Prospect of minimum income gaining steam as Canada clamours for new ways to manage welfare and benefits

Posted on December 28, 2015 in Social Security Debates – Canada/Politics
December 27, 2015.   Joseph Brean

At a Montreal convention in 2014 when the Liberal party was a lowly third power in Parliament, its members passed Policy Resolution 100, pledging to create a “Basic Annual Income” to solve problems in the social safety net, from pension risk to seasonal worker benefits.

That promise, to guarantee a minimum income, has a new urgency entering 2016, as the new Liberal majority government brings that platform to life in a country clamouring for new ways to manage welfare and benefits.

It is not a new idea, much the opposite. Its many champions include American Founding Father Thomas Paine, on the grounds that everyone is entitled to share in general prosperity. He thought the state should pay citizens a bonus, perhaps on their 21st birthday, which would minimize the “invidious distinctions” between rich and poor. Unlike his other views, it did not catch on in America.

But it became unusually popular over the past year in Canada, with top-level political support everywhere from Alberta to Prince Edward Island and official Ottawa.

There is always an incentive to work, and people who work are always better off than they would be if they didn’t work

In response, Evelyn Forget, one of the few researchers to have actually studied the policy in the wild, described guaranteed basic income as an idea whose time has come, and “definitely doable.”

She is the University of Manitoba economist who analyzed data from a pilot program during the 1970s, where everyone in Dauphin, Man., was guaranteed a “mincome” as a test case. The program ended without an official final analysis, but Forget did her own and found minor decreases in work effort but larger benefits on various social indicators, from hospitalizations to educational attainment.

The results suggested to her that a national mincome could improve health and social outcomes at the community level.

Critics point to the likelihood of abuse, such as a writer for The Economist, who described a similar Swiss proposal, the subject of a referendum next year, as “self-defeating … it would reintroduce the sort of distortions that many of its advocates hope to banish from the welfare system. Loafers could live comfortably without lifting a finger.”

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Nobel economics laureate Paul Krugman has argued a mincome is an appropriate response to the increasing share of income going to capital as opposed to labour, but he fears for the idea’s political popularity.

One popular version of the idea works like a refundable tax credit. “If an individual has no income from any source at all, they receive a basic entitlement,” Forget wrote in an op-ed this year. “As earned income increases, the benefit declines, but less than proportionately. As a result, low-income earners receive partial benefits so that they aren’t worse off than they would have been if they had quit their jobs and relied solely on income assistance. This means that there is always an incentive to work, and people who work are always better off than they would be if they didn’t work.”

Other small scale tests are in the works, in places such as Utrecht, Holland.

Unusually for an economic policy, guaranteed income is popular on the economic left and right, on libertarian grounds, or for efficiency or institutionalized fairness.

If an individual has no income from any source at all, they receive a basic entitlement
It has had proponents such as Milton Friedman, the iconic free marketeer who liked it as a simplification of welfare, and leading Canadian Tories from Robert Stanfield to Hugh Segal. No less a neo-con pair than Donald Rumsfeld and Dick Cheney once oversaw a mincome pilot project for the Nixon White House, aimed at measuring labour market reactions.

But the big boosters tend to be left-wing anti-poverty activists, such as Joe Ceci, a former Calgary alderman who was the provincial NDP’s star candidate and is now Alberta’s finance minister.

He might be uniquely placed to try out this theory, which has had so many champions but so few pioneers. He has the support of the mayors of his biggest cities, Calgary and Edmonton, who have offered to host pilot projects.

For Alberta, this would be in line with the province’s history of experimental economic policy, such as prosperity bonuses, or “Ralph Bucks,” paid out of a massive surplus in 2006.

For Canada, it would be unusually dramatic. But as official policy of the ruling party, it is set to get a serious hearing.

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