A basic income program is coming to Canada soon, says Evelyn Forget. In June a cross-party committee of MPs agreed, calling for the government “to take a deeper look at a guaranteed minimum income to help workers caught in the tectonic shifts of the ‘gig economy.’ ” Forget is an economist and professor in the department of Community Health Sciences at the University of Manitoba. Her research includes basic income guarantee programs worldwide, the cost-effectiveness of healthcare interventions, and the health and social consequences of antipoverty programs. Written for the general public, Basic Incomewas a runner-up for the 2018/2019 Donner Prize, which “encourages and celebrates excellence in public policy writing.”
A basic income is a guaranteed minimum amount of income for each adult Canadian, provided without conditions or checks on how it is spent. With the nature of work in Canada changing from full-time, secure, well-paid jobs, to contract, short term and part-time work, usually at lower wages, and with jobs in many sectors being lost to automation, the objective of a basic income is to eliminate poverty and increase financial security.
But different versions exist. One alternative is a universal basic income (UBI), which is structured to replace all income support programs with a negative income tax. The advantages of this are many: All citizens receive it (no stigma); it is automatic through the tax system; and it concentrates transfer payments on the poor and leaves the tax rate (on income beyond the basic) the same for all. A second alternative would only replace provincial social assistance with a basic income, keeping other income supports in place. It’s relatively inexpensive, less disruptive, and provides administrative cost savings with less invasive and bureaucratic determination of need.
Forget proposes the second alternative. For illustration and costing, the basic income numbers she uses are from the recent Ontario experiment initiated by Kathleen Wynne’s Liberal government and then cancelled by Doug Ford’s Conservative government. For adult Canadians aged 18 to 64, the Ontario project grant was $17,000 per person with a tax back of 50 per cent for income earned over this amount (at $34,000 there would be no grant). The 1970s Mincome experiment in Manitoba supplies Forget with very important evidence not previously used. She also includes data from five other North American experiments.
Critics worry about the effect of a basic income on labour supply, but Forget shows there was only a small reduction in hours worked. Basic income allowed participants to attain more education, and for mothers to spend more time with their children—both investments in the future. Forget notes that healthcare costs are highly correlated with poverty, indicating not only a significant potential cost savings with basic income, but also that basic income is good for our health.
But the model Forget proposes has issues. To implement it would require considerable federal–provincial cooperation—at present highly unlikely. Though many economists favour it, UBI is not discussed and is essentially dismissed in a note in the appendix as too expensive. UBI would eliminate other federal government payments and provincial social assistance, including the bureaucratic costs, greatly simplifying the operation of government redistribution and poverty abatement. It would also have a fairer “tax back”—as the current federal tax rate for taxable income under $47,630 is 15 per cent. But Forget is right: UBI would be expensive and likely hard to sell politically.
Forget makes a compelling case for how and why to implement a basic income in Canada. Public support will be needed to lead intergovernmental co-operation.
—Greg Flanagan is a public-finance economist and a Distinguished Research Fellow at the Parkland Institute.