OPINION | Implementing Basic Income Isn’t a Matter of Feasibility. It's a Matter of Political Will

Photo Credit: Getty Images via Forbes

“When you’re encouraging people to accept money without strings attached, it really doesn’t send the message that I think our ministry and our government wants to send. We want to get people back on track and be productive members of society where that’s possible," Ontario Social Services Minister Lisa MacLeod told reporters in 2018 after failing to deliver on one of the Progressive Conservative’s key campaign promises — to continue the Ontario Basic Income Pilot for its full three-year study period. According to the Ontario Government’s website, the pilot project provided an income worth 75 per cent of the poverty line to over 4,000 participants, however MacLeod labelled this support as prohibitive to participants becoming “independent contributors to the economy '' — a claim that ignores the findings of the Ontario study and other basic income experiments.

Rather, basic income is a feasible way to reduce poverty in Canada without disincentivizing work, sending tax dollars to drug dealers, adding fuel to the inflationary fire, or implementing new tax measures that will send the economy into a death spiral.

The Ontario project studied a form of basic income known as Guaranteed Basic Income (GBI). GBI provides a basic income to all Canadians aged 18 to 64 who fall into a certain income bracket — $34,000 for unmarried individuals, and $48,000 for couples under the model studied in Ontario.

Implementing Ontario’s GBI model across all provinces and territories would provide individuals with an annual income of $18,300, and couples with $25,900, distributed in the form of monthly payments, according to a 2022 report from the Parliamentary Budget Officer (PBO). For every dollar of income earned by employed recipients, 50 cents would be deducted from the benefit. The program would provide a basic income for 7.4 million individuals, and lift 1.6 million families above the poverty line — a 50 per cent reduction in poverty. 

But before GBI’s many benefits could be felt by millions of Canadians, the program will have to pass a major hurdle: concern over its massive annual cost of $81 billion, as calculated by the PBO.  Funding basic income isn’t such a herculean task; all options are well within the government’s reach and the program may end up paying for itself.

While its annual price tag of $81 billion may seem fanatical, the true cost of GBI — excluding its many long-term revenue-generating benefits — is just $51 billion. That’s because the PBO estimates basic income will replace $30 billion of existing federal and provincial funding on our insufficient social safety net. Better yet, the $51 billion figure isn’t actually all that much — it represents just a 5.2 per cent increase in spending compared to total spending by all levels of government in 2022, according to data from Statistics Canada. 

Best of all, basic income advocacy group UBI Works has found a way to finance such an increase without raising taxes on anyone making less than $100,000 — that’s 91 per cent of Canadians. Most tax measures wouldn’t even touch the 97 per cent of people who make up to $150,000. Instead, contributions would come from those most able to pay: $15 billion from the big banks, $18 billion from the ultra-rich, and $19 billion from large corporations. But how exactly can the government implement such measures without throwing a wrecking ball at the economy?

First of all, the government can work within the existing tax code, or within the precedent set by multiple other countries, to implement the necessary tax reforms, according to UBI Works. In fact, just 12 additional measures would be needed, all of which have been costed and extensively studied by research agencies such as the PBO and the Canadian Centre for Policy Alternatives. 

It is true that increased taxes can harm economic growth by cutting into profits and limiting companies’ abilities to invest in growth. But this traditional logic ignores the economic growth created by consumers’ increased ability to spend — a prerequisite for most corporations’ growth plans. This is especially pertinent since all 12 tax measures were designed to target government revenue sources that, left in the hands of the private sector, weren’t helping grow the economy.

“Taxes can hamper economic development, but spending those tax dollars effectively can promote it enough so that the net effect is economically stimulative. The [12 tax measures] we propose minimize these hampering effects by targeting areas of unproductive money accumulation in the economy, and in turn giving that money to households who will spend and invest it,” reads UBI Works’ website.

Case in point: consumer spending increased remarkably after the federal government substantially increased the Canada Child Benefit in 2016 — which provides a basic income for many Canadian families — resulting in significant economic growth the following year.

In 2017, Statistics Canada identified consumer spending as the largest driver of economic growth, while the Bank of Canada found increased spending created GDP growth of 0.5 per cent — 16 per cent of total growth. Then-Bank of Canada Governor Stephen Poloz identified stimulus’ critical role in the economy.

"It's important to bear in mind that the government's efforts at stimulus are embedded in our view of the economy," he told CTV News.

“For instance, the changes to the [Canada] child benefit program [have] been highly stimulative [...] So we would not be where we are today if that had not occurred.” 

The benefit of more money in Candians’ pockets will “trickle-up” to corporations. The Canadian Centre for Economic Analysis predicts implementing basic income will reward corporations with $32 billion in added gross profits every year. That’s just a rounding error short of corporations’ $33 billion tax contribution to GBI, and a possible explanation for why over 170 Canadian CEOs have signed a letter calling for the implementation of GBI. 

GBI could come at zero cost for government as well. If businesses start earning more, governments will too — even under existing tax rates. The Canadian Centre for Economic Analysis estimates GBI would create $22 billion in additional tax revenues. This is proven by the return on investment the federal government has received from the Child Benefit. The Centre found that the government recoups 55 per cent of its investment in the Canada Child Benefit by capturing growth through existing revenue streams. Better yet, this increased revenue will be met by decreased spending on other programs.

The yearly inflation-adjusted cost of poverty in Canada is $111 billion. While most of the costs are relegated to the private sector, the government spends an additional $10 billion on health care and an added $2 billion on the criminal justice system due to the effects of poverty, according to a 2008 Ontario Association of Food Banks report. Since Canada’s population has grown by 7 million people since the report’s publication, the costs could be even higher. 

The potential for such positive results was confirmed by a basic income study in Dauphin, Manitoba, which found an 8.5 per cent decrease in hospital visits during the study period, according to Evelyn Forget, a researcher in medicine at the University of Manitoba. 

With a fully costed funding plan, the potential for widespread economic growth, and decreased government spending on the costs of poverty, GBI is a financially feasible program ready for implementation in Canada — if politicians step up.

The prevalence of different forms of partial basic income in countries around the world has helped debunk another basic income myth: people receiving free money from the government will put their feet up and stop working. This one’s so prevalent that basic income advocates have even assigned it a name — the Malibu Surfer. 

University of Chicago economist Ioana Marinescu has studied multiple unconditional basic income programs in the US and Canada and found no evidence of a large-scale disincentive to work.

“Our fear that people will quit their jobs en masse if provided with cash for free is false and misguided,” she writes in an article for the Roosevelt Institute. 

One such test of basic income was a series of US trials that took place in the 1970s designed to evaluate the effects of Negative Income Tax (NIT), a form of GBI. The vast majority of trials identified no harms to the labour market.

"Would a large number of people respond to an NIT by withdrawing entirely from the labor force? […] The experiments found no evidence of such behavior. Some of the experimenters said that they were unable to find even a single instance of labor-market withdrawal," wrote basic income advocate Karl Widerquist, who is also a professor of political philosophy at Georgetown University.

Marinescu also studied the Alaska Permanent Fund — which provides everyone who has lived in Alaska for over a year with an annual amount of US$800 to $2,000 — concluding the stimulus cheques have “not made Alaskans any less likely to work.” A similar program overseen by the Eastern Band of Cherokees — which provides all band members with a dividend of casino profits worth about $4,000 per year — also doesn’t have an effect on band members’ willingness to work, according to Marinescu.

Economist Djavad Salehi-Isfahani, a professor of economics at Virginia Tech and a fellow at the Brookings Institution, and Mohammad Mostafavi-Dehzooei, an assistant professor of business at Georgia Southwestern State University, studied an Iranian basic income program and also found no decline in employment rates.

“Our overall conclusion is that the program did not affect labour supply in any appreciable way,” they wrote.

In Canada, Evelyn Forget, the University of Manitoba Researcher, told BBC she found no change in employment rates in Dauphin during the basic income study. She also cited a recent basic income study in Finland that found participants were able to take on more work with the support of basic income.

“The nature of the jobs that people got once they received a basic income was changing so instead of taking on precarious part-time work, they were much more likely to be moving into full-time jobs that would make them more independent. I see that as a great success.” 

A similar trend was identified by researchers studying the Ontario Basic Income Pilot. They found that 61.5 per cent of study participants who responded to a survey from McMaster University believe it is easier to look for jobs with the support of GBI — something the researchers attribute to the improved general well-being of recipients.

An even further indictment of the Malibu Surfer theory: 78 per cent of respondents said the free money from the government motivated them to find a better paying job — again likely due to the increased health fostered by the program. When given money by the government, people felt motivated to improve their lives.

However, the McMaster study also found that 15 per cent of participants who had a full-time job before enrolling in the Basic Income Pilot stopped working during the study. Therefore, doesn’t this vindicate the Malibu Surfer theory? Not quite. 26 per cent also said they went back to school during the study period, which would likely allow recipients to increase their incomes in the long term, and can hardly be equated to putting your feet up. 

Similarly, 40 per cent of recipients of the Canada Emergency Response Benefit (CERB) — a temporary basic income implemented during the pandemic to help cushion job losses–used the program to pursue additional education, according to a survey conducted by the Canadian Centre for Policy Alternatives. 

In study after study, people took the flexibility afforded by basic income to bolster their future financial success — a clear disapproval of the Malibu Surfer theory.

But where else might basic income cheques be going? Could taxpayer dollars end up in the hands of drug dealers? Most likely not. Basic income is shown to improve beneficiary’s health, in turn leading to reduced drug-use. 

In the Ontario Basic Income Pilot, 82 per cent of survey respondents said their mental health improved under GBI, 17 per cent of smokers said they quit during the study and 39 per cent said they smoked less often. Forty-three per cent drank less alcohol, while 4.7 per cent stopped drinking altogether. An unnamed participant described how her increased well-being under GBI helped ease her smoking habit.

“[I was] smoking much less on basic income because I wasn’t as stressed out. ... I was coughing up blood before as a result of my smoking habit. ... When I had money to do things, and I generally felt better about myself, I felt less need to smoke and so I began to give up smoking,” she told McMaster researchers.

Research examining the Canada Child Benefit has found similar results. Families receiving the benefit were shown to spend more wisely and in the interests of their children.

A report from the Canadian Centre for Economic Analysis found “families who receive greater child benefits increased their spending on goods that increase health and reduce their spending on ‘risky’ goods such as tobacco and alcohol, which likely contributes to [...] positive health outcomes [...] The transfers shift expenditure patterns, increasing families’ share of expenditures on necessities, namely food, education and child clothing.”

Marinescu also found that the money provided to band members in the Eastern Band of Cherokees casino dividend program served to reduce addiction.

“[The dividends] also had positive impacts on parenting, mental health, and reduced substance abuse among youth. For those who fear that recipients will use cash grants on drugs and alcohol, these results prove the exact opposite: cash reduces addiction by improving economic security,” she writes in an article for the Roosevelt Institute. 

Sure, critics might say that there’s nothing stopping GBI recipients from putting tax dollars towards drugs. But this ignores the full picture. GBI improves people’s lives, removing the underlying conditions that feed users’ dependance on drugs.

But what about inflation? There has to be at least one preconceived notion about basic income that’s correct, right? Wrong. Basic income doesn’t lead to price increases, but instead helps households absorb the effects of inflation.

When Alaska introduced its Permanent Fund in 1982 its inflation rate was above the US average, according to news website Medium. Since then, inflation in the state has dropped lower than the nation-wide average. According to UBI Works, “prices go down when the cheques go out”— companies often reduce prices when consumers receive stimulus in order to encourage them to spend the money. 

Similarly, when Kuwait introduced a form of basic income in 2011, its rate of inflation decreased dramatically. In December 2010, inflation was at 6 per cent, however it began to rapidly fall after the program’s implementation, reaching just 3.8 per cent in February 2012, according to Medium.

Another common misconception about GBI is that the deficits it would create — like the huge deficits governments ran during COVID to fund programs like CERB — would lead to quantitative easing, the inflationary practice of literally printing more money. This claim ignores the fully costed plan that proves GBI can be implemented without incurring debt.

“Contrary to what misinformed fearmongers might suggest, a basic income could ease inflation. Most economists agree that inflation is caused by introducing new money into the market, not by redistributing it… A basic income would not cause inflation; it would help families facing rising costs,” wrote basic income advocate Reverend Chris Butler in The Chicago Tribune.

Misinformed fearmongers were wrong about so much else as well. Contrary to the claims of Minister Lisa MacLoed and others, GBI will prove a feasible alternative to help everyday Canadians without shrinking the labour market, putting tax dollars in the pocket of organized crime, creating inflation, or inhibiting economic growth by increasing taxes. With astounding benefits and minimal shortfalls, Canadians want to see GBI implemented. Sixty per cent of respondents to a 2020 Angus Reid poll were in favour of the idea.

With majority support amongst voters, it’s now time for leaders in Ottawa to deliver on GBI’s potential to fundamentally transform Canadian society, from the ground up.