What the poverty advocates forget about Canada’s flirtation with a basic income

Posted on December 8, 2015 in Social Security Policy Context

NationalPost.com – Full Comment
December 8, 2015.   Colby Cosh

News of a Finnish proposal to introduce a universal guaranteed annual income has once again revived talk and memories of Mincome, the Canadian experiment tried in Manitoba in the 1970s. The replacement of piecemeal welfare benefits with an unconditional basic income has been batted around for decades. It is an idea that finds favour with some libertarians and hardcore market believers, who admire it as a possible way of eliminating the deadweight losses from bureaucracy associated with the traditional welfare state. (It might certainly have some use in circumscribing the grandiose, demented “disability state,” which has supplanted classic welfare in the U.S.)

A basic income is also popular with some socialists and do-gooders, who see in it the chance of eliminating poverty outright. But the very merits of a minimum income make it difficult to test. Many oxen stand to be gored by such a scheme, if it is to yield any efficiency savings at all. Will we really just be able to dismiss all the social workers, all the outreach agencies and urban homelessness fighters?

That seems to be part of the idea in Finland, whose centre-right prime minister has talked of “simplifying the social security system.” The Finnish plan now being bandied about would give every adult €800 ($1,172) a month — money that would be tax-free, although it would count toward the personal tax exemption for those with earned income.

Manitoba’s Mincome trial, which ran from 1975 to 1979, is being spoken of respectfully now because guaranteed income has so rarely been tested in a thoughtful way. Mincome was designed consciously as an experiment, applied in two theatres. In the city of Winnipeg, 1,187 households were randomly chosen to receive a “negative income tax,” and each was paired with a similar household elsewhere in the city to serve as a control. The guaranteed income was also given to everybody in the town of Dauphin, Man., and the surrounding rural municipality, in order to check the effects of “saturating” an area with money for merely existing.

This seems like a broadly sensible design for a social policy experiment. Different households in the Winnipeg part of the program were given different clawback rates on the income they earned, in order to provide what one might call dose-response details of the labour-market effects. The Dauphin side of the project did not come with an explicit control group, but, after all, every other similar town in Canada was there to provide an implicit one.

But what are we to conclude if we take the botched, almost shameful implementation of Mincome itself as a lesson in what becomes of ambitious big-government ventures? Gulp.

Scientifically, however, the whole thing ended in disaster. The original budget for the experiment was set at $17 million, but, in the words of Evelyn Forget, a University of Manitoba health economist who did a sort of historical autopsy on Mincome in 2011, this “was never more than a wild guess.” Most of the budget was to be covered by the federal government, which was, at the time of the program’s founding in 1973, under pressure to rethink (and streamline) Canada’s social safety net.

Unfortunately, the budget was not inflation-indexed, but the payments to the experimental subjects were. If you remember the year 1973, you will immediately see the problem. Inflation smashed upward through double digits almost as soon as things got underway.

This meant there was no money left to do anything with the actual information being gathered by the researchers. Within a couple years, well before the end of the handouts, they were unable even to go on gathering. “Virtually no analysis” was ever performed on the Mincome data. It was socked away, on thousands of reams of paper, in the federal archives.

Mincome staff economists did eventually use the data from Winnipeg to estimate whether a minimum income made people more work-shy. Their guess was that, if anything, it seemed to make them less so. But the dropout rate of participants in the Winnipeg household surveys was a frightening 36 per cent, making it difficult to trust that inference — especially given that people entering the program knew perfectly well it would only be temporary.

Prof. Forget actually found the physical boxes containing what is left of the Mincome information, a remarkable enough feat. She eventually got a study out of her interest in Mincome, but those boxes were no help. Instead she looked at other health and education data from Dauphin collected by the province during the Mincome period.

She then compared Dauphin with her own control group, constructed statistically, after the fact, from other among Manitobans alive at the time. Forget’s clever 2011 paper is almost a ghostly twin of the actual Mincome experiment, performed using none of the numbers actually collected thereunder. Her conclusions were that the “saturation” minimum income seemed to slightly increase the likelihood of Dauphinites completing high school and to reduce the burden on the area’s hospital.

So the news from 1970s Canada is good for the prospects of real-world basic income programs. Good, that is — but not very clear, and exceedingly fragmentary. But what are we to conclude if we take the botched, almost shameful implementation of Mincome itself as a lesson in what becomes of ambitious big-government ventures? Gulp.

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