PM’s COVID-19 aid underlines the potential benefits of universal basic income

Posted on April 12, 2020 in Social Security Debates

Source: — Authors: – Business/Opinion

Imagine that upon entering the COVID-19 crisis we had a universal basic income (UBI) program in place. If UBI were to be implemented, every adult would receive a fixed monthly payment from the government independent of his or her employment status. No questions asked, no forms to fill out. Direct deposit into your bank account.

Consider a payment of just $1,000 a month, as U.S. Democratic party ex-candidate Andrew Yang proposed in his campaign. This could have gone a long way toward relieving the stress so many people are experiencing right now.

With massive layoffs already taking place, the closure of anything non-essential and a severe recession around the corner, UBI could ensure that utility bills are paid and food is in the fridge. This is priceless in such extraordinary times.

The idea of UBI has been around for many decades. In fact, two pilot programs were already introduced in Canada. The first took place in Dauphin, Man., from 1974 to 1979, when the so-called Mincome program provided cash payments to low-income households. The second pilot took place in 2018 in different communities in Ontario(Thunder Bay, Brantford and Lindsay among them). Four thousand people participated in the pilot, but it was terminated prematurely once Doug Ford’s government came into power.

While a final report summarizing the Mincome experiment in Manitoba was never published, in recent years Evelyn Forget, a professor at the University of Manitoba, analyzed the old data and concluded that UBI is still relevant, and recommended its implementation as a complementary measure.

Surprisingly, UBI is one of those ideas that people from both the economic right and left get excited about. They like it for very different reasons, but it still may increase the likelihood of being adopted by policy-makers.

So why is UBI a good idea? The socially minded see two major arguments in its favour.

The first: to reduce the breadth and depth of poverty. A UBI would effectively lift everyone above the poverty line, defined in Canada as the cost of a basket of goods and services that individuals and families require to meet their basic needs. UBI would let everyone live with dignity.

The second is that UBI is essential in an era of technological unemployment not unlike the one we are about to experience. In coming years, robots and other machines will take over many jobs traditionally done by people — assembly-line workers and drivers being two examples.

Additional arguments in favour are that UBI will correct the widening gap between rich and poor, and establish the notion that everyone — including, for example, stay-at-home parents (many of them women) — has a quantifiable economic contribution.

As Annie Lowrey highlights in her book “Give People Money,” UBI would “ensure that every person had some minimal level of capital and, thus, some minimal level of choice.” This is extremely important for the well-being of society.

Should we worry that people wouldn’t want to work with UBI in place? Lowrey doesn’t think so. Work is part of one’s identity, she argues, and UBI payments aren’t enough to eliminate the incentive to work.

The economic right, on the other hand, sees UBI as an opportunity to get rid of governmental bureaucracy and inefficiencies. It views UBI as a way to replace existing allowance programs, tailored over many years, with an efficient, one-cheque solution. And in the process, one could fire public-sector employees who would no longer be necessary. According to this school, funding UBI isn’t a problem, since poor people aren’t going to end up with more.

But to achieve some social goals, UBI is going to cost money. How much?

A recent report by the Basic Income Canada Network examined a few scenarios to estimate the cost. One approach would be to include in the program all Canadians aged 18 to 64; a single person would receive $22,000 and a couple, $31,113. Payments would be reduced gradually as other income rose, and residents older than 65 would continue to receive Old Age Security. The price tag of the program: $134 billion annually. Funding resources would include existing refundable tax credits, progressive tax measures such as higher tax brackets and higher tax rates on high incomes, and increases in corporate taxation.

The idea of UBI is gaining attention and supporters. Currently, there is a pilot taking place in Stockton, Calif. Additional pilots are planned in Newark, N.J. and Milwaukee, Wisc.

Prime Minister Justin Trudeau’s government should be congratulated for creating a UBI-like program during the COVID-19 crisis. This only emphasizes its necessity. Once the COVID-19 crisis is over, Canada must launch a large-scale UBI pilot. A safety net should be provided to all Canadians every day, not only in times of crisis.

Amir Barnea is an associate professor of finance at HEC Montréal and a freelance contributing columnist for the Star.

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