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August 18-31
VOL.14 ISSUE. 26
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Money-Back Guarantee?

Nathan Raine
Published Thursday July 23, 04:53 pm
The idea of a minimum income is complex, but intriguing

In the late 1970s, the small Manitoba town of Dauphin was the subject of a radical social welfare experiment. The Canadian government tested the idea of a guaranteed minimum income (AKA basic income, or “mincome”), giving the poorer residents of the town a small, guaranteed salary — regardless of their employment status. After four years the experiment was scrapped, but the effects were resounding. Graduation rates were up, mental health improved, hospital visits declined and poverty was greatly reduced.

But the findings essentially went by the wayside, and outside of pedagogical endeavours, the project hasn’t been given much further consideration. Forty years later, discussions around the Dauphin mincome experiment are being resurrected, with debates over its merit and possible application discussed everywhere from Switzerland and Holland to the Silicon Valley and Alberta.

“You not only get the benefits of eliminating poverty, you would get the spin-off benefits: Less domestic abuse, less crime, less additions. We have concrete evidence that this is exactly what occurred in Dauphin,” says Simon Enoch, director of the Canadian Centre for Policy Alternatives. “Today, those positive social benefits would hopefully [still] flow from a guaranteed income.”

Just who, how, and what a minimum income would entail is where it gets much more complicated. The most popular proposal is a negative income tax system, which essentially tops up one’s annual income if it fails to reach a certain amount. In a nutshell, one may stand to receive an income tax rather than pay one.

“One of the reasons why the guaranteed minimum income is coming back into vogue is that we increasingly see that people who work 40 hours a week aren’t making it,” says Enoch. “We’ve gotten to this low-wage economy, where some people are paid by the task instead of hour. So this would be a way to give a baseline floor to which no one would fall.”

 

SPANNING THE SPECTRUM

Some righties might yell that this sounds like a socialist ploy if there ever was one, but there seems to be support for the idea from both sides of the political spectrum. The left is trumpeting its extensive range of social benefits, the right its reduction in the size and intrusiveness of government.

“I think of it as a double-edged sword. You’ve got support both on the libertarian right, and the progressive left,” says Enoch. “It would get rid of all the stigma of applying for social assistance, all the bureaucracy and petty ameliorations that people have to go through to access assisted living.”

Recently the mayors of Calgary and Edmonton (Naheed Nenshi and Don Iveson, respectively) voiced their support for some kind of guaranteed minimum income. Nenshi told reporters he’s “really, really interested” in mincomes, particularly by way of the negative income tax, while Iveson said he hopes Edmonton can become a testing ground for mincome policies. And even Saskatoon mayor Don Atchison was mildly aroused by the idea, saying “it’s an interesting concept” that warrants further discussion.

Daniel Béland, Canada Research Chair in Public Policy and a political sociology professor at the University of Saskatchewan, says experimentation on a smaller scale might be exactly what’s needed.

“We have to value experimentation. Someone has to take a first step. It’s sad that we’ve abandoned the [experiment in Dauphin]. We could’ve been in a very different place today as opposed to where we [are now],” says Béland.

“The experiment in Dauphin had a very positive effect on low-income people, but the question is the economic consequence of that. A small experiment like Dauphin doesn’t give you all the answers,” he says. “I think it would be interesting to have it done in the context of a large, modern city like Calgary or Edmonton — because there’s no consensus right now on the long-term consequence on people and the economy. Canada won’t be doing this tomorrow morning, so this kind of implementation might be a good way of doing it.”

HOW WOULD IT WORK?

Béland proposes a pilot project in Calgary and/or Edmonton over a period of three to five years, with a guaranteed minimum income for only part of the population, to act as a comparison group. But he’s also quick to point out that a mincome policy of any nature is riddled with complications.

“Some people argue that it creates negative work incentives, as the amount you get is independent from your status on the labour market, so it could reduce your [incentive] to work, or to look for work. This is an argument economists have long made,” he says. “People have also argued that it could reduce the apparent value of work in society, reduce the initiative to increase minimum wage, and improve work conditions because there will be this universal floor. It’s not an easy issue to tackle because there’s very little evidence of what a scheme like this will actually do.”

The amount that would be guaranteed is also still very much up for debate. In Dauphin, the subjects of the experiment received roughly $9000/year in today’s dollars. Currently, Switzerland is considering a basic income policy which would give residents the equivalent of $35,000 CDN/year. The amount most often thrown out in Canada is somewhere between $12,000 and $20,000/year, but arriving on a fair number might not be simple.

“At what level do you set it? If you set the minimum income level really low, it won’t have much impact. If you set it much higher, you get rid of poverty but create economic problems. You might solve one problem and create another,” says Béland.

Taxpayers would initially be hit with a substantial spike in their taxes. But both Béland and Enoch argue that with more money circulating, the economy could soon benefit.

“There’s no doubt that the taxation would go up,” says Enoch. “But low-income people often spend much of their income on essentials and shop locally. So as far a stimulus to the local economy, a guaranteed income would be an absolute. It could create a tremendous amount of local demand, which will drive employment even higher.”

In addition to the increased taxation, question marks abound — such as if minimum income rates should vary depending on local cost of living, for example. Charles Plante, a sociologist and policy director at Upstream, has researched basic incomes and formulated some potential policies to the mincome system, including some insights on just how much poverty effects our economy.

“We estimated that the cost of poverty for Saskatchewan is 3.8 billion dollars [annually],” says Plante. “The idea is that poverty is actually really expensive. People living in poverty rely on more services, and it also prevents people from contributing as much as they otherwise would to the economy.”

Plante says that using the poverty lines as a general benchmark, a reasonable minimum income rate could be around $30,000 for a family, or $16,000 for an individual.

“In theory, if we did our policy effectively and eliminated poverty in Saskatchewan, we could spend up to $3.8 billion and still be in the black. It would cost roughly 1.1 billion dollars to ‘top-up’ everyone in the province to the poverty threshold. That’s a lot less than the cost of poverty.”

Plante also says that among the many costs of poverty is social assistance ‘targeting’: Ensuring a policy or social service only effects a certain subset of the population.

“Targeting requires whole ministries of civil servants to, essentially, make sure the recipients are poor enough. I like the idea of having less aggressive targeting. Our threshold of what we deem as deserving of [assistance for] poverty is very, very low,” says Plante. “One of the impulses of basic incomes [is that] we are going to get rid of those overhead costs and make basic income more inclusive.”

An active concern with implementing a form of guaranteed income is the loss of social services. Many experts, including Plante, say that the realization of a basic income would not erase the need for many social services, including free health care and affordable child care.

“I don’t think basic income is a replacement for all other social programs such as free health care, or other policies I’m in favour of, like universal, affordable child care. For some people, there is no amount of income that will fix their issues,” says Plante. “Basic income is not a solve-all.”

Plante estimates that ‘topping up’ everyone in the country who falls under the poverty threshold, if using a negative income-tax system, would cost about 20 billion federally.

“The upside of this system is that we already try to talk to every Canadian once a year and have them file their taxes. Then we give them a return, or tax them based on their income. But whether we gave them a lump sum or [do it] incrementally is still an issue of debate. As you can see, the more we talk about this, the more the details of the thing get complicated.”

And that, if anything, is the consensus on the mincome concept. An intriguing idea that becomes more and more complicated as one begins to inspect the details. But although all the experts agree that there are countless questions around the idea, a rejuvenation of the Dauphin experiment might be just the way to go.

“Guaranteed income is an idea that has legs. We’ve been talking about it off and on for a number of decades,” says Béland. “Because of the renewed interest in equality and poverty, I think that the time is right to experiment more with this approach.”
 

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