Do You Support A Guaranteed Minimum Income For Canadians?
Canada has quite a good system of helping to reduce poverty in our senior citizens. OAS is payable to most. GIS is available for low income seniors, plus every province and territory has a variety of support programs.
But what about a guaranteed minimum income amount for all adults?
This fall Swiss voters will vote on a referendum that would guarantee every citizen a yearly income equivalent to approximately $35,000 CDN, whether they work or not – no strings attached.
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This idea is not new. Every ten or fifteen years there is renewed interest in the concept. A group of activists from Basic Income Canada Network is currently trying to drum up support for providing every Canadian with a minimum income of $20,000.
Advantages
The proponents of a guaranteed minimum income state that it is a superior way of stabilizing poor people’s income and reducing poverty.
- It would keep administration costs to a minimum by eliminating all other social assistance programs, such as unemployment insurance, disability payments, welfare, and GIS, as well as Child Tax Benefits and GST/HST rebates.
- “Frees up people to pursue what creates more meaning for them.” (Daniel Straub – The Liberation of Switzerland). In other words, unleash the potential to pursue personal interests, and inspire creative thinking for innovations.
- Give people some financial independence and control.
- Increase the flow of money back into the economy – housing, food, and clothing.
- Social justice problems (read crime) associated with poverty would be diminished.
Disadvantages
The biggest barrier is negative stereotypes about poor people – “Whatever happened to earning a living?”
When my mother (who had worked at paid employment since she was a teenager) became eligible for OAS payments she was incensed that her neighbour (a life long stay-at-home housewife) also received the same amount. “I’ve worked all my life and she just sat at home!”
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In our culture we’re brought up to believe that in order to survive you have to work. There are strong feelings that we shouldn’t give people money for nothing. “They’d probably just spend it on beer and cigarettes.”
Other objections:
- Payments might discourage recipients from looking for a job – those lazy ne’er-do-wells.
- It would require a massive amount of money.
- Low-paying, low-status jobs would be expensive to fill.
- Current workers may leave the workforce and rely solely on basic income “hand-outs.”
- Lazy, greedy people would just abuse the system.
- Who will work if we’re giving away money for free?
A social experiment
In a labour market experiment, for a four-year period (1974-1978), the poorest families in Dauphin, Manitoba were granted a guaranteed minimum income.
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The government thought it would become a universal program, but the idea eventually just died off. It came to a quick halt when an economic recession hit Canada causing prices to increase 10% each year.
All that remains of that experiment are hundreds of boxes of unanalysed documents in a warehouse, collecting dust.
University Study
Professor Evelyn Forget of the University of Manitoba unearthed some of the government documents and performed her own analysis. She found that the unemployed had more opportunities to find work better suited to them rather than taking the first job that came along.
Only two segments worked less – new mothers who wanted to stay home longer with their babies, and teenagers who, under less pressure to support their families spent more time in school, resulting in more graduates.
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She also discovered an 8.5% decrease in hospital visits with fewer work related injuries, accidents, domestic abuse and mental health problems.
“In today’s terms, an 8.5% decrease in hospital visits across Canada would save the government $4 billion annually … the amount (they are) currently trying to save by slashing social programs and arts funding.”
Her conclusion was that “a guaranteed minimum income program is a superior way of delivering social assistance.”
Final thoughts
In theory, the concept of a guaranteed minimum income sounds good. In practice, I think about our government bureaucracy.
Can our federal and provincial governments come together and agree on the administration of such a complex plan when their usual response is the quick fix (raise the eligible age for OAS, cut certain benefits)?
Is it feasible? What kinds of tax policies and adjustments would be required to support it?
How do you feel about a guaranteed minimum income?
Saving on bureaucracy is good, but that only gets us so far (the same problem with the flat tax). Ultimately the money has to come from somewhere.
For the average person it would just be a shell game: they’d get their minimum income payment, then pay it back through higher taxes. The rich would have to pay more to make up the difference.
The net increase of a $20,000/person/yr basic income would be where that amount is higher than the existing government programs (welfare, EI, GIS, OAS, etc.). Looking just at seniors, 1.8M receive GIS, which with OAS pays out just under $16,000 per year. So there alone we’re looking at ~$7.2B in spending that has to come from somewhere.
Not sure how many people in the rest of the age spectrum would get new benefits — EI would be about the same, I think welfare would be more, and many people who don’t quality at all (stay-at-home spouses and adult children) would start getting benefits.
But for the elderly alone this would require a ~2.5% increase in taxes on average, most of which would of course have to be levied on the rich. If the rest of the population was something like double that again, that’s quite the increase in taxes required.
But it’s the third bullet point that concerns me more: the clawback would have to be pretty steep on the guaranteed income amount, as the average person has to end up a net payer of tax, so there would be a huge hit to the incentive to work at or near current minimum wages. Unless the plan also comes with a huge restructuring of the tax system (no income tax, but 30% GST?)…
I think it’s a good idea in theory but the practicality of government administering something like this efficiently and effectively would be a concern. They can’t even manage the programs that are currently available, and this would be a huge change that would likely result in more mis-management by the government
I think one of the attractions of a program like this is the idea of sweeping away the old patchwork and starting fresh…but in the end it would bring with it its own set of problems and inequalities. There’s no system on earth that can be completely equitable, completely effective, and completely error-proof at the exact same time, and anyone that thinks so hasn’t read much history.
The question should always be “what maximum level of inequality, inefficiency, and perceived loopholes are we willing to accept in order to deliver the maximum gain to participants?”, and I think a patchwork solution of different programs has the best chance of being able to deliver the maximum gain across all the different kinds of income situations that we agree need to be addressed.
Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.
Maimonides
I would like to see a better program for education.
The main problem with this system is $20,000 goes so far in some areas and in big cities it gets you no where. How do you account for the differences in cost of living? If you dont’t account for the differences will you creatproblems in cities where it is cheaper to live? The social experiment was confined to a single area which mrans it did not face this problem.
I don’t believe this program would benefit our younger generation at all. If anything it would harm them more than what our education system and government has already done.
The younger generation already believes they are and should be entitled to more things than they deserve without working for it. Our education system and government say don’t fail a student because it is embarassing for them to fail in front of there friends, etc. So what the education system and government are saying is that it would be less embarassing for them not to be able to get a job, buy a house, support themselves or a family in front of their friends. There is nothing wrong with working for what you want in life and feeling proud of what you achieved. This new program they are talking about would have more people using it and less people working to pay into it which would put our economy and country into a massive economic failer. Our government and education system needs to promote education (yes, people do fail if they don’t put some effort into what they do), work for what you want in life (yes, work pays off in life). This will show the younger generation what our grand parents and parents had to do to support themselves, their family, buy a house and feel the pride in what they accomplished in life. One thing that does need to change is the pension system our government is using. I don’t know of any company that you work at for a couple of terms and receive pension for life. They should have to be in office for minimum of 15 years before you get a pension.
I think it’s a really interesting idea; my first instinct is that I like it. A single parent or low-income family wouldn’t need to work as many hours to support their family, giving them more time to spend with their kids – and simultaneously reducing childcare costs. From that perspective, it’s win-win. Put in in place today, sounds great! More people working part-time means more jobs available – and that means less unemployment.
Few people are going to want to live on $20,000, so there’s built in motivation to find and keep part-time employment at least. Many people build their identity around their work or really enjoy it and wouldn’t change a thing about their jobs even if this came in. For them, it would more of a safety net.
Logic, unfortunately, leads me to wonder about the specifics of how it would work. I can see a lot of potential problems. How is it getting paid? Will it put people who are currently making a lower-middle-class income back down to closer to that $20,000 after tax? What kind of clawback would we be looking at? I think they’d need to do not one, but multiple trial runs before they even thought about rolling something like this out.
I think it is an idea to consider. Production exceeds our ability to consume the goods produced.
With automation and fewer good jobs we are moving into a new era of living for humans.
The Swiss are putting in a guaranteed income system.
I work in retail and it seems like it is now a catch and release system, there is no real penalty for theft.
Imaging if there was no welfare at all in Canada or very little like in the US. We might have to arm ourselves.
Not a society I would like to live in.
I can see where we will end up with something like this in the distant future (Star Trek) but I doubt that cash is the way to get there. Perhaps guaranteed housing and food items could be a start. There is a lot of trouble dumping money on people. A lot of it will be well used and a lot horribly used on whatever is being effectively marketed, or to leverage unbearable debt.
I live in Calgary on $36,000 (net) a year which includes child support payments of $1000/month. Which means I live on $24,000. Now, I make a lot more than I spend to live on since I invest close to 50% of my earnings. I think a couple taking $20,000 each would be just fine. Where do I sign up?? Instant retirement!
This is really interesting, and I have to say, I do like the concept. $20,000 seems like a lot to support though. I think an idea would be to sink up amounts received with related federal tax credits. For example:
The federal basic personal exemption (around $11,000+ currently and indexed every year), would be the amount everyone is entitled to receive. You get an extra $2,240 (or whatever it ends up being) per child under 18 wich matches up with the credit on line 367. If you’re a single parent, and can claim one of your children as “equivalent to spouse”, you get another $11,000.
These amounts would each be individually clawed back at 15%around the current OAS limit ($71K). This would mean by around $150,000 the benefit is eliminated completely. Any tax changes to fund this should occur above this level. A small bump over the $150,000 level, and a second small bump over $500,000 (similar to what Ontario has done). Then maybe an ultra night net worth tax for people earning 7 figures ++ every year.
At the end up the day, this would help those who need it and it wouldn’t be funded by the middle class.
I like Daniel’s, Robert’s and Mclain’s posts. Robert’s would fail because that would somehow be looked at as being unfair because the person does not have control over the money given to them.
Why don’t we all just get US citizenship’s move to Hawaii and receive US $47,000.00 in total benefits every year. (Google it). That is what the welfare system gives there.
I have to say I’m getting tired of this ongoing social “re-engineering” program that people are falling for. Where success has to be shared with those that do nothing to contribute to society, and you or a company is made to feel guilty for not agreeing. The wealthy tax the middle class to pay for the poor? Great system. Really fair.
In Canada we still have 300,000 plus seniors 65+ that have incomes below the poverty line. I suggest average annual incomes for seniors should be increased at least $5,000.00 annually to help seniors near the poverty line.
Secondly, I don’t think more entitlements are the final solution. the government of Canada could encourage the 50+ demographic to become more active, creative and productive in their own pre-retirement or retirement life. Younger people under 40 years of age are presently getting great support from the Federal Government re: job finding programs and entrepreneurial training programs. Whereas; the Boomers/Elders are left alone to fend for themselves in this challenging economy or worse yet they are ‘put out to pasture’ before their time. We need more focus placed on the 50+ demographic because they have more skills, experiences, knowledge, resources, contacts and wisdom compared to the under 40 demographic.
Yes, we could all use more entitlements from the Federal Government however;there is a financial budget limit on these resources. Productive longevity in Canada could solve the problem by encouraging the 50+ to give back to society and at the same time get more meaning and purpose in life for themselves.
@ Joe
That’s a big number… $150,000,000.00 not including doubling that figure for the paychecks of the government workers distributing that extra amount to the seniors, being so efficient in the background.
Is that “another cup of coffee’s” worth per day out of everyone’s pay check to add to all the other cups of coffee we forgo that we keep hearing reference too?
When did we all lose self responsibility?
“Give back to society” strikes me as an amazing comment. For people who have worked steadily for forty years and been heavily taxed throughout that period, it’s not exactly fair that they now be compelled to continue to “give back”. How much can “society” extract from the same few people all the time?
Guaranteed minimum income is a non-starter.
I struggle with OAS, even though I might get some someday.
“Old Age Security” is for those that need it, not some senior making $70k per year, those seniors aren’t even clawed back at that point.
Canada has a good/great system of helping to reduce poverty in our senior citizens; but its overly complicated and I feel we need one program for that: GIS or a derivative of it.
The Swiss did it right. I only wish we will follow their lead someday…
Mark
I think it would just encourage too many people to not work. As it is, there are positions where we can’t hire enough people. If we reduce the number of adult students who work along with other adults who are just boosting household income a bit I think we’d really be stuck with too many open positions.
I lived in Switzerland from 2004-2010 and can tell you that the Swiss have great sense of both social and personal responsibility. Since the Swiss only passed the right for maternity pay for working women in 2005 (not kidding…) and recently overwhelmingly voted down a large minimum wage hike (May 2014) – I have my doubts this measure will pass. The Swiss federal government wields enough control to manage the program properly with one central point of control – we’d be arguing for years who is responsible for what, who controls what and who pays for what. If the Swiss actually do it – I tend agree with Mark – they’ll do it right – but I hope we take the time to learn from their experience before we attempt to jump in.
Dude, this is straight up socialism and Un-Canadian.
Also why do men have to work 3 years longer there then women to collect their pension? I find that very strange.
This sounds horrible, the fact that we provide GIS and OAS is bad enough. People should be forced to pay for their choices and have to live a miserable life if they couldn’t bother to put a dime away for themselves in the future. Simply saving 50$ a month from 25 to 65 would provide you with 162k at 65, assuming 8% return. Doesn’t take much…
Thanks everyone for your well-considered comments. Plans to reduce extreme poverty are commendable but difficult to implement successfully. The consensus seems to be that people should be responsible for themselves, with social programs only for those unable to be, such as the disabled for instance.
So many things come to mind when I read this. 1) a single non-working mother with 3 children in GTA will have an income of $35,000 (welfare & child benefits, not including medical benefits from the welfare program). $20k would drop it by 1/3 if you eliminate universal child benefits to pay for it. 2) What would stop an 18 year old from moving out of their parents house and enrolling in university part time (to not be designated as a student) and receive the income. 3) What happens to the cost of items that low income people currently pay for, items at the dollar store, basement rental apartments. I suspect these items that people at the bottom of the income ladder pay for will experience a huge surge in inflation. 4) The Swiss are required to have health insurance and purchase it from private insurance companies. Without the massive tab for healthcare that our government has, the Swiss have more of a luxury to pay for other social programs.
There are many people 65 and older still working getting a good salary and collecting old age pension. I find this to be obscene. They can earn up to $100,000 per year before the claw back kicks in.