Premier needs primer in the value of universal basic income to the economy

Posted on February 9, 2019 in Debates

Source: — Authors: – Star Business Journal/Opinion
Feb. 8, 2019.   By DAVID OLIVE, Business Columnist

Doug Ford, premier of Ontario, is poised to kill one of the world’s most ambitious and sophisticated universal basic income pilot projects (UBI), cutting a year off its intended three-year duration. The decision was made last July, soon after the Ford government came to power, and is effective March 31.

Ontario’s new government is able to do that because the UBI project, and its promise to reinvent social assistance and give poor people greater incentive to join the paid workforce, is scarcely known or understood.

UBI is a handup, not a handout. The approximately 4,500 participants in the test communities of Hamilton, Thunder Bay and Lindsay receive a no-strings-attached basic income equal to just 75 per cent of Ontario’s low-income, or poverty, threshold of $22,653 in 2017 when the project was launched.

Participants in the UBI project are not punished with the loss of their social assistance when they get a paid job, unlike the current system. For recipients who are not part of the project, social assistance payments are scaled back about 50 cents for every dollar earned in employment income. But a basic income is guaranteed, removing the disincentive to join the workforce.

About 70 per cent of Ontarians living in poverty have a job. But the working poor are not sufficiently rewarded for their work, even the many who work two jobs – a perversion of capitalism.

That accounts for the widespread discontent among the working poor worldwide. The phenomenon has manifested itself in the rise of strongman leaders, whose glib nostrums will not remedy the poverty crisis but worsen it.

In a landmark address to the UN General Assembly last September, UN Secretary-General António Guterres equated the low-income crisis with climate change as one of the world’s most urgent problems.

Guterres said UBI is a necessity to counter the social instability caused by a huge population of people worldwide who are unsuited to the Information Age jobs of the 21st-century economy.

Ontario’s UBI program is intended to determine if a guaranteed annual income — the ultimate social safety net, putting a floor under deprivation — will encourage greater workforce participation and better health, housing and education outcomes.

UBI streamlines the current difficult and demeaning qualification process for social assistance. It also reduces the crime, health and inadequate-education costs associated with poverty. For those reasons, the Ontario UBI program earned the support of all three major Ontario political parties when it was first unveiled in 2016.

UBI is a free-market concept, an experiment in breaking the cycle of poverty, enlarging the paid workforce and spurring the consumer economy. As such, it should have the support of career businessman Doug Ford. It was hailed as a worthy experiment by Patrick Brown, Ford’s predecessor as Ontario Tory leader.

UBI in Ontario owes its existence to former Tory senator Hugh Segal, an erstwhile candidate for the federal Progressive Conservative leadership. Segal is a longtime basic-income champion. Segal’s blueprint for UBI in Ontario was implemented with few changes by the Wynne government that solicited it from him.

But that cuts no ice with the Ford family, outsiders to a Progressive Conservative mainstream that has governed Ontario for most of its post-Second World War history.

Doug Ford has offered no explanation for killing UBI — and breaking a 2018 campaign promise in doing so — except that it’s a “simple” matter of saving money.

Aborting the UBI project will save about $50 million. That’s equal to 0.5 per cent of Ontario’s annual spending on social services, or 0.3 per cent of the province’s projected deficit for fiscal 2018-2019.

The devastating impact on the 4,500 participants in the UBI project, who have been blindsided by Ford’s decision appears to make that savings a false economy.

Scrapping the UBI will also consign the $100 million already invested in the project to the rathole. The Ford government is not interested in deriving value for taxpayers by studying and recording the impact of the UBI project to date.

Ford’s social services minister asserts that her advisers have told her that the UBI pilot has yielded too little evidence to prove its efficacy.

How those advisers came by their information has not been disclosed. But news-media examination of the UBI project has turned up abundant evidence of improved quality of life in the UBI pilot communities.

Automation in all its forms — computerization, robotics, artificial intelligence — is devaluing many types of work. That accounts for the current wage stagnation in North America despite a Canadian jobless rate at a 40-year low. Everyone from the late Stephen Hawking to Elon Musk has warned that social policy must change to ease the transition of workers to the new economy.

Closer to home, 100 corporate CEOs have petitioned the Ford government to save the UBI project . “Automation, globalization, the conversion to more of a gig economy, precarious work, the monopolization of certain industries, like the way Amazon is on retail — all these things are putting downward pressure on wages of everyday Canadians,” Floyd Marinescu, CEO of software developer C4media and of CEOs for Basic Income, wrote in an open letter to the government.

“We all want to grow the economy, and the economy consists of people.”

The moral case for eradicating poverty needn’t be made, or so one hopes. But the economic case does.

Western economies, including Canada, are held back by widespread skills shortages. The below-average health and education of Canada’s approximately five million people living in poverty, including as many as 125,000 Toronto children , is the leading cause of that skills shortage. That population is a vast untapped resource in doing the giant work that needs to be done in this country’s laboratories, tech centres and small-business incubators.

That millions of Canadians must work two low-paying jobs to make ends meet imposes a heavy financial cost on the country. In working 16-hour days, they force the health-care system to treat a multitude of stress-related ailments, ranging from psychological disorders to heart disease.

Finally, poverty is a factor in Canada’s chronic underperformance in productivity growth. Health-related absenteeism and high turnover in the low-pay workforce are constraints on productivity growth, the chief measure of a country’s prosperity.

A guaranteed annual income, or UBI, is not a silver bullet. If it is shown to work, UBI still must be accompanied by further increases in the minimum wage which falls short of the cost of living, a sufficient inventory of affordable housing, freer access to higher education as Europe has long provided and universal daycare, the absence of which dissuades at-home parents from skills-upgrading and paid employment.

Those are not radical ideas. Governments in Canada adopted them ages ago, if not yet sufficiently so to the need.

What is radical is Doug Ford’s agenda in weakening social protections, for which he did not seek or earn a mandate in the 2018 election. These reactionary measures include freezing the minimum wage at $14 , new restrictions on disability assistance and efforts to enable landlords to more easily evict low-income Ontarians .

Doug Ford said last October, “The best way to help people out of poverty is something called a job. A good-paying job.”

It might be news to the premier that most poor people in Ontario have jobs — and quite a few put in longer hours than he does.

UBI is not a novel concept. Thomas More championed it in Utopia(1516). Canada saw positive outcomes from a 1970s “mincome” experiment in Manitoba, but the project was of insufficient duration to be deemed conclusive.

UBI advocates have called on Ottawa to rescue Ontario’s UBI project. And the federal Liberals have endorsed UBI. “At some point, there will be a universal guaranteed minimum income in Canada for all Canadians,” Jean-Yves Duclos, the federal social development minister, said in December.

But while the Liberals might run on a UBI platform in this year’s federal election, Prime Minister Justin Trudeau has said it’s inappropriate for Ottawa to interfere with provincial programs.

For now, one can only appeal to Doug Ford’s interest in his legacy. Saskatchewan was the laboratory for Medicare. And Quebec pioneered a universal daycare system that is overdue for a national rollout.

In politics, builders usually are better and more fondly recalled than dismantlers. Admittedly, basing UBI’s survival prospects in Ontario on that truism is a frail hope. But at this point, it’s all we have.

David Olive is a business columnist based in Toronto.

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