In his article in Inroads entitled “A Dubious Antipoverty Strategy” (Winter/Spring 2014, pp. 33–43), Jonathan Rhys Kesselman claims guaranteed income, or universal basic income, is politically unfeasible and financially unsustainable. He cites $350 billion as the “cost” of basic income on the basis of a very rudimentary calculation of Canada’s population multiplied by a $10,000 per capita basic income.
Kesselman does not include any multibillion-dollar figures as savings to be derived from implementation of basic income. Many program redundancies, both full and partial, result from implementing a guaranteed income proposal at a decent level (with a reduced amount for children). These redundancies do not include any cuts to vital and cherished Canadian programs such as public health or education. In fact, large-scale health costs and caseloads associated with increasingly precarious jobs, incomes and persistent poverty rates linked to the status quo income security program structure can be reduced significantly, improving health service delivery.
Margot Young and James P. Mulvale have a short list of program redundancies resulting from the implementation of basic income, which add up to $132 billion annually (2005 figures).1 The Canada/Quebec Pension Plan remains intact. And two very important points ensue: (1) many more income security programs not included in the list are redundant or currently skewed by benefiting the highest-income earners at the expense of lower-income groups, and (2) the much lower $30 billion cost of a basic income “top-up” version which Kesselman briefly mentions is closer to the true cost than $350 billion. This is because all currently employed people will pay back some or all of the basic income in its different delivery formats.
Basic income also has the potential to create more employment, because the strongest disincentives to labour-market work are, as Kesselman notes, contained in the existing welfare structure. Many Canadians work multiple jobs because of a lack of income security and sufficiency. This is a worsening trend that basic income can help restore to a healthier balance, opening up job opportunities for those seeking them while reducing pressures on overworked people. From 1976 to 2003, according to Statistics Canada, the number of Canadians working “at two or more jobs or businesses almost quadrupled (from 208,000 to 787,000), compared with overall employment growth of 61%.”2 Many multiple job holders are postsecondary students.
As Young and Mulvale explain, different versions of basic income or guaranteed income can be calibrated to achieve the same or similar result and final cost.3 Applying the $132 billion in program savings that they identify against the $30 billion “top-up” version of basic income leads to a very large surplus justifying the proposal, which remains even if the cost of basic income is raised to $60 or $90 billion to make it more generous. The $132 billion savings figure does not factor in the $72–$86 billion annual cost of poverty in Canada,4 which a basic income set at the poverty level addresses. It also neglects to include payback of basic income through the existing tax structure at prevailing rates (current income and sales taxes), not to mention an additional clawback that can be applied.
What happens when we eliminate other redundant or skewed income security programs that fail to address universal income security and put these public savings toward a far more effective basic income? These include tax shelters such as TFSAs, RESPs, RRSPs and many others, which often very disproportionately benefit those who do not need this government support. The poverty industry, as many have called it, including many charities and the special tax status they receive along with government grants, can be greatly reduced or eliminated, making the money available for an unconditional basic income instead. And despite the good intentions of many charities, we have all read too many stories of highly paid managers and executives in charities and other inefficient uses of donations. This money is better directed to those who need it in the form of a universal, unconditional income.
There are bureaucratic costs associated with monitoring people who are often trapped in these various programs. With a basic income the burden on social housing and unacceptably long waiting lists is also reduced, and people have more freedom in choosing accommodation and location. This is an example of a partial redundancy: I do not advocate elimination of social housing and all related programs, but many who feel trapped in the social housing bureaucracy because of lack of income or job security would like to have other housing options. And housing bureaucracy in Toronto, for example, has proved to be extremely wasteful (single-tendering contracts and other issues), with such funds better directed to those in need.
Limited space allows me to touch on only a few more points. I agree with Kesselman that Employment Insurance (EI) should be maintained. It also represents a small annual cost relative to overall redundancies and other public savings available from implementing basic income. The federal government has used contributions to the EI fund unjustly for many years, eliminating a large surplus that the fund had achieved. EI needs to be made fairer as it is excluding more people who contribute to it, because jobs are increasingly precarious. And the scandal about EI quotas leading to the firing of a whistleblower recently shows us how dangerous it is to rely for income security exclusively on bureaucratic programs with many arbitrary and changing rules. Increasingly, people need a universal basic income to provide an income floor, as EI and welfare programs are so often designed to exclude, and not always in a transparent or accountable fashion.
It is also fundamentally unjust that many people, and their children, are excluded from the benefits of paid parental leave administered by EI when a newborn arrives. Basic income can address this unfairness. This cost component of EI can therefore be removed as basic income can serve this purpose universally, and better.
Corporate welfare, offshore tax havens and related transfer pricing, special tax treatment of unearned income (corporate dividends, capital gains, etc.) and many loopholes represent a large drain on the existing system. This money should not be given away needlessly and can be much better distributed to universal benefits like basic income and health care.
Concerning work ethic and political feasibility, the work of Evelyn Forget and Brian Steensland is central to understanding the Canadian and U.S. basic income / guaranteed income experiments of previous decades. The director of the Office of Economic Opportunity (OEO) in charge of the basic income experiments in the United States revealed in 1970 that the opposite effect on work ethic had occurred. He said that “there is no evidence work effort declined among those receiving income support payments” in the NIT (negative income tax) experiments.5 The director of the OEO was Donald Rumsfeld, a staunch conservative. Steensland reports, “If anything, findings suggested that the program increased the work effort of participants receiving these payments.”6 Forget has similar findings from the Canadian experiments, including significant improvements in health and education outcomes.7
Kesselman acknowledges at the outset of his article that advocates from across the political spectrum, including prominent economists such as John Kenneth Galbraith, James Tobin and others, have advocated scrapping the existing welfare system in favour of basic income. Kesselman advocates that the current welfare system be kept in place and be made less parsimonious. Therefore, to provide a true costing of basic income it is necessary to explain how much less parsimonious such welfare advocates intend to make the existing programs and then provide this total cost in billions of dollars, which can be subtracted from the cost of basic income implementation. Favoured programs include enhancement of the Working Income Tax Benefit (WITB), “special public employment projects” and more money for invasive, bureaucratic and stigmatizing welfare.8
Finally, a recent Trudeau Foundation survey found that more Canadians support guaranteed annual income than reject it. This is impressive given how often large cost figures for the proposal are put forth without presenting the numbers for savings and redundancies that are also in the hundreds of billions of dollars, and how this leads to a large savings surplus when applied against some versions of the proposal. Other versions of basic income can be calibrated to simulate the lowest-cost version – the “top-up” version – with room to double or triple the $30 billion cost while still creating large public savings.
Continue reading “Basic income will be fairer and cheaper: A reply to Jonathan Rhys Kesselman”
