The Effect of Loosening Means‐Testing Requirements on Income Assistance Flows in British Columbia Canada

ABSTRACT In Canada, eligibility for provincial income assistance requires applicants and recipients to pass a means test—they must have income and assets below a specified level. The “good policy” argument argues that strict means tests ensure those with sufficient income or assets cannot access nor continue on income assistance, keeping caseloads low. The “bad policy” argument argues that strict means tests reduce the ability of income assistance recipients from becoming self‐sufficient. Exploiting an increase in asset thresholds and the introduction of an earnings exemption in British Columbia, we test these hypotheses using recipient‐level data. Our findings suggest that loosening means‐testing requirements is unlikely to result in an influx in new income assistance recipients but that it could encourage re‐entry; however, it could also help recipients exit income assistance permanently.