Proponents of basic income say the system can help Canadians cut themselves loose from the welfare trap—but is there a catch?
In 1974 the poorest residents of Dauphin, Manitoba started receiving cheques from the government to help them make ends meet. Those cheques kept on coming each month for five years in an experiment dubbed “Mincome”, which sought to find out whether or not establishing a guaranteed basic income would disincentivize Canadians from working.
However, with changes of government at both the provincial and federal levels the experiment was scrapped in 1979, and a final report wasn’t released for more than thirty years. While Dauphin hasn’t seen any more efforts to revive the program, the project has gained popularity both at home and abroad.
In its latest budget, the Ontario government announced it would run a basic income pilot project in the fall of 2016, even though details surrounding this project are sparse and they have not yet picked which community will test it out.
Regardless of the outcome of the experiment, Canada’s current social security system badly needs to be reformed. According to U of O economics professors Gilles Grenier and David Gray, Canadians under this system are forced to pay extremely high tax rates, which disincentivizes them from working in the first place.
A variety of issues will have to be addressed before the hundreds of thousands of Canadians who walk this fragile economic tightrope every day can finally drop down to safety.
Minimum income, maximum impact
In 2011, University of Manitoba economics professor Evelyn Forget, who was an undergraduate student when Mincome first started up, dug up the numerous boxes of disorganized files to find out whether the experiment found residents were disincentivized to work. The results were an astounding ‘no’.
The only groups who worked less were teenage boys who took the opportunity to finish their high school education, and mothers who opted to spend time with their children.
“When you think about it, it’s sort of obvious. Basic income doesn’t provide a comfortable living,” said Forget. “It provides basic necessities, and nobody leaves a good job because they’d really like to live around the poverty level. And so it’s kind of obvious that people with jobs aren’t going to quit those jobs.”
Both Forget and Gray emphasized that basic income should be designed to be a temporary fixture in the lives of Canadians.
“We only want it to be temporary. It’s nobody’s goal, I don’t think… even the extreme left (doesn’t) want people to be on the Guaranteed Annual Income (GAI) benefit forever,” said Gray.
Forget pointed out because of certain social and economic factors, certain populations will be more likely to benefit from basic income.
“Some people are going to be dependent for longer periods of time. Other people are going to be dependent on a particular point in their lives, maybe when children are very young and very dependent, for example,” said Forget.
But above all, basic income could help meet the changes that the current unstable economic system poses. Forget mentioned the plight of people in the 55-65 age bracket “who, for one reason or another, might have lost a job because of a health challenge.”
“They’re capable of working, but it’s not that easy when you’re 60 years old and have a limited skill set to go out and find a new job and (are) competing against guys who are 25 years younger and can work a lot harder usually for less money.”
Even younger workers, including millennials, are having trouble finding stable employment, which is a contributing factor to the public’s growing interest in alternative methods of social security like GAI.
Many university students clock in hours at a part-time or even full-time job as they pursue their studies. With continually increasing tuition fees, this trend is no surprise as students struggle to avoid debilitating debt. Providing students a basic income would mean less would have to work, or work as many hours, potentially freeing up jobs for others seeking employment.
Students often don’t find relief post-graduation because of growing prevalence of short-term contracts or temporary jobs, noted Forget. Baby boomers used to be able to lock down a job that they would stay in for the remainder of their career.
“Those kinds of jobs are getting increasingly difficult to find all around the world,” she said.
With arguments like these, it’s easy to see why Mincome was started in the first place.
Finding a balance
The economic downturn of the 1970s fuelled a fire of increased social awareness before the austerity of the 80s settled in.
“I think what happened was that there was a lot of enthusiasm about poverty reduction at the beginning of the 1970s,” said Forget. “So everybody was very keen and as the decade unfolded there were a number of… economic challenges. There was high inflation, high interest rates, high unemployment and so on.”
Now that similar economic hurdles are persistent in today’s society, basic income projects are popping up across the globe.
Finland plans to cut down on numerous social services and pay citizens 800 euros ($1,100) a month beginning in November. Uretcht, a city in the Netherlands is also kicking off an experiment to test the effects of basic income, and the Swiss will vote in a referendum in June on whether to implement a basic income of $3,200 a month.
In Quebec, Premier Philippe Couillard has charged his Minister of Employment and Social Solidarity, François Blais, with seriously studying the effects of basic income. At federal level, Yves Duclos, Minister of Families, Children and Social Development has spoken in favour of the concept.
The Ontario Liberals were the latest to join in the fanfare with the release of last month’s budget.
Often considered to be a far-flung left-wing idea, basic income also appeals to more Conservative appetites, according to Grenier.
“There’s also some right wing arguments, if you want a government that’s not too interventionist then you say, ‘just give everybody a basic income and we don’t care, you can do whatever you want,’” he said.
One right wing proponent is former Conservative senator Hugh Segal, who has advocated for guaranteed income for Canadians for many years, believing it could save millions in tax dollars.
“Federal and provincial governments have argued for decades that poverty is a complex problem. ‘Complex’ is a code word for a problem no one wants to face directly,” Segal wrote in The Literary Review of Canada. “Poverty is a complex issue, but in the end it is about one thing—a person not having enough money to meet basic needs of food, shelter, clothing and transportation for self or family.”
Gray also spoke of ways basic income could simplify Ontario’s current systems, including Ontario Works which provides financial and employment insurance to those in need.
“The social assistance program called Ontario Works, is very, very complicated. And one of the things that the (GAI) program has working in its favour is that it’s a lot simpler.”
Holes in the social security net
As Grenier pointed out, interest in GAI experiments have come and gone over the years. However, despite the variety of tactics provincial and federal governments have used over the years, the poverty rate has hovered around 12.9 per cent in Canada for the past forty years.
While the pilot project is planned for fall 2016, it’s been clear for quite some time that Canada needs to rethink how to structure its welfare system.
In 2010 the National Council of Welfare, who were the first ones to advocated for Mincome in the 1970s, released a scathing report that found the Canadian welfare system actually makes it more difficult for people to get out of poverty. Many provinces, including Ontario, force applicants to show need for welfare by draining their bank accounts, noted the report.
The federal government did not respond to the report, and shut down the council two years later.
Gray stated that if the Liberals want to effectively roll out basic income, they need to avoid the “welfare trap” that is tying down Canadians in the current system.
“The welfare trap is a built-in feature of social assistance, whereby someone gets a job (and) almost all of their paycheque is basically deducted from their benefits,” said Gray. “So they’re practically working for free or they’re working for a very very low wage per hour.”
“So we would have to define the benefit formula so that people don’t get caught in that welfare trap and have every incentive to get into labour markets and hopefully ascend to jobs which pay middle class wages.”
Grenier also echoed this sentiment, noting that many welfare recipients often have to pay extremely high tax rates, which disincentivizes people from working in the end.
“Whatever you earn, you lose in welfare so it’s like having a 100 per cent tax on your income.”
Forget points out the antiquity of some of the programs in effect, meaning they aren’t adapted to the current challenges of the 21st century Canadian economy.
“All our social programs that currently exist were set up for a very different kind of world and we really do need to think about what these programs need to look like going forward.”
Getting tied up
Grenier, Gray, and Forget all spoke to the numerous factors that need to be accounted for before basic income eliminates poverty in Canada.
“To lift everyone out of a condition of poverty is a very, very tall order,” said Gray.
“This just alleviates their economic hardship. It certainly doesn’t do anything to try to get them attain some self-sufficiency, where they would earn their living from the labour market,”he said. “So it would have to be combined with other policies and measures and other programs to try to induce people to leave this program once and for all.”
In addition there are a variety of factors that put (and keep) people in poverty, factors that won’t necessarily be fixed with a government cheque. After all, according to Statistics Canada, Indigenous Canadians, recent immigrants, seniors, single-parent households, and persons with activity limitations are more likely to live in poverty.
“Poverty is also about stigmatization and discrimination,” said Leilani Farha, executive director of Canada Without Poverty and acting United Nations special rapporteur on adequate housing in a Huffington Post Canada article. “You know, basic income is not going to address that. No single policy is going to address that,” she said, criticizing the existing social assistance system as one that hands out “paltry, paltry amounts of money.”
Coordination between the federal and provincial governments will also need to be managed effectively, in order to make the system run efficiently, and prevent the waste of tax dollars.
“We always will have a problem with coordination when the federal government handles the unemployment insurance and the provincial government handles the social assistance,” said Gray.
Forget also mentioned that young people are susceptible to becoming dependent on a GAI if there’s few employment options available.
“We know that young people have a particularly hard time finding their way into the economy and into first jobs. And we know that if they don’t do that by a particular age they are going to pay for it throughout their lives in terms of lower wages and so on,” she said.
“And so I think a lot of people quite rightly fear that this kind of a program makes it too easy for young people to survive.”
However, as the system currently stands, Canadians from all walks of life are barely hanging on as they try to pursue an education, support their families, and find economic security.
With a continuously dynamic and shifting economy, Canadians will continue to struggle to find a balance as they walk a higher and higher tightrope.
The least we could do is try to give them a bigger safety net.
