The province of Nova Columbia’s Social Assistance Program

1. Assume a worker, named Aman, works 80 hours a month at a job where she earns $20/hour. Aman applies for, and qualifies for,
   social assistance. The province of Nova Columbia’s Social Assistance Program (SAP) pays a monthly benefit of $600. The first $400 in
   monthly earnings are exempt, but after that the benefit reduced by $.40/$1 of earnings. [16]
   A. Write the Benefit Equation for the SAP, using B for the Benefit (in $) and E for Earnings (in $).
   B. Calculate the maximum number of hours that Aman could work before her Benefit is reduced to zero.
   C. Calculate Aman’s total income per month: from the SAP and from her 80 hours of work. Ignore taxes.
   A._____________________
   B._____________________
   C._____________________
   Now assume the province replaces its social assistance program with a Guaranteed Income Program (GIP). The GIP provides $1000 in
   monthly support. When an individual has combined income of $1600/month (from GIP and earnings) the GIP is discontinued: the GIP
   =$0 at that point.
   D. What is the maximum number of hours that Aman can work, before her GIP is reduced to 0?
   E. If Aman works 80 hours per month, what is her income from the GIP and what is income from work? Ignore taxes.
   F. If Aman works 25 hours per month, what is her income from the GIP and what is income from work? Ignore taxes.
   G. If Aman works 0 hours per month, what is her income from the GIP and what is income from work? Ignore taxes.
   D.______________________
   E._____ ____
   F.____ _____
   G.____ _____
   H. You were a Public Finance economist in the government of Nova Columbia when it replaced the SAP with the GIP. Name 2 questions
   that were likely raised during the discussions on whether to make this program change in social assistance.
   1._________________________________________________________________________________________________
   2._________________________________________________________________________________________________
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2. Elizabeth has an annual income of $90,000. She feels there is a 4% chance that she will get seriously sick this year, and be off work
   for two months this year, losing that work income. Her sister Marion has an annual income of $78,000. Marion feels there is a 10%
   chance that she will be off work for two months, losing her work income. Assume there is privately available, for profit, health
   insurance. [14]
   A. Calculate the actuarily fair premium for full insurance for Elizabeth, for a year.
   B. Calculate the actuarily fair premium for full insurance for Marion, for a year.
   A. _____________________
   B. _____________________
   But, the private health insurers are not able to distinguish how Elizabeth and Marion assess their individual risk. Acccordingly, the
   health insurers can only base risk on the general population. The insurers estimate there is a 6% risk of any worker being off work for
   two months from serious illness.
   C. Calculate the annual premium for health insurance for the general population case, assuming an average annual income of $84,000.
   D. Who benefits more from health insurance in this general population case? Why?
   E. Who loses from health insurance in this case? Why?
   F. Over the long term, what do the losers in this private health insurance system do? What is the consequence for the private insurers?
   G.You work for the Government of Nova Columbia. What is your recommendation, to solve the problem you identify in “F”?
   C.____________________
   D.______________________________________________________________________________________________
   E.______________________________________________________________________________________________
   F.______________________________________________________________________________________________
   G.______________________________________________________________________________________________
3. A. [4] Canada’s Employment Insurance program is a compulsory participation program. This creates income redistributive inequities
   across workers. Discuss these inequities, and what you might suggest to correct the inequity/inequities.

B. Canada’s Employment Insurance program funding is governed by _____________(federal legislation, provincial
legislation, both federal and provincial legislation). Choose one. [1]
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4. You are a public finance economist employed by the country of Great Zealand. The government is considering including drugs (legal
   drugs, dispensed by pharmacies under prescription) as part of the national public funded health plan. You are asked for your views, as
   an economist, on this policy direction. What considerations do you raise in discussing this proposal? [5]

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