Robert Reich On The Universal Basic Income

More and more jobs are fated to disappear, thanks to monoliths like Amazon squeezing out other retail, thanks to autonomous vehicles close to becoming part of the mainstream, and for a host of other reasons. Economist Robert Reich offers a partial answer to those losses, one that I doubt will ever be implemented in the United States:

A Bold Experiment Or A Necessary Support?

The concept of a guaranteed annual income just won't go away. It is regarded by some as an effective way of addressing the increasingly wide disparities afflicting our society, and reviled by others as an affront to individualism and a disincentive to work. I fall into the former camp, and empirical evidence appears to be on my side.

Here is a brief backgrounder:



A certain momentum seems to be building. Senator Art Eggleton, for example, is calling upon the federal government to initiate a pilot program:

“Quite frankly, the social welfare system that we have throughout this country, mainly run by provinces, it’s just not working,” said Eggleton. “We have one in seven people living in poverty in this country. That’s a shameful thing in a country as rich as Canada.”

Instead of pouring billions into a system that doesn’t help lift people out of poverty, he said, “I think it’s time to try a new approach. And I think a basic income could be that approach.”

There is interest in other jurisdictions as well. Quebec is onboard with the idea, and Ontario has announced plans for a pilot project, the details of which are yet to come.

A recent opinion piece written by Laura Anderson and Dr. Danielle Martin argues that considering the many possible positive outcomes, such a pilot program needs to be designed carefully. A past flirtation with the idea can be instructive.

Labour market outcomes were a major consideration in the 1970's Dauphin, Manitoba experiment with a guaranteed annual income. No one wants a plan that discourages people from working. Anderson and Martin point out that the Dauphin experiment did not discourage participation, with but two exceptions:

The first was women with infants at home, who effectively used the BIG [basic income guarantee] to purchase maternity leave. We should expect a different response from women in modern-day Canada, where maternity leave benefits are much more extensive. But where child care and other supports for working parents are insufficient, we may see responses to a BIG that will show us those cracks in the system.

The other group whose employment levels decreased under Mincome was teenage boys. A closer look reveals that with a basic income guarantee, male high school students were more likely to make the decision to stay in school until graduation. Given the Ontario government’s aim of increasing graduation rates and the need for a highly educated population, it will be important to understand how people’s labour market decisions interact with other important choices.

Perhaps the biggest changes that would come with the elimination of poverty are to be found in healthcare outcomes:

Poverty is the biggest determinant of health. As such, we should expect to see significant improvements in health among recipients of a basic income. For example, the Mincome data showed that under a BIG, hospital visits dropped by 8.5 per cent. This included fewer emergency room visits from car crashes and domestic abuse, and fewer mental health visits. In Ontario today, these indicators along with others — such as low birth weight, avoidable hospitalizations, and health system expenditures — are already measured, and a close look at the impact of a BIG on those metrics must be included in a basic income pilot.

The connection between poverty and poor health worldwide is a well-established one. Impediments such as low education levels, poor diets, smoking and sporadic contact with healthcare providers are all factors contributing to this relationship, a fact brought home recently by The Hamilton Spectator's Steve Buist:

An analysis of provincial data shows cancer in patients from poorer parts of Hamilton is more advanced by the time the disease is detected. The findings raise questions about access to health care, patient education, screening programs and the gap between rich and poor.

The statistics are telling:

The Spectator's data analysis shows that the lower part of the former City of Hamilton had 20 per cent more diagnoses than would be expected based on population.

Meanwhile, the five suburbs of Stoney Creek, Ancaster, Dundas, Flamborough and Glanbrook had about 12 per cent fewer Stage IV cancers than would be expected based on population.

The reason for this disparity is not hard to fathom. Says lung cancer specialist Dr. Peter Ellis:

"We know in general that people who come from lower socioeconomic backgrounds have delayed access to health care," said Ellis. "These people tend to delay seeing a doctor, they don't necessarily understand some of the symptoms they see, they may be less inclined to undertake screening behaviour.

"If you don't necessarily have access to a family doctor, if your way of dealing with problems is to present to the emergency department or some sort of urgent care — which certainly happens more in those lower socioeconomic areas — then you're not going to get the continuity of care.

While a guaranteed annual income would hardly be an instant panacea, over time, as evidenced by the Dauphin data, improvements in a variety of outcomes would, it appears, be inevitable. All that is missing so far is a consistent political will.

Can our 'leaders' rise to the occasion?

Star Readers On The Guaranteed Annual Income

I write periodically in this blog on the concept of the guaranteed annual income; it seems it would be an effective way of helping to address many of the socio-economic problems we face. As you will see in the first of four letters on the subject from Star readers, not everyone sees it as a desirable measure.

Responding to a recent editorial exploring the notion of a GAI, Steen Petersen of Nanaimo, B.C. writes:

A guaranteed annual income (GAI) sounds like a good idea but when Denmark tried providing it many people were quite happy not having to work. To stop the hemorrhaging of government funds, they had to implement a rule that if you refused three job offers, all benefits were cut off.

Sadly, when you have a GAI, a lot of people feel the fruits of their labour is the difference between the GAI and their working paycheque and often that difference isn’t worth the effort. Also, if the government uses the GAI to subsidize low-paying jobs, the result will be more low-paying jobs.

Due to human nature, of both employers and workers, a GAI for everybody for life is simply unsustainable, as Denmark discovered. To make matters worse, since any earnings are deducted from the GAI people receive, the underground economy becomes even more attractive, which further drains government coffers.

While I cannot speak to the Danish experience Petersen describes, despite being an advocate of the GAI I must admit that I have worried that its implementation might simply amount to another subsidy for business, in that there would hardly be the same pressures on governments to raise minimum wages if everyone enjoyed a minimum guaranteed income.

Regarding his other point about it being a disincentive to work, that would surely depend on the form the GAI took. For example, a recent article in The Globe by Noralou Roos, director of EvidenceNetwork.ca and professor in the University of Manitoba’s Department of Community Health Sciences, Faculty of Medicine, posits one version that would perhaps mitigate that likelihood:

One version works like a refundable tax credit. If an individual has no income from any source at all, they receive a basic entitlement. As earned income increases, the benefit declines, but less than proportionately. As a result, low-income earners receive partial benefits so that they aren’t worse off than they would have been if they had quit their jobs and relied solely on income assistance.

This means that there is always an incentive to work, and people who work are always better off than they would be if they didn’t work.

Here are the other three Star letters for your consideration:

The idea of a guaranteed annual income in Canada — where the necessities of life are a citizen’s right and where it is no longer necessary to step over the homeless on the way to work — has been around for decades. However, it has rested in the realms of dreams, of aspirations and wishful thinking — as an idea too complex to be realized.

Now there is plenty of evidence that a guaranteed annual income can give legs to the possibility of a Canada where there are no poor people.

Ottawa has a responsibility to prioritize the implementation of a GAI. Canada without poverty, just think of it. It would be like a rising sun to thaw a frozen land.

Bill Endress, Toronto

Of course a basic income will backfire on the dwindling percentage who still create wealth and pay fresh taxes. Why would anyone with low skills or low job prospects seek work if the basics are covered adequately? Recirculating taxes in the social net does not create any new public income.

We need to tread with caution as it is so hard to undo errors due by the pride, ambition and egos of the politicians.

Nick Bird, Richmond Hill

No matter how governments act or whether they are conservative or socialist, there will always be people who are unable to work due to lack of jobs, lack of physical or mental ability, lack of training, etc. Jobs that were common two generations ago do not exist in today’s world — jobs that allowed people to make a minimum wage and some that allowed workers to own a home and raise a family.

These jobs are gone and will never be again in the industrialized world unless the captains of industry and the shareholders are willing to take a little less, and do away with much of the automation that has made thousands of jobs redundant.

A national minimum wage for every citizen of the age of majority will not be in the platform of any party in the near future. I and many others have benefited from the days of dishwashers, service station attendants, car washers and many other service jobs that have disappeared and are continuing to disappear.

When the mass of the unemployed grows to an unmanageable problem, what then?

Allan McPherson, Newmarket

More On The Guaranteed Annual Income

Responding to a recent opinion piece advocating for a guaranteed annual income, Star reader David Gladstone of Toronto has this to offer the crucial role it can play in a world of tremendous change and increasingly precarious employment:

It seems the world is never proactive when it comes to preparing for a disaster, whether it is economic, environmental or societal. We just wait for the “tsunami” to occur and then we spring into action, always too late and largely ineffective.

The timely proactive argument for a basic income is a case in point.

Artificial intelligence has arrived and in the next decade or two will be performing a vast array of jobs that will cause serious social reorganization.

A guaranteed income will provide a basic financial security for everyone, which may allay the fear that the future holds no hope.

The industrialized nations of the world will exploit the many advantages of artificial intelligence, but at the same time those nations will be more secure with a guaranteed income for their citizens. The alternative is a large class of people living in poverty who will, out of desperation, seek economic justice through social upheaval.

It is in the interests of all parties that a guaranteed income be put in place before the full impact of computer generated services and materials flood the market.

Will Canada be proactive and position itself for the 21st century through a guaranteed income? Any bets?

An Idea Gaining Traction

The concept of a guaranteed annual income, a subject I have written about previously on this blog, seems to be gaining traction. A relatively simple way of uplifting countless people from poverty and in the process ultimately saving money through a streamlining of our fragmented systems of social programs, it is now finding interest within the halls of power.

Recently, the Minister of Families, Children and Social Development, Jean-Yves Duclos, told the Globe and Mail

the concept has merit as a policy to consider after the government implements more immediate reforms promised during the election campaign.

The general concept is that a guaranteed income would cover basic needs and reduce demand on existing social programs. However, proposals vary widely on whether it should be paired with a drastic reduction in social programs such as welfare and unemployment insurance or complement them.

This means versions of the idea have appeal across the political spectrum, as it could lead to a larger or smaller role for government depending on the model.

Support for the idea seems to cross party lines.

Conservative MP and finance critic Lisa Raitt said she would like the House of Commons finance committee to study the idea. She also said she raised the issue with Finance Minister Bill Morneau recently during a private pre-budget meeting.

“He seemed favourable,” she said. “I have an open mind on it. I know that there’s been progress made on it around the world in terms of how people are viewing it. I don’t know if it will work in Canada but the work of the committee will help us figure out whether or not it is something that is good or not good.”

And across Canada, momentum is building. François Blais, Quebec minister of employment and social solidarity, has been asked by Premier Philippe Couillard to look into how that provinces social supports can move in the direction of a guaranteed annual income. But that's not all:

The political cast includes Calgary’s Mayor Naheed Nenshi, Edmonton’s Mayor Don Iveson and Halifax’s Mike Savage. In fact, no less than nine provincial and territorial capital leaders support basic income or at least pilot projects, with innumerable smaller city and town mayors across the nation declaring their support as well. They know — as government leaders who are closest to the people — that a guaranteed income would reduce inequities in their communities, reduce crime, improve health outcomes, and strengthen social cohesion.

Are we reaching critical mass? Long observation of politics suggests that is not yet the case, but clearly we seem to be moving in the right direction.

Thinking Beyond The Conventional

We are regularly told, both by governments and their corporate confederates, that these are tough times, and that only patience and a freer hand for business will bring about eventual relief. To the seasoned observer, such a prescription is utter nonsense, of course. Neither an expansion in good-paying jobs nor a contraction of the income gap has occurred under that roadmap.

The fact is there are solutions to many of the problems we face today, whether it be climate change, the grinding poverty that so many contend with, or the sad plight of our native peoples, to name but three. Yet these solutions, while well-known and well-researched, always seem just over the next horizon, never to be realized.

Consider the matter of the guaranteed annual income, which I have written about previously on this blog. A recent piece by Glen Hodgson and Hugh Segal suggests the time is right for such a program, especially since countries in Europe are giving it serious consideration.

How does a guaranteed annual income system work? Basic income support would be delivered as a tax credit (or transfer), administered as part of the income tax system. Existing social welfare programs could be streamlined into this single universal system, thereby reducing public administration and intervention. Earned income for GAI recipients could be taxed at low marginal rates, thereby lowering the existing “welfare wall” of high marginal tax rates for welfare recipients who try to break out of welfare by working and providing a stronger incentive for recipients to work and increase their income.

The benefits of such a program would be many: poverty reduction, better health outcomes, greater labour force engagement, etc. And to top it all off, it would likely save money since it would replace the siloed benefit programs that currently exist, thereby significantly reducing administrative costs.

Even if you don't believe that a guaranteed annual income would be cost effective, there are other untapped sources of revenue that could fill the gaps and do much, much more. One of those sources is a form of the Tobin Tax, a tax on financial transactions.

The New York Times writes:

A financial transaction tax — a per-trade charge on the buying and selling of stocks, bonds and derivatives — is an idea whose time has finally come.

A well-designed financial transaction tax — one that applies a tiny tax rate to an array of transactions and is split between buyers and sellers — would be a progressive way to raise substantial revenue without damaging the markets. A new study by researchers at the nonpartisan Tax Policy Center has found that a 0.1 percent tax rate could bring in $66 billion a year, with 40 percent coming from the top 1 percent of income earners and 75 percent from the top 20 percent. As the rate rises, however, traders would most likely curtail their activity. The tax could bring in $76 billion a year if it was set at 0.3 percent, but above that rate, trading would probably decrease and the total revenue raised would start to fall.

As the editorial points out, it is already being applied in a limited number of countries:

There are already financial transaction taxes in Britain, Switzerland and South Korea as well as in Hong Kong and other developed markets and emerging nations, generally at rates of 0.1 percent to 0.5 percent on stock transfers. In addition, 10 countries in the European Union, including Germany and France, have agreed to apply a common financial transaction tax starting in 2017, though relentless lobbying by investment banks and hedge funds threatens to delay and even derail the effort.

That last sentence, of course, epitomizes the main obstacle to implementation, the opposition of the moneyed forces who seem to see any taxation as a capitulation to some kind of socialist scheme. Unfortunately, those forces seem to almost always have the ear of government.

So despite the propaganda, there are ways to bridge the yawning gulf that separates those who have a lot, and those who have little. Don't let anyone tell you otherwise.

Where Is Help To Be Found?

Over the past several weeks I have been reading a number of letters to the editor from 'concerned' citizens about the arrival of Syrian refugees in Canada. Some offer a racist perspective thinly disguised as concern for our fellow Canadians (Instead of helping those people, shouldn't we be dealing with our own homeless?) while others are genuine and heartfelt, happy that we are helping those who have suffered so much thanks to a civil war not of their own making, but also wondering why we can't be doing the same for our fellow Canadians who toil away in desperate situations, often despite their best efforts to get off the street, get jobs and housing, etc. And that is a good question indeed.

Contrary to what some would like to think, it is not simply the poorly educated who are often in fairly desperate straits. As I have written more than once on this blog, the precariat is growing in number, a fact that I was once again reminded of this morning in an article about Toronto's library workers:

Jobs have been slashed by 17 per cent since 1998, according to the city’s library worker union, despite a 30 per cent increase in circulation. And while the number of public library managers on the Sunshine List has skyrocketed, around 50 per cent of non-management library jobs are part time — leaving many strapped with irregular hours and limited access to benefits and pensions.

With good job creation a staple of the City of Toronto’s proposed poverty reduction strategy, library workers say the city needs to start by looking at its own standards.

While there will always be those who insist on disdaining unions, more out of envy than anything else, the above amply illustrates that having a unionized job offers only limited protection against privation and the vagaries of the workplace. So where does a possible answer lie?

The notion of a guaranteed annual income is once more gaining traction.

At a Montreal convention in 2014 when the Liberal party was a lowly third power in Parliament, its members passed Policy Resolution 100, pledging to create a “Basic Annual Income” to solve problems in the social safety net, from pension risk to seasonal worker benefits.

That promise, to guarantee a minimum income, has a new urgency entering 2016, as the new Liberal majority government brings that platform to life in a country clamouring for new ways to manage welfare and benefits.

While some see it as simply a program that would discourage people from working, the fact is that it has a myriad of benefits that makes it attractive to those on both ends of the political spectrum:

Evelyn Forget, one of the few researchers to have actually studied the policy in the wild, described guaranteed basic income as an idea whose time has come, and “definitely doable.”

One popular version of the idea works like a refundable tax credit. “If an individual has no income from any source at all, they receive a basic entitlement,” Forget wrote in an op-ed this year. “As earned income increases, the benefit declines, but less than proportionately. As a result, low-income earners receive partial benefits so that they aren’t worse off than they would have been if they had quit their jobs and relied solely on income assistance. This means that there is always an incentive to work, and people who work are always better off than they would be if they didn’t work.”

And there have been some surprising enthusiasts of the concept:

It has had proponents such as Milton Friedman, the iconic free marketeer who liked it as a simplification of welfare, and leading Canadian Tories from Robert Stanfield to Hugh Segal. No less a neo-con pair than Donald Rumsfeld and Dick Cheney once oversaw a mincome pilot project for the Nixon White House, aimed at measuring labour market reactions.

Lest we forget, there was an experiment conducted in the 1970's in Dauphin, Manitoba which some very encouraging results. Evelyn Forget was

the University of Manitoba economist who analyzed data from a pilot program during the 1970s, where everyone in Dauphin, Man., was guaranteed a “mincome” as a test case. The program ended without an official final analysis, but Forget did her own and found minor decreases in work effort but larger benefits on various social indicators, from hospitalizations to educational attainment.

The results suggested to her that a national mincome could improve health and social outcomes at the community level.

Is a guaranteed annual income a means of addressing the growing income gap in Canada, a way of starting to rebalance the disproportionate transfer of wealth to the few at the expense of the many? Perhaps, although the one quibble I have with it is the possibility that it could ultimately work against the development of fairer minimum wages and labour laws to protect workers more than they are today. Indeed, would it become essentially a subsidy to business, who could justify ongoing low wages by pointing out the safety net provided by a guaranteed annual income?

I don't have the answers, but surely something other than the current sad status quo is needed.

More From Star Readers

Whenever I need a morale boost, I look to the letters' section of The Toronto Star. There I find regular confirmation that progressive notions are far from dead in this country, despite the best efforts of the Harper regime:

Re: Underemployment reshapes Canada’s job market, Opinion March 14

During the 2008 recession, some of my well-employed friends smugly asked, “What recession?” They would probably say that the trends in today’s job market aren’t troubling at all; they indicate that we are finally realizing the “leisure society” promised log ago by improved production and technology. This view is delusional.

Last year, our society transitioned from well-paying full-time jobs (less than 20 per cent of all new jobs), to lower-paying and “precarious” part time jobs (almost 80 per cent of all new jobs). This is not merely troubling, but cause for concern, if not panic.
The Canadian Centre for Policy Alternatives’ “Seismic Shift” tells us that 125,000 more Ontarians are unemployed today than before the recession, that fully one-third of part-time workers are frustrated by their inability to find full-time jobs, and we know that many Canadians are forced to take on more than one part-time job — just to make ends meet.

Unless these part-time jobs are freelancing gigs or busking at subway stations, this kind of work is not indicative of a leisure society but, rather, of slavery. We are condemning hard-working citizens to a daily grind that leaves them very little time for family, rest and recreation. This is hardly “progress.”
The golden lining on this storm cloud is that it presents us with an unprecedented opportunity to implement a guaranteed annual income. Are political leaders listening?

Salvatore (Sal) Amenta, Stouffville

We can have full employment in bad times if we adapt the German system Kurzarbeit, the largest work-sharing program in the world. The program included 64,000 workplaces and 1.5 million workers at the peak of the recession in mid-2009.

The Economist magazine, the most read magazine by CEOs and politicians, praises the German system, in which employers reduce hours rather than cut jobs in recessions: “Germany’s gross domestic product fell by 4 per cent in the two years to the end of 2009, twice as much as in America. Yet its employment rose by 0.7 per cent while America’s plunged by 5.5 per cent.”

Joseph Polito, Toronto

A Way Out of Poverty?

In today's Star, Carol Goar writes about a fascinating anti-poverty experiment undertaken in Dauphin, Manitoba which ran from 1974 to 1978. A joint federal-provincial initiative, it was undertaken to determine if a guaranteed annual income could be effective in reducing the worst social and physical impacts of poverty.

The results are provocatively suggestive of real benefits for society if people are removed from the ranks of the poor. Unfortunately, given the current federal climate, it is unlikely that this idea will be revisited in the near future, but Goar's article is certainly worth reading.