Giving everyone $500 per month would cost the government $228B per year (Illustration by Leeandra Cainci)
COVID-19 has been a dizzying public health and economic shock. Job losses and GDP declines have eclipsed the previous recessionary record, leaving many with serious questions about what ought to be done to support families and businesses now that the slow, delicate process of reopening is beginning. How do we jump-start the economy to get people back to work? How do we protect vulnerable Canadians from future shocks of this nature?
The conversation within some circles is trending toward the notion that a universal basic income (UBI) might achieve both. By having government provide direct cash transfers to Canadians at a level that would guarantee a floor on income, we immediately introduce increased spending capacity when and where it is sorely needed. According to the federal government’s Labour Market Information Council, nearly two-thirds of the more than three million jobs lost when the pandemic hit were concentrated among those in the lowest-paid occupations—in other words, those whom a UBI is notionally meant to support. Meanwhile, if that floor ensures an individual’s basic needs are met, then we protect them from future volatility in economic conditions, as well.
Some argue that we’re already halfway there. The Canada Emergency Response Benefit (CERB) has provided direct cash support to individuals and households impacted by the pandemic. You might argue that making that program permanent would provide the near-term shot in the arm our wounded economy needs.
But a UBI is far more complex and nuanced than many observers would have you believe. To start, the CERB is not a UBI—not even close. Not only is the program temporary, a UBI is meant to be a condition-free cash transfer to individuals—i.e., no means testing and no employment requirements. In contrast, the CERB required that one’s employment income had to be sufficiently impacted by the pandemic. If you did not lose your job or did not lose enough of your income to meet the government’s threshold, you were not eligible.
In fact, a June report from the Canada Revenue Agency indicated that roughly 190,000 Canadians had to return CERB payments due to ineligibility. The program was wildly successful for what it was, but it was simply another income support targeted at a specific at-risk population, not unlike the Guaranteed Income Supplement or the Canada Child Benefit. Making the CERB permanent in order to support the economy is a non-starter because it would never help everyone who needed it.
To make universal basic income affordable, you need to exclude Canadians who may truly need that support
But to ask whether an actual UBI would be beneficial isn’t a real question because, of course, the answer is yes. Any number of jurisdictions have either run pilot programs or had expert panel reports on the subject: Sweden, Finland, Spain, the U.K., the U.S., Ontario, Manitoba and Quebec, to name just a few. Generally speaking, most studies show that these programs have a positive impact on everything from incomes and economic well-being to mental, physical and community health. Implementing such a program now would give tremendous benefits to a scarred economy.
The problem with UBI programs isn’t that there aren’t proven benefits. Rather, it’s the series of sticky implementation issues that policymakers struggle with in designing a program.
For example, the first problem you need to solve is, who gets it? Theoretically, a UBI is supposed to cover everyone, condition-free. But consider how much money we could feasibly provide nearly 38 million Canadians on an annual basis. Giving everyone $500 per month would run the government $228 billion per year. Total revenue for the federal government last year was $332.2 billion—meaning you’d need to increase revenues by an enormous amount just to provide $500 per month. That doesn’t even cover basic monthly expenses anywhere in the country.
What if you only considered the poorest 20 per cent of Canadians? We might then be able to provide a larger benefit, but it opens up another problem: Why is the person who earns the maximum allowable income deserving of the protection that a UBI brings, while the person who earns $1 over the threshold is not?
The bottom line is that to make a UBI affordable, you need to exclude people who may truly need that support, which is exactly what these programs aim to avoid.
I’ve left out one key aspect of all this. Theoretically, the idea of a UBI is that we would be better off as a society by consolidating all of the money that we spend as a country on low-income supports, including the administration of those programs, and providing a direct cash transfer. Proponents of a UBI argue that Canada already spends an enormous amount of money on an inefficient patchwork of low-income supports. Consolidating all of that money would allow us to afford a more inclusive UBI.
There is truth there. But our programs form a patchwork not because of the inefficiency of government, but because of the nuances of what it means to be low income.
Consider a low-income Canadian who requires a wheelchair. In Ontario, the province has the Ontario Disability Support Program that provides additional financial support to that person. Would a UBI cover wheelchairs? If not, that’s hardly fair that a person with greater needs would receive the same benefit as a person not living with a disability. If it would, then we would need administration to assess that person’s situation and we would need to have a UBI that’s flexible to people’s needs.
And if we consider all of the different possibilities for why someone may be low-income or face additional challenges as a low-income person, then perhaps the savings aren’t as great as we might think.
I have no doubt in my mind that Canada will have a universal basic income in the future. With growing inequality, the increased threat of automation and the rise of the gig economy, we have more need now than ever for a policy that helps put an income floor underneath our nation’s most vulnerable. But that conversation needs space and consideration for the policy to work. Latching it onto our current debate about how to support the economy is not only counterproductive, it risks casting a negative light on the policy as a whole.
ROAD TO RECOVERY
Lost your job? These expert strategies will help get through the financial and emotional hardships. Also, learn how to use government-issued monetary support wisely.