Arguments For and Against Basic Income Programs

Introduction

Implementing a Basic Income (BI), program poses several possible implications for Canada’s future economic development. The improved health outcomes, higher educational attainment, reduced poverty rates, and increased population growth associated with BI programs would likely have a positive and welcome impact. However, the potential disincentive to work and the costs of funding a BI program pose critical considerations for a government looking to implement a BI grant. This article will examine previous BI program results to provide an overview of the potential impacts and considerations for implementing a BI program in Canada.

Arguments For Basic Income Programs

Positive Health Outcomes, Higher Education Attainment, and Labour Market Participation

Many benefits of BI payments were observed in the MINCOME project, where residents of Dauphin and Winnipeg, Manitoba were provided with a BI grant between 1974 and 1979.[1] In Dauphin, all residents were eligible to receive the payment, a unique design compared to other studies.[2] The program contributed to beneficial physical and mental health outcomes, a decline in medical visits and hospitalizations, and higher high school graduation rates by bringing income security and stability to the recipients.[3] The results also showed that while a households’ secondary and tertiary earners exhibited some decrease in work hours, the primary household earners showed little change. [4] When the pilot was cancelled, however, these outcomes returned to pre-experiment levels. [5]

Other BI trials, such as those in Germany, Finland, India, and North Carolina, USA, all found similar results: improved overall health outcomes, higher educational attainment, reduced crime rates, and lower poverty levels.[6] These positive outcomes have led to a healthier, happier, safer, and more highly educated population.[7] These qualities have also contributed to a more productive workforce, as higher education is positively correlated with higher-paying jobs, increased innovation, and economic stimulation, leading to a more robust overall economy.[8]

Increased Fertility Rates

A more permanent example of a BI program is in Alaska, USA, where residents have received a BI grant since 1982, paid for by state-invested funds financed from oil revenues. One key result from this program has been an increase in state fertility rates.[9] The former Allowance for Newborn Children program in Quebec, which provided subsidies for each child, found similar results. The declining fertility rate in the province rebounded after the program was introduced then reverted to the declining rates when the program was cancelled.[10] These studies suggest that when individuals are provided with a grant or subsidy, the ability to have more children becomes more affordable.

Canada’s large population of baby boomers is ageing into retirement, but the younger generations are having fewer children.[11] With a smaller working population and a declining birthrate, there could be substantial cost increases to fund public services like healthcare, education, and financial supports for senior citizens. The positive outcomes found in BI program pilots could potentially stimulate a higher population growth rate, leading to more security in the future.

Arguments Against Basic Income Programs

Disincentive to Work

A common argument against BI programs is that providing individuals with a BI payment disincentivizes work.[12] This is based on the belief that when individuals are provided with BI payments, they will not have a reason to work as long, or at all, compared to if they had not received the payment. However, the evidence to support this argument is mixed. While one study of 7,500 participants from multiple states in the United States found evidence that a BI payment did modestly reduce hours worked, there have been questions about these claims’ validity.[13] BI trials in Germany, Iran, and North Carolina, and the permanent BI program in Alaska, found that BI payments either improved or did not impact the respective labour supply.[14] Further, one of the leading causes of absenteeism from work in Canada is illnesses. The Manitoba BI pilot program found that the BI grant did not lead to higher absenteeism rates and contributed to increased positive health outcomes for the participants.[15]

High Costs of Implementation

The high cost to implement a BI program successfully is also seen as a prohibitive factor to implementation. Two BI trials conducted in China received criticism because the BI grant amounts were not high enough to have a chance at reducing poverty rates.[16] A compounding factor was the limited time frame of the programs, which was too short to produce any real impacts. As a result, adequate funding and program duration are key but costly considerations to ensure that a BI program has the opportunity to achieve its intended results.

The BI pilots and permanent programs worldwide show that the money needed to implement a BI program could be sourced in many ways. Funds have been sourced at the federal, provincial, and municipal levels using different taxation methods, state-invested funds, oil royalties, non-profit institutions, or private donors.[17] However, many BI programs are based on small-scale trials, only implemented in select communities or regions within a country.

Long-Term Government Debt

Income and corporate taxation are often seen as an option for securing the funds necessary to implement and sustain a BI program.

One proposed funding mechanism for a BI program is that wealthier individuals take on a more considerable tax burden. There are several ways this could be executed, such as through an additional 2% tax for those with a net worth above $20 million, luxury goods taxes, or reducing government tax subsidies.[18] However, critics have raised concerns with this approach, stating that the high taxation increases required to implement a national BI program would quickly and drastically raise government debt.[19]

Another proposed funding mechanism is to reduce spending on current social welfare benefits and programs and use this savings to fund a BI program.[20] However, critics have questioned a universal style BI program’s ability to lessen the inequality gap if payments are also provided to wealthier citizens and if funding is reduced for existing social programs for those in need.[21]

There are various estimates for implementing a BI program in Canada, two of which are outlined below in Table 1.

Table 1: Basic Income Program Estimates for Canada

Conclusion

If a BI program was to be implemented nationally in Canada, there is evidence to suggest that there could be numerous benefits, such as positive health outcomes, higher educational attainment, and reduced poverty levels, with these benefits extending beyond those directly receiving BI grants. However, sourcing the funding required to implement a successful BI program will likely remain a point of contention. As Canada would not be the first country to implement a BI program, the government would have the benefit of looking to existing empirical evidence to understand what practices have been successful and whether the costs of implementing a BI program will meet the needs of Canadians.