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What is a basic income supplement?
A basic income supplement (BIS) is a direct way of dramatically reducing or eliminating poverty in Canada by ensuring that all Canadians have access to the financial resources they need to secure safe housing, food, and a reasonable standard of living. It would be administered through the federal income tax system.
The idea is often referred to as a guaranteed annual income (GAI), a guaranteed minimum income, a negative income tax or simply as a basic income. As many of these ideas are linked to specific implementations of a general idea, we’ve elected for the more neutral basic income supplement (BIS). You can read about the two most common models (negative income tax or universal demogrant) in Chandra Pasma and Jim Mulvale’s overview.
Here is an example, where the initial transfer is $18,000 and the tax back rate is 50%. Click here for the data table.
Why should we have a basic income supplement?
Canada already recognizes the need to provide financial assistance to low-income Canadians, persons with disabilities, older Canadians, and a number of other groups with particular financial needs. The “social safety net” is a source of great pride to many Canadians, and has made our economy stronger and more resilient. Canadians recognize how important it is to ensure that our society provides help to those who need it.
But we can do better for the one in 11 Canadians who remain below the Low Income Cut Off (LICO).
A basic income supplement is a more dignified approach. As Conservative Senator Hugh Segal writes:
How we deal with the lowest income Canadians among us would be different.
They would not be “case load burdens”; they would be citizens.
They would not have to apply through Plexiglas for enough money to feed their kids.
They would not be trapped in the rules and constraints of welfare and the excessive state involvement in their lives, such as “spouse in the house” rules, or be prohibited from applying for post-secondary education support.
They would not be treated as dim creatures, incapable of making decisions; they would be treated as human beings trusted to make life choices.
We have already embraced the idea of a basic income for children and seniors: the National Child Benefit Supplement for low income families with children and the Guaranteed Income Supplement for low income seniors are similar to a basic income supplement administered through the federal tax system.
A basic income supplement is a logical next step for Canada to take, to ensure that all Canadians have that support. Canadians from many different political parties support the idea of a basic income supplement. Let’s try it out and see if it works.
Interesting idea, but I’m not convinced. Let’s see the numbers.
Please read the following articles, some of which are critical of the idea:
Politicians, columnists, advocates
- Why Bob Stanfield and Milton Friedman were right by Hugh Segal
- Scrapping Welfare by Hugh Segal
- The problem isn’t giving people money when they don’t work…it’s taking it away when they do by Andrew Coyne
- Why Canada Should Pilot a Basic Income to Reduce Poverty by Jesse Helmer
Academics & policy experts
- Understanding Guaranteed Income by Chandra Pasma & Jim Mulvale
- Should Canada have a guaranteed annual income? by Kevin Milligan
- The Town with no Poverty by Evelyn Forget
- A guaranteed income? From Mincome to the millennium by Derek Hum and Wayne Simpson
- On Basic Income: go big or go home by Stephen Gordon
- On the political economy of a basic income by Stephen Gordon
- What are some of the biggest problems with guaranteed annual income? by Tyler Cowen
- Income Security for Working-Age Adults by John Stapleton
- Practical Challenges of Creating a Guaranteed Annual Income in Canada by Charles Lammam and Hugh MacIntyre
- Rethinking Income Support: A Guaranteed Income by Ken Battle
- Negative income tax and labour market participation by Samir Amine & Pedro Lagos Dos Santos
- Fighting Poverty: assessing the effect of a guaranteed minimum income proposal for Quebec by Nicholas James Clavet, Jean-Yves Duclos and Guy Lacroix
- Storify archive of Twitter chat with Stephen Gordon, Kevin Milligan, Mike Moffatt and Lindsay Tedds
- Static cost estimates for two benefit levels and five claw back rates (Kevin Milligan)
- Switzerland’s proposal to pay people for being alive by Anne Lowrey
Please email email@example.com if you know of an article that should be added to the list above.
Can we afford it?
Poverty costs Canadians more than $72 billion a year. Children in Canada face a particular poverty burden, and it is estimated that one dollar spent on reducing child poverty saves $9 in future government spending. Canada has a number of different programs that provide financial assistance; unfortunately, because they each require their own administration and staffing, they also have significant administrative costs. An effective basic income supplement could replace some of these distinct programs with one that is simple, efficient, and effective, which would help us reduce administrative spending over time.
Cost is one of the reasons we are proposing a pilot project first. Let’s see if it works, how much it costs and what the benefits are before we try implementing it on a larger scale.
Does a basic income supplement work?
This is not the first time Canada has tried a basic income supplement. More evidence is needed, however, which is why Canada should support a pilot program to test it out in the real world. What we learn from our pilot program could benefit not only low income Canadians but low income people all over the world. Here’s an academic paper on the results of the Mincome experiment by Evelyn Forget at the University of Manitoba.
One concern in terms of implementation and the design of a basic income supplement is its effect on labour force participation. However, as Stephen Gordon outlines, we might expect a basic income to be better than conventional welfare programs in terms of labour force participation. While Gordon’s model is theoretical and involves simplifying assumptions, we see this as an argument in favour of a pilot project. Let’s test a few different implementations and see what the actual effects on labour force participation are.
How would this pilot project work, exactly?
In the Mincome experiment, the residents of the town of Dauphin, Manitoba, were eligible for the mincome and there was a control group. We envision a broadly similar approach, with one or more cities or towns participating in the pilot of a basic income supplement over a period of 3-5 years. Ideally, we would like to see more than one approach to a basic income supplement tested.