Weighing trade-offs on poverty

TheStar.com – comment – Weighing trade-offs on poverty
June 20, 2008. Carol Goar

OTTAWA–The longing for a simple, affordable plan to reduce poverty runs deep.

It has propelled the idea of a guaranteed annual income onto the national agenda no fewer than five times since the 1970s. But no proposal has ever had enough momentum to overcome the political and practical barriers that stand in the way of implementation.

Senator Hugh Segal believes Canada is close to the breakthrough point. “Our current programs haven’t made a jot of progress (in reducing poverty),” he says. “We’ve tried everything else. Why don’t we try a basic income floor?”

Segal, a Conservative, was addressing the Senate committee on cities chaired by Art Eggleton, a Liberal.

Despite Ottawa’s fiercely partisan climate, the Senate remains an oasis of civil and informed debate.

Those qualities were on display last week. The committee assembled a dozen leading social scientists to seek advice on the feasibility of a guaranteed annual income. Its members wanted to know if there was a formula that would lift Canadians out of poverty without draining the national treasury or disrupting the labour market.

Predictably, the 3 1/2-hour round table was inconclusive. But it gave the senators a clear understanding of the rationale for moving from the existing patchwork of social programs (welfare, unemployment insurance, old age security and the child benefit) to a universal income floor; the cost of doing it in a humane way; and the reasons to think twice.

At the wrap-up, Eggleton would only say: “I’m open-minded. I do believe we need a national poverty reduction strategy. If we don’t have a silver bullet, relentless incrementalism is the least we can do.”

As the committee decides whether to opt for a bold departure or a more conventional approach, it will have to weigh some difficult trade-offs.

A guaranteed annual income would have three principal advantages:

It would provide all Canadians with enough income to meet their basic needs. Because the benefit would go to everyone, there would be no stigma, no means test, no auditing of bank accounts, no fraud investigations and no intrusion into people’s privacy.

It would be administratively efficient. Because the payment would be delivered through the income tax system – in the form of a negative tax for those with no income – there would be no need for legions of bureaucrats.

It would give governments a new tool to reduce poverty. Most research shows a revenue-neutral plan – one costing the same as the programs it replaced – would produce a slight drop in the poverty rate.

But a universal entitlement would have four major drawbacks:

It would be an expensive way to fight poverty. Economists have calculated the price of bringing everyone up to 70 per cent of Statistics Canada’s low-income cut-off at roughly $20 billion. A more generous benefit would carry a bigger price tag.

It would leave many needs unmet. A guaranteed annual income would not include job training for the unemployed, support services for people with disabilities, subsidized child care for single parents, student aid or social housing.

It would induce some people not to work. The impact would depend on the size of the benefit. Various experiments conducted in Canada and the United States have shown a 1-to-20 per cent drop in labour force participation.

Finally, it would require an extraordinary amount of federal-provincial co-operation to enact a new national program. It might have to be done piecemeal. It might never be completed.

Segal, who served as chief of staff to former prime minister Brian Mulroney and associate cabinet secretary to Ontario premier Bill Davis, knows a thing or two about selling controversial initiatives to Conservative leaders.

Eggleton, who held three portfolios in Jean Chrétien’s cabinet and was Toronto’s longest-serving mayor, knows a thing or two about political pragmatism.

It will be interesting to see which path the Senate committee takes.

Barring an election, its report will be released at the end of this year.

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