Basic income hailed as key in kickstarting the economy in a post-pandemic Canada

Paul Smetanin, CANCEA president and one of the report’s authors

A new report by Canadian Centre for Economic Analysis (CANCEA) makes a strong case for utilizing a basic income as part of Canada’s post-pandemic economic recovery.

By Brendan Kennedy

A universal basic income would not only lift more than 3.2 million Canadians out of poverty, it would also create hundreds of thousands of new jobs, grow the economy by tens of billions of dollars and eventually pay for itself with increased tax revenues.

That’s according to a new report by the Canadian Centre for Economic Analysis (CANCEA), which was commissioned by basic income advocacy group UBI Works to look at the potential economic impacts of Canada implementing two different kinds of basic income programs.

“I think the biggest message coming out of this (report) is that a basic income program can be designed in a sustainable way,” said Paul Smetanin, CANCEA president and one of the report’s authors. “It can be thought of as an investment as opposed to a cost.”

basic income program can take many different forms, but it is essentially an unconditional cash transfer from the government to individuals. It would, theoretically, replace other social assistance payments, such as employment insurance and welfare, that critics say are insufficient and administratively onerous.

Interest in basic income programs has increased during the COVID-19 pandemic due to the unprecedented economic shock and the popularity of the Canada Emergency Response Benefit, which for roughly six months paid $500 per week to 8.9 million Canadians who had lost work due to the pandemic.

Smetanin said his company is not advocating for a basic income and the report makes no prescriptions from a policy perspective. He said they simply assessed two different basic income models through the “hard, cold lens of econometrics.”

The first, a guaranteed minimum income based on the design of Ontario’s cancelled basic income pilot project, would ensure a minimum income of $24,000 for individuals and $34,700 for couples. The second program, based on a proposal by UBI Works, would guarantee a minimum income of $24,000 for individuals and $36,000 for couples, while also paying a $6,000 “universal dividend” to all adults.

Both programs would “claw back” 50 cents for every $1 of employment income and 100 per cent of all income from other government transfers, excluding the Canada Child Benefit and the $6,000 dividend.

The report found that, depending on which program was used and how it was funded, it would create between 298,000 and 598,000 new jobs after five years, and add between $36 and $84 billion annually to Canada’s GDP.

Each program “has the potential to essentially eliminate poverty in Canada,” the report says, while also raising between $389 and $514 billion in new tax revenues over 25 years.

UBI Works founder Floyd Marinescu said the social benefits of basic income programs are well known, but “what no one’s been able to say until now is that it can also grow the economy.”

Marinescu said he hopes the report will get people to consider basic income programs as an investment with a “rate of return in real economic numbers, not just a cost.”

The report considered a wide range of possibilities for how a basic income program would be funded, from being mostly paid for by government debt, to mostly covered by taxing households and businesses. Smetanin said the analysis showed that to have the most positive economic impact, the program should be funded primarily by taxing higher income households.

“If you do it by taxing businesses, the economic impacts start to deteriorate quite quickly,” he said. “If you use too much debt, the economic impacts won’t keep up with the accumulation of debt.”

Marinescu said the report makes a strong case for utilizing a basic income as part of Canada’s post-pandemic economic recovery.

“Our government is going into massive debt funding all kinds of things, but this report shows that a basic income could actually be a lot cheaper than what’s happening right now as recovery spending.”

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