains more power will have more influence over policy, perhaps the point where a policy already in place can be subject to analysis; or where a new policy can be introduced, simply by defining a problem. The introduction of universal health care came as a response to a problem, as per the stages heuristic, but institutional theory argues that the problem had to be defined by some institution. It was not necessarily the idea of the voters, however they might have favoured the concept once they had heard it elaborated.

An example of how policy monopolies can be brought into action is the idea of austerity. This idea became popular in the face of recession in 2008, and was implemented in a number of different countries around the world. The idea is essentially raising a zombie idea from economics of old, the notion that by dismantling the social welfare state, essentially by denying it funding, that enterprise would be emboldened. The economics of austerity have never worked, but the idea caught hold at a time when government revenues were suppressed by economic malaise — austerity answered a solution that many in government thought they could sell to their constituent. Austerity was never, on the balance of evidence, the solution to short-term budget crises, but it was an idea that reflected the policy monopoly in many quarters that has sought to find ways to methodically dismantle the social welfare states in many nations (Aquanno, 2013).

Lipsky (2010) further elaborates how the illusion of fiscal crisis is used to shift public opinion, so that the public is more accepting of cuts to the social safety net. Lipsky note that a number of techniques are used in order to change how certain policies are implemented. It would be impossible to sell to the most important stakeholder — the Canadian voter — the idea of dismantling the social welfare system, but opponents of this system have taken to shifting the dialogue. Lipsky argues that a replacement dialogue centres around the idea of accountability, and by extension having government services run like businesses. On paper, as presented to the public, such concepts sound perfectly reasonable. In reality, they are a means to an end — an excuse to constrain funding for elements of the social welfare state that are seldom seen by middle class Canadians. This again points to the reality that middle class Canadians have consistently voted to preserve the elements of the social welfare system that benefit them, but have tended towards tacitly allowing the erosion of other elements, in particular services for the most needy in society. This is accomplished by monetizing social services, and then responding to feigned fiscal crises (Canada is in no way in danger of default) by cutting those services that are deemed as sub-optimal, from that monetary perspective. This trend has been ongoing for a couple of decades, and very much reflects the influence of new ideas — driven by new institutions in the policy sphere — on the way that social services are framed in public policy discourse.

Part II. Application

Reasonably, the rise and slip (not really a fall) of the Canadian social welfare state is influenced by the factors that influence the voters. Thelen (1999) and others have sought to understand why different countries have different policies with respect to the social welfare state. Even among nations that have adopted this form, there are significant differences in the way that it has been implemented. The amount of political power than voters have, and the different factors that influence them, appear to be the underlying drivers of changes in policy. Hall explains this, leaning on Marxist understanding of governmental power structures: “a series of pressures are brought to bear on the state, which then moves in the direction it is pushed by the strongest societal forces.”

The forces that drove the creation of the social welfare state initially were those forces most powerful in the Great Depression. While Canada firmly believed in capitalism, such that over Communism was never on the table, the country suffered greatly during the Great Depression, and was thus influenced by the prevailing policy responses around the world. The social safety net was an idea implemented in more than one country, famously in the American New Deal. Canada was also influenced by the economic thought of the mid-20th century. As Aquanno (2013) notes, Keynes was the superstar of economics, and his model highlighted the need for government spending during difficult economic times; the natural conclusion being that spending on infrastructure and social support would flow most directly into the economy. These ideas, and the strength of labour unions, gave rise to the social welfare state in Canada, but since the 1960s this has been eroded.

New institutions emerged, and these institutions brought new ideas that have since influenced the course of the Canadian welfare state. These ideas, towards dismantling the state, have enough tacit support among the voting public, but they have also gained currency because they are popular in other countries. Arguably, the public is influenced by the U.S. — if Canada was situated next door to Sweden public sentiment might argue in favour of an even-stronger social welfare state. Institutions serve to frame the issues and the discourse. There has been a rise, especially since the 1980s, of promoting free market economics as a solution to social problems. While this is not supported by data, the institutions supporting the idea have effectively filled the power vacuum left by the weakening trade unions. The public has bought into many aspects of this framing, and the result is that there has been a shift towards undermining the social welfare state, in the interests of “budgetary restraint,” “efficiency” or whatever other euphemisms are used.

This move has come in lockstep with the rise of economic neoliberalism. In particular, since the free trade agreement with the U.S. was first enacted (NAFTA’s precursor), the move towards free market economics has dictated changing the terms of the conversation regarding the welfare state. The elements that can be weakened are, and a lot of that is because of the shift in the way that issues are being framed now. Arguably, the move towards neoliberalism and globalization, the result of strong institutional forces influencing public policy, has begun to turn significant attention to the structure of the welfare state, in the hopes of reducing its ability to redistribute wealth. Garrett (1998) argues that the institutions that underlie globalization have become so powerful that they cannot help but shape the public discourse, and that is why there seems to be this growing, if tacit, support of undermining the welfare state. Elements of that state, such as universal health care, would be impossible to remove instantly, but can be undermined to the point where they are considered to be a “problem,” which of course will bring about a new idea, a proposed solution, and a new iteration of the changes heuristic.


The rise of the Canadian social welfare state can be explained through a couple of different theoretical lenses. First, it follows the patterns set out in the stages heuristic and punctuated equilibrium. When a problem is perceived by the public, it demands action. The Canadian political system is structured in such a way that action must be taken. The solution is found and implemented. Eventually, after an equilibrium period, circumstances have changed and this necessitates revisiting old policies. Or at least, it does when there are institutions with an interest in reshaping those policies in their own image. Institutional theory tells us that the relative power of institutions affects public policy. If in no other way, it does so by framing public discourse. Thus, when the citizens vote, they vote on issues and options that institutions have brought to the fore.

The institutions that underlie globalization are powerful, enough so that their rise to prominence since the 1980s has given them voice to shape the public discourse. This, of course, is simultaneous to the decline of influence of labour unions, who arguably marginalized themselves by aligning with the distant 3rd party, the NDP, taking their voice away from the genuine power brokers of the nation. That said, globalization’s institutions are so powerful now that issues are reframed in a way that will allow them profound influence over policy. The social welfare system is now measured on “cost efficiency” and other such things antithetical to the entire idea of social welfare — it was never the same thing as economic transaction – and this reframing has allowed for concepts like austerity to return to public debate, taking the place of the time-tested ideas that support government investment in the social welfare state. Institutional theory has the best explanatory power for understanding why this works, but the how can be best explained by the dual concepts of punctuated equilibrium — the rise of globalization being such a punctuation — and stages heuristic.


Anderson, G. (1990). The Three Worlds of Welfare Capitalism. Princeton University Press: Princeton.

Aquanno, S. (2013). Austerity: The History of a Dangerous Idea. New York: Oxford.

Baumgartner & Jones (no date). Punctuated equilibria in politics. No Publication — in possession of the author

Cameron, D. (1978). The expansion of the public economy: A comparative analysis. The American Political Science Review. Vol. 72 (4) 1243-1261.

Coleman & Skogstad (no date). Introduction. No Publication — in possession of the author

Garrett, G. (1998). Global markets and national politics: Collision course or virtuous circle? International Organization. Vol. 52 (4) 787-824.

Hall, P. (1993). Policy paradigms, social learning, and the state: The case of economic policymaking in Britain. Comparative Politics. Vol. 25 (3) 275-296.

Lipsky, M. (2010) Street-level democracy: Dilemmas of the individual in public services. Russell Sage Foundation: New York.

Thelen, K. (1999). Historical institutionalism in comparative politics. Annual Review of Political Science. Vol. 2 (1999) 369-404.

Thelen, K. & Steinmo, S. (1992). Historical institutionalism in comparative politics. Historical Institutionalism in Comparative Analysis.

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