The Case Against a Universal Basic Income

Posted on August 11, 2018 in Social Security Debates – Intelligence Memos – The Regent Debate: The Case Against a Universal Basic Income
August 11, 2018.   Janice MacKinnon

In the C.D. Howe Institute’s inaugural Regent Debate four prominent voices sparred over the following question: Should Western democracies, such as Canada, establish a universal basic income? Today, we present an argument against from former Saskatchewan finance minister Janice MacKinnon.

As Saskatchewan minister of social services I was involved in early stages of the National Child Benefit, a model for modern social programs. It was targeted at a specific problem: poor children growing up in families whose parents were on welfare. It provided support for the children: free eyeglasses, dental services, prescription drugs; and it incentivized the parents to move from welfare to work.

Today we are facing what has been called the “fourth Industrial Revolution,” in which AI and new technologies will cause significant job displacement. What is required to meet this challenge is not a one-size-fits-all universal payment to all people but an approach that targets a specific problem: the need to transition people into new careers.

A recent study by the World Economic Forum modeled the jobs most likely to disappear and the new ones that emerge. It recommended investments in reskilling that will bridge workers into new jobs, and in financial support to help workers make the transition. It concluded that with a targeted, evidence-based, long-term plan, 96 percent of workers at risk would find good-fit job transitions.

With the UBI the focus is paying all people. All people get paid, no incentives to work, and few resources left over for the major retraining that is required for displaced workers. But we can’t afford to just hope that these recipients will find the appropriate training for the jobs of the future and decide to enter the workforce. With an aging population, Canada needs to incentivize all Canadians able to work to remain or enter the workforce. Reskilling and upskilling the workforce will enhance our productivity, which is essential to improving everyone’s standard of living. Studies have shown that paid work, even subsidized paid work, is more effective than government transfers in helping people escape poverty.

The other main problem with the UBI is its cost. Estimates show that, depending on the design, it would cost as much as $300-400 billion a year, more than the whole federal budget. Now advocates of the UBI say, “Well, other programs are going to be ended to help offset the cost.” Which ones? Seniors’ benefits? Subsidies for housing, daycare, training, legal aid?

But eliminating other programs won’t come close to paying for the UBI. Taxes have to be raised. Now, there’s no more room to raise high-income and corporate taxes in Canada since governments across Canada have already raised these taxes to the point that Canada has a competition problem, especially considering what’s happening to taxes and regulations in the United States.

Advocates for the UBI have modeled new changes to the tax system, but what do they show? Yes, the incomes of low-income Canadians will increase, but in the models, a person at $55,000 a year would lose 12 percent of their income, and many would see their income taxes increase by more than 50 percent.

The final problem with the UBI is it treats the symptoms of poverty, inadequate income, but doesn’t get to the root causes. What causes people to be poor? What can be done to prevent poverty? What tools can we give these people to help raise themselves out of poverty into a better life?

For a full video of the debate, click here.

The Regent Debate series is generously sponsored by Aaron and Heather Regent.

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