The pandemic has sparked discussions about Universal Basic Income
The spread of COVID-19 has had devastating results, but a small benefit has been the renewed discussions around Universal Basic Income (UBI).
Canadians experiencing unemployment due to the pandemic have been eligible for the Canadian Emergency Response Benefit (CERB). Others have been the recipient of the Employment Insurance (EI) program that works in much the same way. However, both of these programs come with eligibility requirements. A Universal Basic Income, sometimes called a Guaranteed or Minimum Income, is a regularly scheduled payment delivered to citizens without any financial assessment or work requirement. Generally, those on the political left are in favour of it, claiming it will reduce poverty and improve the health and wellness of citizens. Those on the political right claim it will disincentivize people from working, be used on drugs and alcohol over food and shelter, and massively increase taxes.
When assessing these factors, we first have to agree on a few items. The first is what success looks like. Proponents of UBI see success as a population with an excellent work-life balance that is healthy and can afford basic needs. Most people would agree that everyone deserves to be able to feed and clothe themselves and provide shelter for themselves and their family. Another measure of success would be a steady employment rate. Regardless of any utopia we may dream of, we still need people to fill roles within our society. The aim, of course, would be to have a workforce that works because they want to, not because they need to.
Since human behaviour is the biggest determining factor in this debate, the only true way to know who is right and how real people will actually behave is to do pilot projects—and there have been many. In July 2016, the Overseas Development Institute (ODI) reviewed 165 studies of 56 basic income programs from 2000 to 2015, covering 30 low- and middle-income countries worldwide. This review discovered poverty decreased, school attendance increased, overall health and diet improved, personal savings increased, adult employment stayed statistically the same (while employment of minors dropped dramatically), and women’s independence increased. These are all amazing and desirable results!
Pilot programs in North America yielded similar results. According to Wikipedia, a variety of pilots have been conducted over the years. Four pilots in the 1960s and 70s in Indiana, Seattle, and Denver found that while there was negligible change in most categories, school attendance and completion increased while sales in “drugs and luxury goods” remained flat. Meanwhile, a five year study in Manitoba ending in 1979 found a significant reduction in hospitalization, “specifically in case of mental health diagnoses.” An interesting result was the decrease in employed new mothers and teenage boys entering the workforce earlier in their lives, because these individuals stayed in school and got a high school diploma instead.
More recently, a three year pilot in Ontario started in the fall of 2017. However, its cancellation was announced less than a year later by the newly elected Progressive Conservative government. Payments ended in March 2019, but project conclusions are still pending as researchers are currently sussing out the potential bias from the premature cancellation. Meanwhile in the U.S., a pilot project in Stockton, California began in February 2019 for residents living at or below the median income line. Recipients received $500 debit cards once a month for eight months. Most participants used their stipends to buy groceries and pay bills.
Despite all of these positives, the question that remains from those opposed to the program is “How do we pay for it?”. While Conservatives may not like the answer, we pay for it the same way we pay for everything: taxes. Currently, EI premiums are deducted on everyone’s paycheck, but not everyone receives EI. This 1.58 per cent EI deduction (down from 2.70 per cent as recently as 1998), up to its annual cap of $856.36 (matched by your employer, up to $1,198.90) almost completely funds EI payments in Canada. If Canada introduced an UBI, it would ultimately replace EI. Employment Insurance pays a maximum of $573/week (before taxes, which then go back into the federal EI bucket). So if Canada moved to a UBI, this income tax deduction would have to increase.
The question then becomes why the percent and annual maximums are flat, regardless of income. If it can generally be agreed that those of higher income should pay a higher income tax, which already funds things like schools and education and healthcare, it would only seem appropriate that the same principle should apply when it comes to funding a program that universally improves the health and education of a nation’s citizens.
While I have not done the math, it would be reasonable to assume that through careful adjustment of this UBI deduction, this program could almost entirely pay for itself. Making it an automatic payment, perhaps triggered by tax filings or annual declaration, would reduce the administration costs of routine eligibility checks. The result is a population that is healthier, happier, and has money to inject back into the economy. Isn’t that something we deserve?
Featured Image: The idea of a Universal Basic Income has been tested in many pilots. | Pixabay