4 questions you probably have about basic income

Ontario is testing the program. Here’s how it works

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Anyone who took the time to read through Ontario’s 2016 budget in its entirety may have noticed a small discrete paragraph announcing the province’s plan to design and implement a “basic income” pilot program.

While details remain vague, economists say the intent of the initiative is to lift people out of poverty by providing all residents with a guaranteed minimum income every month—regardless of whether they work or not.

But how a provincial government might feasibly implement a basic income program, and what the fallout would be for getting it wrong is the subject of much debate.

Right now, other provinces, including Quebec and Alberta, are flirting with the idea of studying basic income, and federal interest is growing as well. Even outside our borders, it’s a key conversation: This year, Switzerland will vote on a proposal that would guarantee 2,500 Swiss francs a month to all its residents.

1. How does basic income work?

While there’s no standard definition of basic income, “what you’re seeing in the Ontario budget is an interest in putting an income floor on Ontarians to ensure that everyone has a minimum level of income,” says Craig Alexander, vice president of economic analysis at the C.D. Howe Institute.

This means that Ontarians participating in the pilot program would receive a monthly cheque from the government regardless of whether they’re actively employed or seeking work. That cheque would replace employment insurance and many other types of social program benefits. “There are big cost savings associated with eliminating programs that would no longer be needed,” says Alexander.

But how Ontario will define the minimum standard of living and what number you put that income level at is a complex endeavour. “It’s the minimum you need to not just survive but to have a reasonable standard of living,” says Benjamin Tal, deputy chief economist of CIBC World Markets Inc. “So the threshold will be a function of the cost of living.”

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2. Has it been tested before?

Basic income isn’t a new concept in Canada. In fact, it’s been around for decades. It was previously tested in Dauphin, Man., back in the 1970s as a project jointly funded by the Manitoba government and the Canadian federal government under Prime Minister Pierre Trudeau.

The purpose of that study, says Tal, was to determine whether a guaranteed minimum income would discourage participants from working. “The main criticism of such a program is that you’re giving residents free money, meaning people will say, ‘I don’t have to work!’”

For basic income to make sense, adds Alexander, you want it to incentivize savings and investment. “But you don’t want it too high so as to deter people from working.”

Interestingly, research gathered from the Dauphin experiment didn’t find a significant decline in labour force participation, except within two subgroups: new mothers, who had more money to take a longer maternity leave, and high school students, who stopped working part-time.

Still, major conclusions shouldn’t be drawn from this one study. “Because it was a pilot program, you don’t treat its findings as permanent,” says Tal.

3. Why are we talking about it now?

Major structural and technical changes impacting Canada’s labour market have brought basic income back to the forefront of our national dialogue.

“Globalization means you can produce anything anywhere in the world,” explains Alexander. “A worker in Canada is competing with China or India. But the Canadian market can’t compete on labour costs, which means businesses here need to produce better products and require higher-skilled workers to create them.”

And then there’s the race against machines replacing labour. “You particularly see the pressure on middle-skilled workers in Canada,” says Alexander.

Right now, governments see basic income as a potential panacea for these problems: It’s a giant safety net to guarantee Canadians a minimum income if they fail in the labour market and fall below a certain standard of living.

Tal concurs with this analysis. “We all realize that we are in a midst of significant change in the way the economy is functioning,” he says. “We will have a situation where the skill-sets will not be consistent with what the economy needs. There will be a transition where fewer people will be employed and able to find a job.”

4. What could go wrong?

Intuitively, basic income sounds very appealing. “It can reduce poverty. It can reduce government program costs,” says Alexander. But scratch below the surface, he adds, and it quickly becomes unwieldy.

For starters, there’s no unilateral way for governments to roll out such a program. In Ontario, let alone the rest of country, no minimum standard of living could be equally applied to all residents—particularly in cities like Toronto and Vancouver where shelter costs far exceed national averages. If such a program were to be rolled out nationally, “are you going to have higher annual incomes in Ontario versus Manitoba?” asks Alexander. “You could have people moving away from provinces to get income.”

An even bigger question is how governments will pay for basic income. In a perfect world, basic income would create smaller governments by eliminating many programs for low-income individuals. But that doesn’t mean it still wouldn’t be an incredibly expensive program to get off the ground and running.

This is why basic income is always a reoccurring theme, says Alexander. “Even though governments are interested, it’s something that will require a lot of investigation. It would be a huge fiscal cost to launch it, but if you get it wrong there would be a huge fiscal consequences.”

11 comments on “4 questions you probably have about basic income

  1. The naysayers will complain about the poor being lazy and unmotivated, and leeches, and that this can’t be done, that its communism, or blame the poor for societal and economic trends. Then they will complain about rewarding the same, and that everyone who is eligible is a deadbeat druggie. We have a massive antipathy of the poor, those who advocate eliminating minimum wage, eliminating all public services, starving, punishing and criminalizing the poor believe the answer is tough love, no matter how many lives it costs (its their fault after all and if they die en masse thats their fault).
    These same people typically support taking from the poor and giving to the rich, trickle down economics (it only fails because we still charge taxes), giving obscene corporate welfare to the richest people/corporations on earth, tax cuts to levels below even our sales tax (aiming for zero tax on the rich while massive regressive tax increases on the poor), and subsidies, preferential treatment and little to no enforcement of tax evasion as the solution. The rich are supposed to get richer because they are worthy, even giving them virtually unlimited money for nothing in return is acceptable, people hope they will become rich and be able to look down on everyone else and especially the poor, minorities and other races, so virtually any punishment can be justified, often the more harsh the better.

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    • Having a work ethic is a thing of the past for many. Too busy on their phones and PS4’s. Laziness plagues our society. The truth is that if you are prepared to work hard you will succeed. Attitude and effort are still the keys to success. Having a massive chip on your shoulder like this writer is a barrier unless you want to be a Union official.

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      • If you are prepared to “work hard” you will succeed. This is a very sweeping statement which benefits only corporate companies. People in construction and in food industries work harder than a doctor, doe it mean money is pouring into the pockets of construction workers who work hard? Guaranteed income program is for people earning below $30,000 who form 80% of the population of canada.

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  2. In Ontario the government had no problem cutting welfare rates by over 20%. The Canadian government had no problem signing free trade deals, destroying the unions and their labour power.

    This is why the private sector and the “welfare” sector have been destroyed. The only sector left are the government sector ( people sitting there doing nothing like the CBC and Senate ), the back-2-work project sector ( building empty useless buildings like MARS and Velodromes in Milton ), and the bailout sector ( because corporate welfare to Bombardier and the Auto Sector is A.O.K. – just not to low income people ).

    Because politicians are overpaid government types, then they think like overpaid government types, they have no understanding of the long term consequences of their actions.

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  3. “are you going to have higher annual incomes in Ontario versus Manitoba?”
    Maybe using rent/property taxes the same it is applied to seniors provincial payments.
    Same for HST.

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    • once you get into free money , it is very hard to move up there is little incentive . when I buy a lottery ticket with my earned taxed dollar and it loses too bad for me … when I buy a ticket with free money I cannot lose anything , the lesson here join the free spending liberals and live to a ripe old age onrthe backs of our hard working population .. having operated a business for a number of yours I could curl your hair with “welfare “stories., liberalism is well defined as the” Art of spending someone else’s money “

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      • Many people work hard and save peanuts. Guaranteed income applies to them too. Remember, savings is the key whether you work or not. Those people who don’t work may not save much if they depend totally on guaranteed income.. Obviously people with more needs and desires need more money on top of government free income.

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  4. This concept is so incredibly nonsensical that there can only be one of two reasons why the clowns in Queens Park plan to implement it. Either they are completely brain dead or they believe that we, the people, are.

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    • You are just lashing without knowing the changes in the economic model. Future is going to very different from your 100 yr old 9 to 5 job, brick and mortar school practice with the invention of machines and automation. Come out of this 9 to 5 job mindset through which we don’t save money anyways. I would see guaranteed program as interest payments which canadians hardly get

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  5. I moved to Holland from BC recently to be surprised on how much they get here just for being on welfare.. Basic amount for 1 person is 1050 euros plus they look fore you for a home to live it, its a right of all Europeans! Of course Canada is the last country that does not support mortgage payments as being taxable. My daughter works here in Holland and they gave her 105% of the price of a home. Nice. And she get a tax break on paying her mortgage. Why are we so far behind the 8 ball?

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  6. This article merely grazes the fundamental root issue – that is Big Government itself – and how much its existence impairs the real economy. Imagine a world where you keep 50% or more of your pretax income, how many real jobs would be created (and spin off employment) from you having that money to spend directly or invest productively. Versus a fat cat bureaucrat, who first steals it from you pay via taxes, and then flushes most of it down a toilet. Sure there is a layer of society that will always need support, but I would guess this assistance could be had for 10% of the cost the government spends today.

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