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Tuesday, November 29, 2016

What Happens When You Give Basic Income To The Poor? Canada Is About To Find Out

Poverty is increasing in most industrialized countries and represents the biggest enemy of our society. Whenever a country experiences a high rate of poverty, crime goes up. Increased crime means the cost for policing and incarceration goes up. What also goes up are social behavior problems, racial profiling, social costs in general )food stamps, housing allowance and medical costs, health insurance etc. etc.

What goes DOWN is productivity, and consummation, with other words the overall economy. The USA has a 14% poverty rate equaling 46mill. Americans and  Canada doesn’t look much better.

  • 1 in 7 (or 4.9 million) people in Canada live in poverty.
  • In Edmonton, 1 in 8 individuals are currently living in poverty.
  • Poverty costs Canada as a whole between $72 billion and $84 billion annually; Ontarians pay $2,299 – $2,895 per year, while British Columbians pay over $2,100 per year.
  • Precarious employment has increased by nearly 50% over the past two decades.
  • Between 1980 and 2005 the average earnings among the least wealthy Canadians fell by 20%.
  • Over the past 25 years, Canada’s population has increased by 30% and yet annual national investment in housing has decreased by 46%.

         Source: http://www.cwp-csp.ca/poverty/just-the-facts/

If major problems with economy and society shall be avoided It is quite clear that a sustainable solution needs to be found fast.
Several countries are considering to establish a guaranteed income system, which will eliminate a lot of other social costs, like the ones mentioned above. The Province of Ontario is now discussing a basic income project to all residents:



by NATALIE SHOEMAKE

Ontario is poised to become a testing ground for basic income in 2017 as part of a pilot program. Hugh Segal is the special advisor to the Canadian province and a former senator. He believes a supplemental income of $1,320 a month could provide a viable path to poverty abatement—effectively replacing welfare programs and a system he described as “seriously demeaning” in a paper discussing this basic income pilot project.

Segal suggests this pilot project would provide real evidence to whether basic income is the solution to poverty many governments have been seeking. It would answer many of the burning questionsand concerns regarding such a system:

  • Can basic income policies provide a more efficient, less intrusive, and less stigmatizing way of delivering income support for those now living in poverty?
  • Can those policies also encourage work, relieve financial and time poverty, and reduce economic marginalization?
  • Can a basic income reduce cost pressures in other areas of government spending, such as healthcare?
  • Can a basic income strengthen the incentive to work, by responsibly helping those who are working but still living below the poverty line?

In the United States, welfare programs are the staple of big government—a Republican nightmare. Paul Ryan has indicated he wants to phase-out these entitlement programs, however, he’s alsoconcerned about solving the poverty issue in America. If Ontario’s proposed three-year project provides compelling evidence that basic income could do both, we may have a bi-partisan solution.

Segal is a conservative. In his view, welfare programs help alleviate some of the symptoms of poverty, but provide no long-term program to get people out.

“Testing a basic income is a humane and useful way to measure how so many of the costs of poverty (in terms of productivity, health, policing, and other community costs, to name only a few) might be diminished, while poverty itself is reduced and work is encouraged,” Segal says in the report.

A guaranteed income would provide a floor no one would fall beneath and citizens would receive it regardless of employment status. Conservatives like it because it provides an elegant solution that could replace the welfare state and the left love it because it provides a greater social architecture.

However, many question how giving people free money could fix many of our socio-economic issues. But we won’t know if we don’t try—if we don’t do the research to find a solution, which is what Segal suggests.

"There cannot be, nor should there be, any guarantees about what results a pilot might generate,” Segal writes. “The objective behind this endeavor should be to generate an evidence-base for policy development, without bias or pre-determined conclusion."

This test of basic income won’t be the first. Researchers and governments across the globe have started implementing similar tests to see what happens when you give people no-strings-attached cash. Finland, the Dutch city of Utricht, and Kenya all have plans to create programs to test this system. Segal believes a program in Ontario could add to this growing body of research.

"This Ontario initiative takes place at a time when other jurisdictions, in Canada and abroad, are working in different ways toward a Basic Income approach to better reduce poverty,” he wrote. “The opportunity to learn from and engage with these other initiatives should not be overlooked, nor should approaches being tested elsewhere be necessarily re-tested here."

A study in Manitoba, Canada done back in the 1970s provides us with an idea of what a community receiving basic income would look like. Many believe people would stop working, and become lazy. They would be half right, some people did stop working in Manitoba. But when you look at the data a little closer, we begin to see how poverty starts at an early age and how basic income could help them get out.

Allow me to explain: People in the town received a set income of $9,000 a year (by today's standards) from the government. Evelyn Forget, an economist and professor at the University of Manitoba, who looked over the data from the study says there was a 9% reduction in working hours among two main groups of citizens.

Here’s the kicker: New mothers were using their additional income to extend their maternity leaves and spend more time with their infants, and teenage boys were using that income to stay in school.

“When we interviewed people, we discovered that prior to the experiment, a lot of people from low-income families, a lot of boys in particular, were under a fair amount of family pressure to become self-supporting when they turned 16 and leave school. When Mincome came along, those families decided that they could afford to keep their sons in high school just a little bit longer,” Forget told PRI in an interview.

Poverty affects all of us in some way (at some point 3 in 5 Americans experience it personally in their lifetime). All of us pay for its upkeep through taxes and can see how it wears down the institutions within our local communities. Basic income could be the solution. We have some data; we need more in order to make the proper call.

Ontario’s experiment will show what would happen if people between the age of 18 to 65, living below the poverty line, received a monthly income of $1,320 ($1,820 if they are disabled). Would they be better able to save and find work?

“There’s no magic bullet,” said Jennefer Laidley of the Income Security Advocacy Centre. “So it’s key that government is now exploring various solutions — reforming existing social assistance programs, improving the quality of work, and considering basic income.”

11 comments:

  1. Once the program starts there is no turning back. Success or failure, you will never, ever be able to stop the payments to those receiving the free money.
    How about a requirement to work a certain number of public service hours if not gainfully employed. Or would that be too embarrassing?

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    1. That is exactly the reason why they start a time-limited pilot project first and evaluate since. A requirement to work public service hours would destroy important aspects of the program, like f.e.x having kids staying in school longer or mothers being able to provide for their little children. I grew up at a time where only one parent worked for the household income while the other stayed at home and provided a lot of good for the household. Today's incomes are not high enough to be able to do that. A guranteed income would allow for one parent to stay home. Experts are already agreeing that there will be not enough work for everybody in 10-15 years. It is most important to be prepared when that time arrives. Besides, the program will save enormous amounts of government costs for administration of all the numerous social programs like f.e.x unemployment insurance, housing allowance etc. Not mentioning savings in the health sector.

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  2. This is a Utopian project I could support IF the funds were actually used for which you stated. Do you, by any chance, know how people receiving these funds would be accountable? There is growing support for our states to require mandatory drug testing for welfare recipients. Once the families climb out of poverty level, do the payments stop? After the oil activity in Alaska, all residents received a stipend but I honestly have not researched the results after 50 years.

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    1. The condition for recipients would be to be lawful residents. Other than that the discussion paper says "no strings attached". Mandatory drug testing to receive a basic income would not be supported in Canada. As you may have heard Canada is about to open up for use of marijuana. Personally, I am not in favor for that, but it is coming.

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  3. Sorry..Ak was not a good example because it was a once a year payment, the highest being $3k+

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  4. My fear is big corporations that pay the lowest possible wages would see a great opportunity to pay less or to otherwise abuse the system.

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    1. I think you may have a valid point there.

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  5. This comment has been removed by a blog administrator.

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  6. In a perfect world everyone would have a good paying job,however advances in technology have taken jobs from all countries. If a welder makes $22 per hour and a robot can do the same job for $8 which one do you think a manufacturer is going to go with.

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    1. Automatization and and the use of more computers are exactly the reason why there won't be enough jobs for everyone. If appropriate measures are not gonna be taken we will move towards an unprecedented unemployment and poverty rate. That in itself will lead to a decline of the economy. We will be in an inner spiral to wiping out our very exixtence. Millions of manufacturing jobs will continue to move to low-wage countries. And a Mr. Trump will not be able to force companies to produce at home. Only deplorables will believe such a fairy tale.

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  7. I find this interesting, as well as the diverging paths the US and Canada are taking. I guess us Canadians can get used to being called a bunch of "Socialists" on an even more frequent basis from our friends down south (which always irks me honestly...where's the fine line where people become "socialists" - both Americans/Canadians pay income taxes, both have a safety net of some degree...).

    Anyway, I 100% agree with your first paragraph and I think Canadians are always willing to pay higher taxes to ensure the relative safe streets and everything that comes with it. I think safety, clean streets, and openness to race/religion is the greatest thing about Canada.

    I'm not crazy about the idea of a basic income, no strings attached approach. We've often heard about people on Welfare who don't work because they don't have to and that this attitude passes on from generation to generation. Basic income will make them more comfortable but if anything, won't change that attitude. It's also another fixed cost to Canadian society. I'm heartened however about kids staying in school longer though and if that really is true than it is achieving a goal of making the population more educated and marketable...but I still have my doubts that the pros outweigh the cons, is it just another cost we pay for without changing anything among the poor (other than making them more comfortable?.

    Coming back to my opening paragraph though: it's funny how Canada/US goes in different directions almost constantly. We're now more left-leaning with Trudeau, US has turned to Trump who is anything but. Before they had Obama, we had Harper who was on the right of the political spectrum. Before that we had Chretien/Martin when they had Bush Jr. Just seems we're never in sync with our political leanings.

    Anyway, interesting read and happy to have come across your blog.

    Frank (bbqboy)

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