Frequently Asked Questions about Basic Income

By consolidating many layers of provincial, territorial and federal income assistance programs and by replacing complex criteria with age and income only (data that is already available), government can achieve significant administrative savings.

While difficult to precisely quantify, the literature points to significant long term savings to government in the areas of health, justice, and related social services. Foodbanks Canada estimates that poverty costs Canadians over $80B/year – $8B/year to our healthcare system alone.

Higher rates of healthcare usage among those living in poverty is well-documented as is the overall causal link between health and wealth. Basic Income trials in Canada and abroad have further demonstrated significant reductions in property crime, violent and domestic crime as well as overall crime, which manifest as significant savings to the taxpayer in enforcement, legal and incarceration expenses. In short, it is cheaper to keep someone out of poverty than it is to provide increased services to those in poverty.

Significant barriers and disincentives already exist in our social assistance landscape as important income supports are often removed entirely when people return to work. Marginal effective tax rates (METR) in Canada are actually highest for those earning low to moderate incomes creating significant disincentives to work. A Basic Income program eliminates many of these barriers, ensures that people will always earn more income when they work and can lower the outrageously high METR faced by low-income Canadians.

Evidence from trials in Canada and around the world unambiguously demonstrate that Basic Incomes do not create a significant disincentive to work contrary to the intuitive assumption and oft-publized exceptions. Parents with young children and those retraining or returning to school often moderately reduce their work but, in aggregate, this is offset by people increasing their working hours as they find more rewarding employment and start their own businesses.

Evidence from the Canada Child Benefit points to higher rates of labour force participation among mothers and an increase to overall productivity. In a metastudy of over 105,000 recipients across 16 separate Basic Income experiments around the world, researchers found that people who receive a Basic Income do not work less.

A survey of Ontario Basic Income Pilot recipients found that a majority of people were more motivated to look for work and found it easier to do so. Of those who were employed continuously before and during the pilot, over one-third of them actually increased their hourly earnings.

The introduction or expansion of any government enabled service requires that important consideration be given to how it is communicated to the public. As with expansions to education, infrastructure, or healthcare, increased costs to government will be reality well before the returns of a Basic Income investment are realised. Therefore, we must clearly communicate the benefits of such a program, not merely to those that may themselves receive payments, but to all voters and taxpayers. For instance we must demonstrate, particularly to those who will fall just above the qualifying income thresholds, that the program will not cost them but rather improve their communities; and, in many cases, increase their wages and quality of life. Central to this message will be communicating that, despite being more visible, a Basic Income actually represents an improvement over the existing system in terms of reciprocity concerns.

The precise design of any eventual Basic Income is subject to numerous policy considerations and important balances need to be found between political realities, costs, incentives, and effectiveness. The terms of a Basic Income are therefore best left to policy experts and subject to the required negotiations between provinces and the federal government. In principle however, any real world Basic Income should be of sufficient size to completely or nearly eradicate poverty and the immense costs it poses to society; unconditional; available to all who need it ;and work in concert with existing social services that Canadians and their businesses alike rely on.

We see Basic Income as core economic infrastructure that ensures people can pursue their potential. It can address the significant costs that serve as structural barriers to those seeking to retrain, go back to school or start a business. It provides basic insurance, increasing our collective risk tolerance and making entrepreneurship available to many more Canadians. It provides a bridge to those experiencing life transitions and compensates those performing the uncompensated labour that underpins the performance of our formal economy. It supports job creation and wage growth; reduces workplace exploitation and helps correct long standing socio-economic power imbalances. It more effectively and efficiently addresses poverty by abolishing the perverse incentives in our social safety net and closing the many gaps that people fall through. Basic Income is the manifestation of the economic promise to provide equality of opportunity to all.

Research by the Canadian Centre for Economic Analysis shows that a national basic income could grow Canada’s economy by $80B/year, create 600K jobs, and cause private capital investments to increase up to $15B/year – while lifting 3.2M families out of poverty.

Basic Income would not cause inflation, because it would simply put billions of dollars already in our economy to better and more productive use, rather than introduce new money into the market. Instead, Basic Income can ease the pain inflation – lessening its impacts on Canadian families – by ensuring they have the money they need to meet rising costs.

Basic goods bought by people in low-income situations are elastic and can respond to a small increase demand. The Canada Child Benefit is a $30B program and has not caused inflation.

Observations from Canadians trials have shown significant wage growth in communities where a Basic Income was being provided. This corresponds with other observations which together show an increase to worker’s bargaining power. While no overall reduction to the workforce was observed, workers were able to pursue better paying employment and employers needed to raise their lowest wages to remain attractive to workers.

These effects might therefore increase labour costs for some businesses that rely on low-wage labour like the service industry. However, these impacts might be more than offset by increases in demand for these same businesses as a result of higher incomes among their prospective clientele. A report by the Canadian Centre for Economic Analysis modelled that this effect would result in a net increase to business gross operating surplus by an average of $13 Billion a year.

A 2020 senator’s report showed that CERB did not cause a labour shortage. Instead, it was a lifeline for millions that kept Canada’s economy from a worst case scenario. It gave many workers the opportunity to seek better paying work, enroll in school or a training program, or switch industries altogether, thanks to the newfound economic freedom that the Basic Income-like benefit gave them.