Pandemic Hurdles for Basic Income

…by Terrance Hunsley

On January 18, I participated in a webinar organized by the office of Senator Kim Pate, for politicians and stakeholders interested in a Basic Income for Canadians. Several well-known and highly-respected speakers took part, including former senators Hugh Segal and Art Eggleton, Murray Sinclair,  Chair of the Truth and Reconciliation Commission, Graham Fox, CEO of the Institute for Research on Public Policy, Professor Evelyn Forget, and the Chair of Basic Income Canada Network, Sheila Regehr. Everyone endorsed the concept and discussed how it could be implemented, pointing out that it would help to “build back better” after the pandemic. 

With the exception of the observation by a participant that neither the PM nor the Minister of Finance seem to be on board,  the overall feeling was upbeat about increasing support. Polls show increasing public support. The Liberal, NDP and Green parties have all endorsed it. A number of mainstream national organizations have either endorsed some variant of it or supported the idea of pilot projects. The Province of Prince Edward Island has asked for federal assistance to implement it. 

So when the country’s top two are not in favor, you have to wonder where they are getting their advice. I could speculate. 

The first two that come to mind would be the Department of Finance and Treasury Board. (Actually, they would probably take up numbers three and four as well.) 

Finance officials have never been favorable to basic income or guaranteed income proposals. Partly because the cost numbers are very large. For a universal program, every adult would receive money. For a targeted program, probably the bottom half of the income scale would receive some amount of money. When you figure out the distribution of the tax revenues required to finance it, the targeted and universal options could actually look quite similar – a transfer of income from the top half to the bottom half of the income scale. That sounds really good and sensible and would achieve a lot of benefits for people and Canadian society – but kind of scary for fiscally-conservative bean counters. There are people around the finance department who still remember the early 1980’s when they designed the National Energy Program for Justin Trudeau’s father, and brought down the government. 

And of course, many of these people are cowering under their desks (or beds if they work from home) as they manage a budget with huge pandemic crimson numbers, with borrowing and money creation figures that were unimaginable two years ago.  

The finance department runs economic simulations on policies under consideration, and they have probably run some on basic income. And their simulations probably suggest that unconditional money would encourage some people to leave the labour market. The simulations would also show the amount of extra taxes that higher earners (including the finance officials) would have to pay. The potential for government revenues to be increased through increased economic activity and better job opportunities for lower wage people would be very conservatively projected.  

The finance department would find close allies in Treasury Board, both at the public service and political level. The Treasury Board President, Jean-Yves Duclos, would weigh in on the matter.  As a professor of economics before entering federal politics, he also carried out a simulation of a guaranteed income. His research also suggested that some marginal workers would leave the labour market, making the program too expensive to operate. 

We should note that basic income advocates dispute these findings, but they don’t have a strong argument, because the experiments that were evaluated took place many years ago in a different economy. And some of them did actually show a small decrease in labour force participation, mainly among marginally-employed single moms. But they point out that many people used the extra money to upgrade their education or acquire tools to earn a better living and that these things are not factored into the economic models.

After Treasury Board could come the Privy Council Office and Ministry of Intergovernmental Affairs. They would point out that the provincial governments have a primary role in responding to poverty as well as establishing minimum wage legislation for most workers. Even though the federal government arguably spends more money to reduce poverty than do the provinces, they have pretty much always done so either through transfers to support provincial programs, or with provincial government approval. And it is by no means clear that provinces would go along with the idea.  A solo federal role could be possible, but probably easier with a universal transfer to everyone, than one targeted to low income people.

But then these departments would flank themselves by ministers of health and seniors and families and the middle class. They would point out that the government has already committed itself to spend more money on improving long term care, improving child care, and introducing some form of pharmacare –  all expensive items.  And seniors and the middle class and parents all tend to vote more than the poor. And the current government is a minority one, with an election likely in the next year or two. 

So even though I believe that Canada would benefit as a country from a basic income, I can’t feel too optimistic. 

Maybe Mr Trudeau and Finance Minister Freeland could gather their political courage and do a couple of things that are well within federal purview: They could support PEI to implement not a pilot project, but the first Basic Income program in Canada. And negotiate with other provinces in the future.  And they could commit to a guaranteed living wage policy to acknowledge all of those exploited front line workers who saved our lives and livelihoods through the pandemic. The Canada Workers Benefit could be adjusted to bring low wage workers up to 3/4 of the median full-time wage in the economic region where they live.  

That would be a nice start, would not break the bank, and would provide a good stimulus for an inclusive economic recovery. 

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