UBI programs are a hot topic among economists and policymakers. Can it live up to its promise to eradicate poverty and solve the crisis of income inequality?
By: DAVID OLIVE
This is the season for a nationwide discussion about a universal basic income (UBI).
A UBI is a government payment that tops up family income so that it modestly exceeds the poverty line, or low-income threshold. As households are able to generate more income on their own, UBI payments are scaled back and eventually discontinued.
A UBI holds promise as our most powerful tool in eradicating poverty and solving the crisis of income inequality.
Canada is emerging from a successful experiment with a UBI, in the form of the Canada Emergency Relief Benefit (CERB). In keeping seven million Canadians financially whole after they’d lost their jobs due to COVID-19, the CERB prepared the country to embark on the powerful economic recovery on the horizon.
Grassroots Liberals endorsed a UBI program at their latest policy convention earlier this year. The government of Prince Edward Island has asked Ottawa to launch a UBI pilot project in the province.
And last week, for the first time in Parliamentary history, there was a debate on proposed UBI legislation. Bill C-273, the National Strategy for a Guaranteed Basic Income Act, was sponsored by Liberal MP Julie Dzerowicz, who represents the Toronto riding of Davenport.
UBI programs are a hot topic among economists and policymakers in other G-7 countries that deployed their own CERB-like programs, including the U.S. and the U.K., and even in the oil-rich states of the Persian Gulf. UBI pilot projects are underway from Stockton, Calif., to Kenya.
It’s worth noting that the CERB succeeded though it had never been tried before in Canada on such a massive scale. It was conceived and deployed in haste while the feds were simultaneously fighting the pandemic in countless other ways.
A UBI, by contrast, would be more carefully designed, and with input from the public, so that its effectiveness would be even greater than the proven success of the CERB.
The economic distress of the pandemic has fallen most heavily on women, youth, Indigenous Canadians, and workers in the new underclass of “gig” economy workers. The latter work in permanent part-time low-pay jobs with no job security or benefits.
The economic disparities cast in high relief during the pandemic will not go away when the pandemic ends. When the economy comes roaring back to life, with forecast GDP growth of about six per cent this year and close to that level in 2022 (more than double the usual rate), gig-economy workers will still be struggling, along with the country’s many other disadvantaged groups.
Canada has twice experimented with UBI, in Manitoba in the 1970s and Ontario in the late 2010s.
The results were encouraging. The health and employment skills of UBI recipients improved, as financial anxiety was lifted, and the additional funds were used to cover daycare expenses of parents who returned to school or sought better jobs.
But those two experiments were of insufficient duration to provide conclusive evidence of benefits and drawbacks. That’s why the Canadian Chamber of Commerce last year asked Ottawa to revive the Ontario UBI pilot projects.
The previous year, another group of business CEOs tried in vain to dissuade Ontario from cancelling the UBI program a year ahead of schedule.
Business is about measuring results. But the flow of data that business thrives on suddenly dried up with the premature death of the Ontario UBI program.
The North American economy is currently suffering skills shortages even more acute than those of the pre-pandemic years, slowing the pace of economic recovery. That phenomenon is obviously worrisome though it has been exaggerated, as explained earlier in this space.
That said, a UBI has the potential to increase both the size and quality of the workforce. UBI recipients in pilot projects in Europe and North America have used their relief from financial distress to upgrade their employment skills.
That explains the business community’s support for at least experimenting with UBI. And surveys of the Canadian public, dating back to the mid-2010s, have consistently shown majority support for a UBI, as well.
In opposing a UBI, Conservative MPs cite the estimate earlier this year by the Parliamentary Budget Office (PBO) that a UBI would cost upward of $93 billion a year by 2025. The PBO calculated that a UBI program would boost the income of about 6.4 million Canadians by an average of $4,500.
That figure of 6.4 million Canadians is arresting, especially when set beside the fact that even before the pandemic almost half of Canadians reported that they were just $200 away from failing to monthly cover their bills.
The PBO’s eye-popping cost estimate assumes a more widespread UBI program than would emerge from Ottawa and doesn’t account for the economic upside of a healthier and larger, better-paid workforce.
As it happens, UBI pilot projects actually cost in the range of $15 billion to $90 billion per year, depending on their scope.
Both the PBO and the Tories also worry that a UBI would discourage work.
There is, in fact, little evidence of laziness in the many UBI experiments worldwide over the past two decades. And last summer, the U.S. Federal Reserve Board of San Francisco issued a detailed report on how extended unemployment benefits and other U.S. income supports during the pandemic had not discouraged work.
As Dzerowicz said in parliamentary debate June 14, “Recipients of basic income do not see it as a handout but a resource that they use to retrain, go back to school or search for full-time work, and when they do, they often find better work, earn more, and stay in jobs longer.”
The NDP and the Bloc Quebecois would rather see the multitude of existing social assistance programs made still more plentiful and generous. But we’ve been doing precisely that for generations, and the gap between rich and poor has steadily widened just the same.
And properly designed, a UBI does not displace those additional supports.
CERB recipients used their $2,000 monthly cheques to pay down credit-card balances, to boost the national savings rate into double digits for the first time in decades, to launch or expand small businesses, and to buy and renovate homes, a shot in the arm for an ailing economy and an investment in themselves and the country.
Lost in the criticism of Dzerowicz’s UBI bill is exactly what she’s proposing, a pithy description of which you can read here.
It’s not a starry-eyed vision. Bill C-273 would merely commit Ottawa to conducting a national discussion on UBI, at town-hall meetings and other venues, leading to a handful of pilot projects to determine a UBI’s efficacy.
UBI is worth reading up on and discussing over the backyard fence. And writing to your MP about.