Subscribe
PurchasingB2B

Guaranteed income

Is it an idea whose time has come?


October 30, 2018
by Michael Hlinka

From the October 2018 print edition

Toronto-based Michael Hlinka provides business commentary to CBC Radio One and a column syndicated across the CBC network.

About two and a half years ago, the Ontario Provincial Government under Kathleen Wynne announced a Basic Income Pilot Project. It involved 4,000 citizens in three different areas of the province: Hamilton, Thunder Bay, and Lindsay. Individuals received, at a minimum, just under $17,000 a year, less 50 per cent of any earned income, while couples received just a little bit more than $24,000, less 50 per cent of any earned income.

According to the government, it differed from social assistance in that it was given to anyone who met the eligibility requirement, it was given to those who were working but below this income threshold, and it was simpler to administer.

The newly elected Conservative government under Doug Ford cancelled the project prior to the three-year promised test period. I think that it’s legitimate to criticize this decision; however I also think it’s equally legitimate to justify what was done because of how badly flawed the project was. For one, enrolment required a 40-page application that would suggest to me there was an important self-selection process about who received the benefit. Then there is the simple fact of geography: It is far different to live on $17,000 a year in Thunder Bay than it is to live in Toronto.

But the idea of a guaranteed income isn’t going away soon, and if it is implemented, it should have a profound impact on society, economic growth, and—quite ominously—the seemingly growing divide between the have-a-lots and have-a-littles in this country.

Before I go any further—and this is because I hope that we can have an adult discussion here—it’s important to recognize that poverty does not exist in any meaningful way in Canada. Which is a very good thing. Obesity is a more serious health problem for lower income Canadians than a lack of calories.

Yet there seems to be a consensus, at least among the ruling elites, that wealthier Canadians have an obligation to take care of our poorer brethren, with essentially no questions asked or nothing required from that less wealthy cohort of society. And once this is established as principle, then it seems difficult to argue with the logic of a guaranteed income and it could be administered very much like Old Age Security (OAS). If you are 65 or older and you meet the Canadian legal and status requirements, you’re getting a check every month.

There is an appealing simplicity. It’s relatively easy to apply for OAS. The benefit, per se, is not means-tested; however if your income reaches approximately $75,000 annually, then some of the benefit is clawed back, and if your income exceeds approximately $125,000 annually, then all of it is taxed back, so it’s like you really never received it in the first place. And this could be a viable model for guaranteed income: Everyone receives that monthly check from the government that gets you to the required threshold, with claw-back provisions in place.

The danger is the incentive system—or perhaps more exactly—disincentive. It would be very tempting for, in particular young people, with little sense of direction, to keep their lives on cruise control, live in their parents’ house for as long as they could, and prolong their adolescence past what is seemly. By the way, I see this going on all around me with college and university programs that provide students with absolutely no useful or marketable skills, but provide an easy excuse for not getting up in the morning and doing something useful. A guaranteed income program would surely exacerbate this problem. And this would be an inevitable consequence. Young people who don’t have someone to guide them, or who possess a particularly short time horizon, would delay entering the workforce in a serious way, and they would fall behind their more focused peers.

It may be unpopular to point out the obvious, but this would be very much “class-based.” Children from intact households with successful families would understand that you only build your career long term by putting in the hours, because if someone is working 2,000 hours a year (50 weeks at 40 hours), then as long as the wage is $8.50 or greater, you’re exceeding the $17,000 threshold where presumably the claw back provision would kick in.

However, there is no perfect way to construct a social safety net. If the guaranteed income is the way to go, then it’s incumbent upon the political classes to end all other programs. No more old age security. No more employment insurance, at least not as it’s currently constructed. No more welfare payments. But the problem with the pilot program is that guaranteed income was piled on top of an already very generous system.