The basics of a guaranteed basic income

Posted on January 10, 2017 in Social Security Debates – Full Comment
January 9, 2017.   ANDREW COYNE

The old line on the guaranteed annual income, or as it’s called nowadays the basic income guarantee, was that it had support across the political
spectrum. Conservatives, it was said, liked it for its emphasis on reducing the traditional welfare system’s punitively high clawback rates on benefits, while liberals were attracted by its promise of a social safety net that was simpler to navigate and intruded less on people’s lives.

These days, it seems like the basic income enjoys something closer to bipartisan hostility. Not a day goes by without another piece attacking the idea as either a utopian fantasy or a Dickensian nightmare.

On the left, it is derided as subsidy to low-wage employers, relieving them of the obligation to pay a decent wage. Meanwhile, the right abides in the eternal suspicion that a guaranteed, unconditional income supplement must inevitably encourage indolence.

In part each side is reacting to the other. The basic income is sometimes described by its more enthusiastic proponents in quasi-millenarian terms, as (on the right) a replacement for most of what government currently does, or (on the left) a replacement for work itself, in a world in which robots will supposedly soon make human labour obsolete. The result has been to encourage skeptical moderates to write off the whole idea as half-baked, unaffordable or worse.

If it seems odd that the same idea could be simultaneously praised on all sides and condemned on all sides, it may be because it is not in fact the same idea. Not only do its advocates have very different notions of what a basic income would involve, but so do its critics. In the absence of a specific proposal for a basic income, everyone is responding to their own imagined model, or indeed to their perception of what other people are proposing, or perhaps even their perception of how other people perceive their perception. Hence the current chaos.

So it is good news that we are finally getting past the vague theorizing stage and will soon have something a little more concrete to argue about. This week Finland became the first country in Europe to test the idea; some 2,000 randomly selected adults will be paid $782 a month for two years, to see how they respond. The Netherlands is to follow soon. And here in Canada, the governments of Ontario and Prince Edward Island are about to launch pilot projects, with other provinces likely to follow.

The Ontario project, announced in last year’s budget, will have the benefit of input from former Conservative Senator Hugh Segal, one of the idea’s most tireless champions. Segal provided the province with a blueprint for how to proceed in a report late last year (Finding a Better Way: A Basic Income Pilot Project for Ontario), whose modest and sensible proposals may reassure some of the idea’s critics even as they dismay its more enthusiastic proponents (or perhaps vice versa: who knows?).

It is best to begin with what Segal recommends the province should not do. It should not, he suggests, test what is sometimes called the “big bang” version of a basic income, in which all sorts of different government benefits, both cash and in-kind, are melted down into a single unconditional payment. Some of the programs sometimes mentioned as candidates for the melting-pot, he points out, have quite incompatible purposes. For example, employment insurance and the Canada Pension Plan are by their nature contributory programs: how much theypay out is supposed to vary with how much contributors pay in.

If it works well, we might then proceed to add a basic — very basic — income guarantee for those of working age to the existing guarantees for children and retirees

And while there is merit in cashing out benefits now delivered as services — among other virtues, to give recipients more choice in the nature and source of the service in question — there is simply no political constituency for that sort of of radical overhaul of the welfare state. Not at one go, at any rate.

Likewise, Segal cautions against testing the version of the basic income sometimes called the “demogrant,” as in the Finnish experiment, in which a fixed payment is made to every adult citizen. Though conceptually similar to the “negative income tax” he prefers — you can either pay everyone the same amount, then tax it back starting with the first dollar of earned income, or you can pay out to those with incomes below that point, and tax those above it — it entails a much heavier gross outlay. And besides, other countries are already testing it.

In other words, Segal’s model would be limited, at least initially, to replacing the current welfare and disability systems. He suggests guaranteeing one test group an amount equal to 75 per cent of Statistics Canada’s Low Income Measure — currently Ontario Works pays just 45 per cent — with a much gentler clawback on earned income than at present. Different levels of payments, and different clawbacks, would also be tested. If Ottawa were willing to partner with the province, he notes, current federal income supports might be added to the mix. But that’s a bonus.

After three years, he argues, there would be sufficient data to draw some conclusions in terms of the effects on work incentives, as well as health, education and other factors affecting the life chances of those on low income. If it works well, we might then proceed to add a basic — very basic — income guarantee for those of working age to the existing guarantees for children and retirees. The payment could then be enhanced, other benefits folded into it, over time, as resources and politics allowed.

At the very least, it would make for less arguing at cross purposes.

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