David A. Green is a professor at the University of British Columbia’s Vancouver School of Economics. Jonathan Rhys Kesselman is a professor emeritus at Simon Fraser University. Daniel Perrin is a principal at Perrin, Thoreau and Associates. Lindsay M. Tedds is an associate professor of economics and scientific director of fiscal and economic policy at the University of Calgary’s School of Public Policy.
More than a year has passed since the Canada Emergency Response Benefit (CERB) was put in place and six months since it ended. From the outset, the CERB was portrayed as a learning opportunity and possibly a model for implementing a permanent basic income (BI) in Canada. MPs and senators from various parties have asserted that a BI should be a key element of the restructuring of Canada’s social safety net coming out of the pandemic, citing the CERB as a leading example.
But with questions about the post-pandemic era becoming more pressing, we should understand what we can really learn from the CERB – which is to say, nothing about a basic income. Because it lacks all of a basic income’s key features, the CERB is not an effective model for how a BI would be implemented in Canada.
We served as members of a British Columbia government panel that examined BI as a policy tool. Our investigations lasted more than two and a half years, relying on more than 40 commissioned research papers and extensive consultations with affected people. (Our conclusions, including 65 policy recommendations, are at bcbasicincomepanel.ca.)
Payments from the CERB ran for seven months beginning April, 2020. To be eligible, a person had to have earned at least $5,000 in the previous year, to have lost work due to COVID-19, and not earned more than $1,000 during the four-week benefit period.
Recipients received $2,000 for an initial four-week benefit period and could reapply for additional periods, eventually extending to 28 weeks, for a maximum benefit of $14,000. The money also flowed under a “trust-then-verify” system, with no checks at the time of application and no taxes withheld; verification of eligibility and the requirement to pay taxes owing based on total income will come to a head in the upcoming tax season.
As a central policy, a basic income would be universal (available to all), unconditional (no requirements for previous work, etc.), and permanent. The CERB fails on all three counts. It was available only to people with some work history; it was conditional on how you lost your job and whether you were earning more than $1,000 a month; it could be collected for just a short period.
To understand the full impact of a BI, we also need to know how it is financed. Universal basic incomes tend to be expensive. Where the taxes to support it fall ultimately determines work decisions, investment plans, family formation and more. Funding of the CERB through a one-time deficit increase means it can tell us nearly nothing about these tax impacts.
So can we learn anything from the CERB’s implementation? Our belief is that we are about to learn that the “trust-then-verify” approach is problematic. The government will have to choose between an unseemly attempt to extract repayments from some lower-income households and asking other taxpayers to accept that money went where it was not intended. This is likely tolerable in a crisis, but not as a continuing policy.
In spite of some claims made by BI proponents, the CERB did not show us that it is easy to get money to people in a responsive way through the tax or EI systems; we are learning the opposite. If we are to use the tax system to deliver benefits in a responsive way, and to supplant provincial social assistance, the system needs to be expanded from once-annual to real-time income reporting, incorporating e-payroll. This is especially true for working-age adults whose incomes vary during the year.
These points fit with one of the main conclusions in our report: A basic income looks simple on the surface. After all, what could be simpler than sending people a cheque based on their taxable income? But details such as how to get money to people who don’t file taxes and how to make payments responsive imply that actual implementation is complex. The CERB entailed fast, blunt fixes for those problems because it was necessary in a crisis. But fast fixes in a crisis do not provide guidance on how to create the best system in the longer run. That requires addressing inherently complex problems – and neither simplistic policies nor the naive equation of emergency measures with permanent policies are helpful in the debates we need to have.
Keep your Opinions sharp and informed. Get the Opinion newsletter. Sign up today.