Financial Series: Universal Basic Income
Part 3 of 6
By Brandon Currie
This article was published in Reveal Business Magazine, Vol 2 | Issue 2
This is the third in a six-part series aimed at helping you achieve a clear understanding of Universal Basic Income and all it entails. Hopefully by the end you’ll possess the foundation of knowledge necessary in order to wade through the vast array of opinion pieces and editorials out there these days.
In the last article we discussed the data and conclusions stemming from “Mincome”, the UBI experiment conducted in Manitoba from 1974 – 1979 by the provincial and federal governments, and analyzed in 2008 by Evelyn Forget. The concern that a guaranteed income would result in a disincentive to work proved to be, for the most part, groundless according to this experiment, As a matter of fact, it appeared that communities would benefit from the financial security ensured by the program. However, could such a project make the leap from paper to reality?
Before we begin to assemble the steps necessary to accomplish this feat we need to agree that a country-wide program such as this would have to be funded by the federal government. Lower tier governments do not have the consistent tax base necessary to finance such an endeavour, never mind the fact that the population itself shifts about geographically. Oversight by the federal government is the most reasonable option. Now let’s break it down:
Since the introduction of the Canadian Emergency Relief Benefit (CERB), implemented due to the COVID-19 pandemic, many Canadians have been calling for the creation of a UBI where everyone would have an income safety net in the event they were to lose their jobs unexpectedly or, simply to help pay for basic living necessities like food, shelter and clothing for those who struggle to do so.
The idea is, every adult (18 and over) would directly receive a monthly benefit Taxation will be discussed in another article. The amount received would be consistent across the country, to allow people to move from province to province without triggering administrative issues concerning payment across jurisdictions (similar to CPP for example). For arguments’ sake, let’s use the most advocated minimum wage of $15. Using that number, $15 for 40 hours a week over 52 weeks = $30,000/year or $2,500/month.
One significant advantage to this guaranteed income is the elimination of other income tested (and arguably flawed) programs such as the Ontario Student Assistance Program and the Ontario Disability Support Program. Hear me out. An 18 year old who wants to pursue post secondary education would have $2,500/month to put towards those studies and would no longer need OSAP, which is funded by the
provincial government. An individual who is disabled and who qualifies for ODSP could, if he or she so chose, go out and find employment to supplement their finances without worrying about being kicked off of benefits. Seniors on Old Age Security and the Guaranteed Income Supplement would no longer need these benefits as the UBI would replace them as the primary retirement supplement.
Of course, the Canadian Pension Plan (CPP), which is funded by employees and employers, would still be in place as this is individually funded, not taxpayer funded. Therefore, people would still be able to enhance their retirement income.
Obviously this represents the UBI boiled down to the basics. We will cover more aspects on the elimination of income tested programs in another article.
So, if implemented today, the proposal would be similar to some aspects of the model Milton Friedman suggested in his 1962 book “Capitalism and Freedom”. Most importantly, in order to qualify for the UBI it would be mandatory to file taxes with the CRA every year. No taxes filed, no benefit. Arrangements would be made for people undergoing situations which make it difficult to file taxes on their own (homelessness, for example). Every year the CRA would receive an individual’s taxes by a specific deadline, which would then “restart” implementation of the benefit on a specific date, much like the current Canadian Child Tax Benefit (CCTB). Direct deposit capabilities these days would ensure seamless disbursement and payment. For those who prefer snail mail, that would of course continue to be an option.
All of this is fine and dandy, but in our next article we’ll get down to brass tacks: What is the cost of such a program? Is it even viable? We will consider the numbers behind the theories next time.
