Conversations about a basic income guarantee (BIG) as a way to reduce poverty are everywhere. At Bilderberg 2016. At Davos. In academic journals. In the popular press. On talk shows. In locker rooms. At book clubs. In church halls. And over dinner.
There’s a growing awareness that our economic reality is changing. Employers used to offer decent wages, extended health care, sick leave, paid vacations, and defined-benefit pensions. Now, jobs like that are in decline. The ‘gig’ economy— where workers are paid by the task—is increasing the precariousness of work. Even people with advanced university degrees face a stressful, uncertain future, cobbling together multiple part-time, short-term jobs or consulting contracts. The global economy has seen manufacturing jobs migrate to Asia and Central America.
Moreover, as Annie Lowrey recently observed, “artificially intelligent systems have become proficient at a startling number of tasks, from reading cancer scans to piloting a car to summarizing a sports game to translating prose. Any job that can be broken down into discrete, repeatable tasks—financial analytics, marketing, legal work—could be automated out of existence.”
Writing about the “downwardly mobile” in a Globe and Mail editorial, columnist Lawrence Martin quotes Dominic Barton, head of Prime Minister Justin Trudeau’s Council on Economic Growth, as having said that automation will eliminate no less than 40 percent of existing Canadian jobs in the coming decade. As we contemplate the prospect of massive structural unemployment, it’s time to re-consider the idea of paid labour as the requirement for survival.
Increasingly, workers receive a shrinking share of revenues, as industry becomes less labour intensive and more capital-intensive—resulting in poverty, polarization of wealth, and economic depression due to falling demand. We are facing an ever-increasing income-distribution problem. Former US labour secretary Robert Reich and Nobel economics laureate Paul Krugman see a BIG as an appropriate response to the increasing share of income going to capital, as opposed to labour. So does Elon Musk.
Our university and college campuses are one place where the growing economic insecurity is showing effects. Campus mental health counsellors are faced with dramatically increased rates of anxiety, depression, and suicide attempts. An Ontario survey of 25,000 young people by the Centre for Addictions and Mental Health showed that students who reported experiencing overwhelming anxiety in the previous year went from 57 percent in 2013 to 65 percent in 2016; those who reported feeling so depressed it was difficult to function increased from 40 to 46 percent; and the percentage who reported attempting suicide went from 1.5 to 2.2.
Little wonder university and college students are feeling so much pressure. How many will have to do a series of unpaid internships, before finding a job, and starting to pay back their student loan? How many will be forced to join the gig economy rather than finding a stable, full-time, permanent job with benefits? The notion that giving people a BIG would turn them into indolent slackers is unfounded. Many already fill every spare moment with unpaid work—for example, looking after young, elderly, or unwell family members; studying; acquiring new skills; and volunteering in the community.
Statistics Canada estimates that in 2010, volunteers contributed the equivalent hours of 1.1 million jobs. Many Canadians would do more volunteer work if they had time. People thrive on having a sense of purpose and accomplishment, along with the respect of others. It’s time to re-think some of our economic imperatives.
We could begin by considering what counts in the national system of accounts. Tobacco companies count, even though Health Canada reports that 100 Canadians die of a smoking related illness each day. Contrast that with a Big Brother or Sister, whose voluntary efforts and personal financial expenditures alter, for the better, the trajectory of a young person’s life. The latter outlay of time and money does not count in our GDP, because it isn’t part of our market economy. A BIG is one way of creating the conditions that allow people to do important work that does not generate an economic return in the strictest GDP sense of the term.
Reflect, too, on the fact that the stress of not being able to afford shelter and food— or even the impending prospect of being in that situation— takes its toll on a person’s health, and places added financial burdens on the health care system. Some estimates tag the cost of poverty at 20 percent of our health care dollars. To save health care dollars and improve population health, the Canadian Medical Association recommends that the federal government make poverty reduction its top priority.
Researcher Evelyn Forget’s findings from the Mincome project—conducted in Dauphin, Manitoba, between 1974 and 1979— showed that doctor, hospital, and mental health visits declined; more teenagers completed high school; and there was less crime and were fewer accidents, resulting in reduced demands on police and court services. A Basic Income Guarantee would give people income security between periods of employment. It would help anyone needing to take time away from work to care for others—be they young children, an ailing spouse, or an elderly parent. It would give entrepreneurs and artists a basic level of security, while they develop—not just their products and creations—but also the networks and markets to sustain their enterprise.
There’s a common assumption that most people living in poverty are on some form of social assistance. In fact, most have jobs—sometimes two or three jobs—but at poverty wages. Seventy percent of people living in poverty in Canada have paid employment. One in eight Ontarians earn minimum wage, which is 12 percent below the low-income cut-off for a single individual, even with full-time hours. Consider the real-life case of a single mother, who worked three part-time jobs to support her children, who suffered from the lack of her time and attention. She’s 65 now and, with Old Age Security and the Guaranteed Income Supplement, can finally catch her breath and enjoy time with her adult children. But fate is unkind, and she’s experiencing the early stages of dementia. Surely in a country as rich as Canada we can do better at supporting our citizens, so all can participate more fully in society.
Children are the biggest beneficiaries of income security. Twenty-two years ago, researchers began tracking 1,420 low-income children in North Carolina. Four years into that study, about a quarter of those children’s families saw a dramatic increase in annual income. They were members of the Eastern Band of the Cherokee Nation, and a new casino on the reserve was paying every tribal citizen a share of the profits—about $4,000 a year, boosting household incomes by almost 20 percent and lifting them above the poverty line. Here’s how that money altered those children’s lives. Their parents drank less and fought less. A more harmonious family environment reduced emotional and behavioural disorders among the children, and boosted two key personality traits that make for a brighter future—conscientiousness and agreeableness.
There is now a significant body of academic research that links childhood poverty to a range of adverse outcomes in childhood and in later life, even if financial circumstances improve. Canada has signed the United Nations Universal Declaration of Human Rights, in which Article 25(1) states: “Everyone has the right to a standard of living adequate for the health and week-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.”
Now consider how unfair it is, in a prosperous nation like Canada, for a child to be born into poverty, and deprived of secure housing and a nutritious diet. How unfair must our society seem to children whose parents are exhausted and ill-tempered from slogging away at several part-time, minimum-wage jobs, while still being unable to meet basic expenses? How fair is it when parental stress causes children to suffer a range of ill effects? Our nation’s natural resources can be seen as the common heritage of all citizens, and providing the less fortunate with a BIG recognizes their share of the bounty that Canadian prosperity allows.
For many people, economic hardship is temporary. The causes vary. Divorce or the death of a spouse can mean struggling financially to raise a family on one income. Illness can mean the loss of income, or even of employment. Young people entering the workforce often find themselves in the Catch 22 situation of not being hired, because they lack experience, but then being unable to acquire experience, without a job. A lack of affordable housing can reduce some to sofa surfing. Moreover, when there isn’t enough money to pay for necessities, debt accumulates, adding the cost of interest payments. Energy levels, and health, can be compromised by an inadequate diet. Anxiety levels rise, compromising the immune system. All these factors can serve to prolong the hardship, by undermining people’s self-confidence and their health.
The worst of these consequences and their negative effects on productivity could be avoided, or at least reduced, with the assurance a basic income guarantee would provide. It would also eliminate the need for social assistance, with its expensive and demeaning requirements for means testing and intrusive monitoring.
Eminent Canadian economist Robin Boadway has outlined how a BIG of $20,000 per adult could be revenue-neutral, by replacing existing transfers delivered through the tax system, including many non-refundable and refundable tax credits. His analysis combines adequacy and comprehensiveness of support with dismantling the burdensome administrative costs and intrusive delivery of provincial social assistance programs, while leaving social services intact. The federal government, provinces, territories and First Nations all assume some responsibility for transfers to low-income persons, but the existing system falls far short of adequate levels of income support, and is blighted by stigmatization and conditionality, as well as discouraging labour market participation.
Professor Boadway proposes a two-stage transition to accommodate provincial preferences without detracting from national objectives. The first stage would see implementation of a federal BIG. Then the provinces would have the opportunity to implement a harmonized provincial BIG. Tax harmonization agreements show how the federal government can achieve a harmonized BIG with the provinces, when both levels of government have legislative jurisdiction and interests in a policy issue. These bilateral agreements are between the federal government and individual provinces, so unanimous agreement is not required. Replacing federal and provincial tax credits with a harmonized national BIG would redistribute disposable income from those in the top half of the net family income distribution to those in the bottom half.
Professor Boadway shows that the fall would be roughly 10 percent, and relatively uniform, for the former, while those in the bottom two deciles would gain by 167 percent and 74 percent respectively. The gain for low-income single adults would be almost 270 percent, and the nation’s poverty rate would fall by 73 percent, to only 3.2 percent. That drop is comparable to the dramatic effect that introducing the Guaranteed Income Supplement had on seniors in Ontario, when the poverty rate fell from 36.9 percent in 1976 to 2.9 percent within a couple of years.
Sadly, the poverty rate for Canadian seniors climbed from a low of 3.9 percent in 1995 to 11.9 percent in 2013, and was almost 30 percent for single senior women. The BIG pilot project, about to be launched in Ontario, should offer insights into what approaches work best, what pitfalls to avoid, and the kind of information systems that will be required. Now the BIG question is not “if” but “when”. And when and if Ottawa will help out.
— prepared by Pamela Cornell, on behalf of the Kingston Action Group for a Basic Income Guarantee, for submission to the Parliamentary Standing Committee on Human Resources (HUMA). This column was originally published in the Precarious Work Chronicle.