John Ibbitson is a writer-at-large for The Globe and Mail. David Parkinson is The Globe and Mail’s economics columnist.
There are few left alive who remember pain like this, a pain not seen since the Depression. Millions thrown out of work. Entire industries shuttered, storefronts dark and schools empty. And fear: of getting sick, of losing your job and your home and your future. Fear that we have entered a long, dark time. The Black Twenties.
But some also find reason for hope. For decades, politicians and planners have argued over whether Canada should replace the social safety net of federal employment insurance (EI) and provincial welfare programs with a guaranteed basic income aimed at lifting all Canadians out of poverty. During the pandemic, more or less by accident, this has happened.
The Canada Emergency Response Benefit (CERB) offers just about anyone dislocated by the current health emergency $2,000 a month. Airport employees, waiters, workers on the line and millions more who suddenly found themselves out of work are surviving on it. Anyone forced to stay home to care for children or someone who is sick qualifies. People who are self-employed qualify. Artists and seasonal workers, people who have used up their EI benefits – all are welcome.
But CERB is temporary. Is it time to make it – or something like it – permanent? Creating a universal basic income, as many call it, would be the most seismic social reform since the advent of public health care in the 1960s. Critics say we can’t afford it. Supporters say we can, and must.
“I’m more optimistic about it now than I have been for the past 20 years,” says Hugh Segal, a former Conservative senator who was Prime Minister Brian Mulroney’s chief of staff, and who has been crusading for a guaranteed income for five decades. The poor have been forced into the rut of welfare dependency for generations, Mr. Segal says. The time has come “to suck up our gut and start a new furrow.”
Others remain unconvinced. "It treats the symptom, not the underlying causes of poverty,” says former NDP Saskatchewan finance minister Janice MacKinnon, a professor at the University of Saskatchewan. "It takes away the incentive to work. And it’s expensive.”
CERB has let the basic-income genie out of the can’t-afford-it bottle. When this crisis becomes merely chronic, a lot of people will be hungry for changes to a system that leaves too many unsupported and too many one gig away from calamity. Hard choices lie ahead: whether a universal basic income is doable; what it should look like; if there are better approaches; what the debate could do to our politics.
All this waits for us on the other side of COVID-19.
At the root of the argument for a guaranteed basic income is a belief embraced by thinkers on the left and the right that poverty is wrong, and we should end it. For the left, want in the midst of plenty is immoral. For the right, in cold, hard economic terms, poverty is inefficient. An impoverished population is a drag on economic growth.
English politician and philosopher Thomas More laid out the case in 1516, with his book Utopia. More observed that even the punishment of death does not deter thieves who must steal or starve. It’s much better, he argued, to provide everyone with enough food (or the means to work for it) so they don’t need to steal. You end up with well-fed workers in place of starving criminals.
Versions of that same argument dominated the thinking behind the assistance programs that were in place in nearly all developed countries by the 1960s and 1970s, creating the welfare state: unemployment insurance, welfare, government pensions and other supports.
But after half a century of tinkering in Canada, three seemingly insoluble problems remain. The benefit paid to someone on welfare – about $10,000 a year for a single person in Ontario – is far below any definition of the poverty line. Most programs penalize rather than reward welfare recipients who earn extra income. And the relationship between someone on welfare or EI and the bureaucracy that oversees it is complex and humiliating: a thoroughly modern equivalent of begging for food.
The alternative of a guaranteed income gained new legs in the wake of the 2008-09 global financial crisis, and as the burgeoning knowledge economy sharpened income inequality and broadened the pool of precarious workers fearfully eyeing the end of the next contract.
A universal basic income – which also goes by other names – could take many forms. All assume that governments would ensure that every citizen has enough income to cover life’s essentials by providing direct payments, either instead of or on top of other income. The key difference between UBI and welfare is that the former requires much less means testing and is much more generous.
In one model, the government would simply send equal-sized cheques to every household, and let the tax system claw back the money from those who don’t need it. Some advocated this approach for CERB, as the fastest way of putting money in people’s pockets during the crisis.
But it’s ridiculously expensive. Kevin Milligan, an economics professor at the University of British Columbia, told the House of Commons finance committee last month that CERB-sized payments in this form would cost $60-billion a month – equal to 30 per cent of Canada’s gross domestic product. The steep price of such an approach makes it a nonstarter, as three-quarters of Swiss voters agreed when they rejected a similar proposal in a 2016 referendum.
U.S. economist Milton Friedman proposed a more modest alternative, known as a negative income tax, in the 1960s. Anyone earning below a minimum would receive payments to lift their income to that threshold; anything earned above that level would be taxable. In the minds of Friedman and other proponents, the scheme would replace a crazy quilt of social programs, minimum wages, pensions and other support measures – often with conflicting rules – with one program that would be far less costly to administer.
This model was tried in a federal-provincial experiment in Manitoba in the 1970s, was recommended by the 1985 Royal Commission on the economy headed by former Liberal finance minister Donald Macdonald, and formed the basis of a basic income pilot program in Ontario that was scrapped mid-experiment in 2018 by Doug Ford’s newly elected Progressive Conservative government.
In early March, researchers at McMaster University in Hamilton – one of the communities involved in the Ontario pilot – published a report based on data from the aborted Ontario experiment. The key findings read like the textbook defence of basic income.
Recipients found it easier to find work and enjoyed better physical and mental health, along with greater food and housing security. Many moved to more secure and higher-paying jobs. There was little evidence that the program prompted people to quit work or quit looking for work.
"The results … dispel some of the fears of the opponents of basic income, including that it will lead to a wholesale abandonment of paid employment,” the report concluded. “The results suggest that the stability basic income provides can help recipients move to better paying employment and to play a fuller role as citizens in society.”
Skeptics question the validity of relatively short-term experiments such as the Ontario pilot, arguing that what amounts to a temporary windfall has a very different effect on participants than would a permanent program.
But for the Ford government, the potential price tag was the much bigger issue. It estimated that rolling out the pilot provincewide would cost $17-billion a year – about 11 per cent of the province’s operating budget, and nearly double the roughly $9-billion the province currently spends on its social assistance programs, although the true net cost can’t be known because the pilot, which would have provided an answer, was cancelled.
The Office of the Parliamentary Budget Officer calculated that a similar national plan would cost the federal government an additional $44-billion a year – even after savings of about $32-billion from folding existing federal supports into the new plan. But the PBO report also said that if Ottawa and the provinces were to co-operate on a basic income program, and use it to replace some provincial programs as well, the net cost would be reduced further. The provinces, which are responsible for the bulk of social services, spend about $20-billion collectively on income supports.
Still, that leaves about $24-billion that the country would have to come up with for this kind of plan – and that’s for a relatively conservative benefit. The cost might even be more.
At $24,000 a year, CERB is considerably more generous than the Ontario pilot, which provided only the annual equivalent of $17,000 for a single-person household.
Should a universal basic income use the CERB benchmark – and if so, how on earth could we afford it?
In designing CERB, Ottawa planners wanted something that could cover life’s necessities – as Prime Minister Justin Trudeau put it, to ensure “that Canadians who are staying home from work have enough money to be able to buy groceries and pay their rent.”
The government settled on a monthly sum that is a bit above the median for EI recipients, and roughly equal to the minimum wage in most of the country. The amount also aligns with the average poverty line across the country for a single-person household: the income required to cover basic necessities, with shelter and food at the top of the list. So there’s a good argument for making $2,000 a month the starting point for any discussion of a basic income.
Still, even more modest income supplements have made their mark. The Canada Child Benefit, for example – a concept introduced by Stephen Harper’s Conservative government that the Liberal Trudeau government increased by about $2,500 a year – has helped bring nearly 300,000 children out of poverty. Historically, the Guaranteed Income Supplement to Old Age Security, an addition introduced in 1967, reduced poverty among seniors.
Perhaps a basic income program that falls short of $2,000 a month – even considerably so – could still meaningfully improve lives.
What this crisis has laid bare are the inadequacies of EI as the country’s chief means of income support, and the need to modernize or replace it with something that provides much broader, if not universal, coverage. David Macdonald, senior economist at the Canadian Centre for Policy Alternatives, calculates that only about 40 per cent of unemployed Canadians actually qualify for EI.
Stricter eligibility rules introduced in the 1990s and today’s proliferation of short-term contracts mean that many without work can’t access a system based on old-fashioned assumptions of nine-to-five jobs.
“The old EI system was built for the world of work as it existed in the seventies," Mr. Macdonald says. “The world of work has changed since then.”
“It seems to me that there likely isn’t any going back," he says. "I think what CERB has built is the foundation for a modern EI system, that’s more responsive, more expansive and more reflective of a modern work world.”
But others wonder whether a one-size-fits-all social program would create more holes in the social safety net than it mends. What about those with disabilities, those with no access to affordable housing, those who need access to training programs?
“Often, when basic income proposals are made, the idea is that you replace existing benefits," UBC’s Prof. Milligan told the finance committee. “The thing about existing benefits is they are very often based on needs. So if you are disabled and you need a wheelchair and you’re on social assistance, you can get a wheelchair.” He fears a UBI program would leave people with special needs to their fate.
The pandemic crisis will leave Ottawa saddled with hundreds of billions of dollars of unexpected debt, and an aging society with fewer young taxpayers available each year to sustain growth. If the goal is to bring people into the workforce who are currently outside it, would other approaches be better?
Economist Armine Yalnizyan, Atkinson Fellow on the Future of Workers with the Toronto-based Atkinson Foundation, argues that for about $15-billion a year – a fraction of the cost of a poverty-line basic income – governments could deliver more affordable housing and child care, better dental care and pharmacare, and improved access to postsecondary education for those in need.
And then there’s the politics of the thing.
Introducing a national basic income would reshape – and strain – the bonds of the federation. Welfare is a provincial responsibility, while EI is federal. Both levels of government would have to co-operate to merge the two programs into some form of UBI. Such co-operation has been rare in the life of this country.
There is a precedent. During the Depression, desperate provincial governments begged Ottawa to take greater responsibility for poor relief. As the result of a constitutional amendment in 1940, what we know today as EI became a federal rather than a provincial responsibility.
Many provinces are again likely to be in difficult straits in the wake of this pandemic. Could Ottawa offer to relieve them of their welfare burden in exchange for certain fiscal considerations?
François Blais, a strong supporter of a basic income, served as Quebec’s employment minister under Liberal premier Philippe Couillard. Although he tried to lay the groundwork in Quebec, he believes any meaningful program would have to be national in scope to deliver the greatest benefit.
“Universal basic income for adults doesn’t exist now” in any country, says Prof. Blais, today a political scientist at Laval University. “Why? Because it is difficult to integrate this kind of mechanism with the existing social security net” and would involve “massive changes to the tax system.”
But in recent decades, a template has emerged that has allowed the federal and provincial governments to tailor national programs, such as health transfers and the harmonized sales tax, province by province.
A national basic income might see Ottawa and a province agreeing to fold existing basic income initiatives like the Canada Child Benefit, Old Age Supplement, federal EI and provincial welfare and disability programs into an income-tested basic income, with special-needs services left intact.
In some cases, especially Quebec, a province might decide to operate its own program, with the federal government contributing funds and the province agreeing to meet national standards.
In quiet times, such dramatic changes to the safety net and federal-provincial responsibilities might be dismissed as unrealistic. But in the world of CERB, “it certainly looks feasible,” says Kim Pate, an independent senator who in April co-authored a letter signed by 50 senators that urged the Liberal government to seize the moment “to craft social and economic reforms.”
Ms. Pate, who previously was executive director of the Canadian Association of Elizabeth Fry Societies, is a strong supporter of a universally accessible basic income, which she believes would go “back to the original intent of our social, economic and health safety net of assistance schemes, which was to assist people to get a leg up and out of poverty, not to keep them entrenched in poverty.”
She would like the federal, provincial and territorial governments to agree on national standards for a basic income, which might require increased taxes on corporations and upper-income Canadians.
Corporate taxes are a popular target for the left as a way to pay for expensive social programs. In a post-COVID-19 Canada trying to revive a business sector that’s being devastated by the current shutdowns, this could be throwing an anchor to the drowning. In any case, given the imposing cost of a guaranteed basic income, the tax hit would probably not be limited to the rich.
"The cost, no matter how you structure it, will require one of two things: either an increase in the deficit … or tax increases. Any tax increase to get a significant amount of money has to affect middle-income Canadians,” says Prof. MacKinnon, the former Saskatchewan finance minister.
Would the Liberals be willing to propose converting CERB into something permanent? The federal pandemic assistance programs appear popular with Canadians, but the enormous cost – we’re headed toward a $250-billion deficit this year – is supposed to be temporary.
The Conservatives would fight any basic income proposal, arguing that taxpayers cannot afford the fiscal burden. We might even see a UBI election, like the one in 1988 that decided the future of free trade with the United States.
In the past, provincial governments have engineered social programs – public health care in Saskatchewan, pension reform in Ontario – that federal governments eventually embraced. British Columbia and Prince Edward Island are both studying the basic-income issue. They may end up taking the lead.
We long for some good to come from this crisis, some national purpose that future generations will point to and say: There, that is when the new world began, when we started to win the war on poverty with an income for all. But maybe a basic income is simply beyond our means.
We’ll predict this much: When the crisis finally ends, we’ll be talking about basic income in a way we never have before.