Basic income 101
Basic income represents a fundamental shift in how we think about income security in Canada - it’s natural to have questions! We’ve pulled together some answers here.
What is basic income?
A basic income is an unconditional cash transfer from government to individuals to enable everyone to meet their basic needs, participate in society, and live with dignity - regardless of work status.
It is a simple, common-sense alternative to a social welfare system that is full of gaps and problems. As individuals - and as a society - we need better options to manage setbacks, stay well, cope with transitions, and welcome new opportunities.
A basic income can come in various shapes and sizes, but there are two common policy models: (1) a universal basic income (UBI), and (2) a basic income guarantee (BIG). Both of these models are universal in their eligibility, meaning they set an unconditional income floor for all Canadians should they need it. However, they differ in how and when payments are made and/or taxed back. In Canada, most basic income groups advocate for a basic income guarantee.
Universal basic income:
A universal model provides the same benefit amount to every individual regardless of their other income. Typically, those who don’t need the payments because they have higher earned income would have some or all of these payments taxed back.
Basic income guarantee:
A guarantee model takes earned income into account, and supplements that income with an ‘income guarantee.’ If your income is very low, you would get the greatest amount, and as your other income grows, the benefit reduces gradually. Those who have sufficient income from other sources don’t get a payment.
Why do we need a basic income?
Poverty is a persistent issue in Canada - nearly 10% of the population is considered low-income. More than half of these Canadians have one or more jobs. Our current social safety net has consistently failed to lift the most vulnerable people out of poverty.
In 2019, the low-income measure (LIM) was approximately $35,000 for a two-person household. Payments from provincial social assistance programs (i.e., welfare) are woefully inadequate, providing recipients with an income lower than 50% of the LIM in most provinces.
Our existing income support system is both expensive and ineffective. These systems rely on outdated assumptions about poverty and the labour market. Basic income would directly address a root cause of poverty - a lack of income - instead of relying on complicated and stigmatizing programs to address its symptoms. An effective basic income should guarantee everyone in Canada an adequate income above the poverty line, replacing certain types of programs (e.g., provincial assistance) while still working alongside other important social supports, like affordable housing and healthcare programs.
“Poverty is a widespread issue across the country and the world, but vulnerable groups such as people living with disabilities, single parents, elderly individuals, youth, and racialized communities are more susceptible.”
- Canada Without Poverty
How do we know a basic income would be effective?
Basic income is not a new or untested idea. We can look to a large body of evidence from current and past trials around the world to understand how unconditional cash transfers can effectively address poverty and other inequities. In Canada, we can look to the famous Manitoba Basic Annual Income Experiment (“Mincome”) in the 1970s, and more recently the Ontario Basic Income Pilot. These and other pilots have showed that basic income can have a positive and transformative influence on peoples’ lives.
In addition to these pilots, Canada already has basic income-type programs for children and older adults: namely, the Canada Child Benefit (CCB), Old Age Security (OAS), and the Guaranteed Income Supplement (GIS). These programs have significantly reduced poverty while being politically popular: for instance, the percentage of children living under the low-income measure in Canada decreased from ~16% to ~10% between 2015 and 2019, due in part to the enhanced CCB.
What does the evidence tell us about the effects of a basic income?
Reducing poverty 💸 A basic income alleviates poverty by directly addressing income insecurity, giving people a minimum livable income regardless of their work status and/or life circumstance.
Improving health outcomes 🏥 The Manitoba pilot saw an 8.5% reduction in hospitalization rates for recipients - largely due to improved food security and lower stress and anxiety.
Increased school attendance 📚 Mincome also saw an increase in high school graduation rates during the experiment, as fewer students were forced to drop out in order to work to support their families.
Negligible effects on work 💼 Pilots have shown very minor impacts on labour market participation and the number of hours worked (more on that later).
…And other positive outcomes, including happier citizens, increased trust in institutions, and reductions in crime.
What programs could a national basic income program replace?
Basic income is not a silver bullet, but it could replace provincial income assistance programs, which are inadequate and ineffective at lifting people out of poverty. The federal government is best equipped with the resources (money from taxes) to administer strong, and consistent, income security programs across Canada. Provinces and territories do not have as many resources, which has resulted in ineffective provincial social assistance programs.
Welfare rates vary widely by province and territory, and each benefit is conditional, meaning accessing them can be difficult, humiliating, and stigmatizing for participants. Interactions with multiple government systems leave applicants vulnerable to racism, sexism, and other forms of discrimination. In addition, current rates of provincial income assistance are far too low to meet basic needs, and create barriers to accessing healthcare and employment. Basic income rates must be adequate for everyone to meet their basic needs, live with dignity, and participate meaningfully in their communities.
Government spending on other social programs should remain and complement a basic income.
As Jamie Swift and Elaine Power (2021) write: “To be meaningful, unconditional basic income must be complemented by other measures to counter the broad effects of free-market fundamentalism” (p. 5) - including non-market housing, childcare, pharmacare, and higher taxes on capital gains.
Many of our existing national programs - such as universal healthcare, the Canada Child Benefit, Old Age Security and the Guaranteed Income Supplement (GIS) - are important and should complement a basic income program. Contributory programs like The Canada Pension Plan (CPP) and Employment Insurance (EI) are also integral components of Canada’s income security system and can complement basic income.
Will people stop working if they get a basic income?
No. Research from pilots indicate that basic income payments do not disincentivize work, and have little impact on labour market participation and the number of hours worked. For instance, during Mincome, only two groups were identified as leaving the workforce: mothers of very young children, and people who went back to school. Meanwhile, research from the Ontario Basic Income Pilot found that most of those who were working when the pilot began continued to work while receiving a basic income. More than a third of these workers reported that basic income helped them find higher-paying jobs with better working conditions.
These findings have been supported by basic income trials around the world. An analysis of 16 studies covering more than 105,000 basic income recipients worldwide found a minimal impact on working hours, with no single study finding more than a 10% impact on labour market participation overall. Simply put, when people are provided a basic income, most don’t leave the labour market.
“Taken as a whole, the current findings provide strong support […] that guaranteed basic income would not serve as a major disincentive to work.” - Gilbert et al., 2018
In fact, our current welfare programs disincentivize work. For every dollar someone earns while on provincial income assistance, up to 50 per cent of their benefit can be clawed back by governments, depending on the province or territory. This creates what is known as a “poverty trap,” where recipients are actually worse-off if they work. A well-designed basic income program would ensure there is no disincentive to work. Instead, the program would provide a gradual decline in the amount of the benefit as employment income increases and ensure workers would always be financially better off working an additional hour.
How much would a basic income cost?
The cost of any basic income program depends on how it’s designed and the specific criteria used. The Parliamentary Budget Officer (PBO), which provides independent analysis on Canada’s finances, estimated the cost of a basic income program modelled after the Ontario Basic Income Pilot to be about $43 billion. However, given the $20 billion in spending by governments on provincial and territorial welfare programs, the net cost of a basic income would fall to $23 billion by eliminating current welfare programs and reallocating resources to a basic income. That’s similar to the amount we already spend on the Canada Child Benefit each year.
This estimate from the PBO also doesn’t include future savings resulting from a basic income, like a reduction in hospitalization rates, reductions in visits to family doctors, and savings in other social systems. In the long-run, a national basic income program could pay for itself when considering savings in these areas. While these savings are harder to calculate, UBIWorks estimates about $18 billion and $4 billion in annual savings from lowered healthcare and criminal justice costs.
Projections and estimates will differ depending on a variety of factors. Regardless, the key takeaway is the same: a national basic income program is not only affordable, but it’s an important investment in our country.
Partner resources
Check out Basic Income Canada Network’s primer series for a great introduction, as well as the Case for Basic Income series, which connects basic income with various sectors and themes.
Still have questions?
Please don’t hesitate to reach out - we’re always happy to talk about basic income. We’ll do our best to answer your questions directly or point you in the right direction.