Universal Basic Income could smash poverty and fix Canada’s Covid-crushed economy. Or not
Cover by Gregory Beatty
It’s hard to find positives in the midst of a global pandemic. But if there is a silver lining to everything we’ve been through this year, it could be how the coronavirus put Canada’s social institutions through a stress test, giving us fresh insight on what’s working and what isn’t.
What’s not working? The list is long. It includes an under-resourced healthcare system with no resiliency to deal with a crisis, the scary state of long-term care and a rickety world health network that needs to be strengthened to prevent future pandemics.
Covid-19 also exposed major fault lines in our economy.
When the lockdown hit last March, some Canadians transitioned to working safely at home. Others, though, stayed on the front lines — often in low-wage jobs with inadequate safety precautions and little or no personal protective equipment.
Many millions of Canadians were thrown out of work entirely.
To its credit (and in the face of never-ending conservative snipes), the federal Liberal government was quick to bring in several programs supporting those workers (and businesspeople) hardest hit.
The program with the highest uptake was the Canada Emergency Response Benefit. CERB gave eligible Canadians $2,000 a month to pay their bills.
Originally scheduled to last four months, CERB was extended — then, in October, replaced — by several programs including the Canada Recovery Benefit, which pays up to $1,000 ($900 after deductions) every two weeks up to 26 weeks total.
CRB is scheduled to end Sept. 25, 2021, although many applicants will become ineligible by the end of March.
Where we’ll be with Covid-19 at that point is anyone’s guess. And that reality is forcing Canada’s federal and provincial governments to confront harsh economic truths.
“The reason CERB had to even be created is because the government recognized right away just how completely inadequate the unemployment insurance system was for something like this,” says Simon Enoch, the Canadian Centre for Policy Alternatives’ Saskatchewan director.
“It covered maybe half of workers, and had stringent eligibility requirements,” adds Enoch. “It had to be scrapped and replaced with CERB because governments had been gutting EI for 30 years.
“Good on them for recognizing that. But I think they thought it was going to be temporary, and now it looks like it’s going to have to be much longer lived.”
The Case For UBI
One idea that’s gaining traction is turning CERB into a permanent universal basic income.
If you’re unfamiliar with UBI, it’s a government commitment to pay everyone below a certain threshold a set amount each year as income.
Before conservative readers blow a gasket, this isn’t some harebrained “socialist” scheme. In the U.S. Democratic presidential primary, tech entrepreneur Andrew Yang touted a “Freedom Dividend” of $1,000 a month for every adult to help offset job loss from automation. And pilot programs have been conducted in places like Stockton and Compton, CA.
Other countries that have or are considering UBI pilots include Finland, Spain, the Netherlands, Scotland and Kenya.
Canada has run its own pilot programs (see sidebar), and far from being a conservative nightmare UBI has support in both progressive and conservative circles.
Progressives appreciate the straightforward nature of UBI, says University of Saskatchewan political scientist Charles Smith.
“It’s based on the novel idea that if you give people in need money, they don’t spend it on frivolous things,” he says. “They use it to live, so they pay the rent, buy food, get medicine, etc.”
That money circulates in the economy, so it’s also grassroots stimulus — which is one reason some conservatives like UBI. They also argue that governments could achieve operational efficiencies by consolidating different support programs, like EI and welfare, into UBI. In 2018, Canada’s Parliamentary Budget Officer put a $60 billion price tag on UBI but that cost dropped to $25 billion when program consolidation was considered.
Universal Basic Income would generate GST and PST revenue, and there’s tremendous potential for backend savings on programs and services that currently deal with the negative effects of poverty.
Give people who are struggling some extra money, the thinking goes, and they’ll have greater ability to meet their basic needs for shelter, food, transportation and other things. That, in turn, will improve their health and well-being — and reduce the strain on the healthcare and criminal justice systems, and other emergency services.
Sounds like a win-win, right?
Well, not so fast.
The main conservative argument against UBI is that it will sap people’s work ethic and make it hard for employers (especially in low-wage, low-status industries) to find workers. We’re even hearing it now, about how CERB created a disincentive for Canadians to return to work.
Smith turns that argument back on conservative critics.
“CERB highlights how poorly paid many people are,” says Smith. “Two thousand dollars a month, in many cities, is barely enough to pay the rent. It doesn’t go a long way. Yet very quickly, business organizations were screaming at the top of their lungs that it was too generous and should be scaled back or ended.”
A Universal Basic Trojan Horse?
Hugh Segal is one prominent conservative who has long supported UBI. The former senator is a Red Tory from the Stanfield/Mulroney era, so that’s not a shocker. But the late U.S. conservative economist Milton Friedman supported UBI, too!
Maybe Friedman was doing it out of the goodness of his heart. But it does get to the “heart” of concerns progressives have about UBI.
Specifically, that it could serve as a neoliberal Trojan horse to eliminate social supports and expand the reach of the market.
“That’s what the more conservative advocates have suggested, give everyone a cash payment and then they can’t ask for any other social programs,” says Enoch. “It’s like ‘You’re getting $1,500 a month, go out in the market and purchase your own health care, education, childcare. It could be a pretence to roll back every other public service we have.”
Look no further than the Saskatchewan Party clawing back money from people on provincial income assistance when CERB came in for evidence of that ideological mindset. It’s not an exact parallel, but it’s instructive of the type of cuts governments could make.
“The other concern is it will just be used as an employer wage subsidy,” says Enoch. “That’s why tech guys like Uber and Lyft love it. They don’t want to pay their workers and if you can get taxpayers to subsidize the wages they do pay, great! We’d continue with that low-wage model with a small government top-up.
“I think we’d be much better off to actually enforce labour standards and have higher minimum wages than give a subsidy to big tech.”
Shady subsidies like that already exist, by the way, Think about people who work for low-wage employers who need food banks and (in the U.S.) food stamps to get by. Who are those programs really benefitting?
Another worry is that universal basic income could inspire predatory pricing that jacks up the cost of rent and other essentials in a shameless cash-grab by landlords and merchants.
Smith agrees progressives’ concerns are real. Still, he thinks a UBI modelled on CERB has merit.
“It’s not enough and I don’t want to see any clawbacks of social programs but I think CERB was by far the most successful program,” Smith says. “It highlighted just how many businesses in Canada exist because they pay wages below the poverty line. It’s the one program I’d like to see continue.”
Whether it will or not, is another matter.
“Defenders of the market [economy] like to say it’s better than anything else because it provides freedom and choice,” says Smith. “But we know in a class-divided society, freedom and choice aren’t equal. When you give workers public money to actually make real choices, their choices don’t align with the business community’s. And the pushback from business is really telling.”
The Liberals were scheduled to consider UBI at their mid-November policy convention, but that’s now been bumped to spring 2021.
With the pandemic threatening to explode in Canada and CRB’s expiration looming for many users, Enoch is curious to see what the government will do.
“We’re in a transition period where provisions that were thought to be temporary are becoming more long term,” he says. “It will depend on who wins the fight, workers or business interests, to see how robust these revamped programs end up being.”
Studied To Death
Canada’s most recent UBI pilot began in April 2017 under Kathleen Wynne’s Ontario Liberal government. It involved 4,000 low-income households in Hamilton, Thunder Bay and Lindsay, with annual payments ranging from $16,989 for individuals to $24,027 for couples (with a 50 per cent clawback for earned income).
The program was supposed to last three years but when Doug Ford’s PCs were elected in June 2018, they broke an election promise and killed it.
Decades before that, Pierre Trudeau’s Liberals teamed with Ed Schreyer’s Manitoba NDP government to do a UBI pilot in Winnipeg and Dauphin. The Manitoba Basic Annual Income Experiment (MINCOME) was supposed to run from 1974–1979. But Sterling Lyon’s PCs took over in Manitoba in November 1977, and that — combined with pressure on the Trudeau government to cut costs after Canada joined the G7 in 1976 — led to the program’s cancellation.
Still, MINCOME did run for four years. And studies showed that labour force participation remained steady, except for two groups: new mothers spent more time at home with their babies before returning to work, and young males stayed in school instead of dropping out to find work.
Two other key takeaways were an eight per cent drop in provincial healthcare costs, and a decrease in arrests.
Polls suggest over 70 per cent of Canadians support Universal Basic Income. And at the provincial level, B.C. Newfoundland and P.E.I. have all struck committees to look into UBI.
“We don’t need another study,” says University of Saskatchewan political scientist Charles Smith. “That’s something Liberals and Conservatives both like to do. What we find is when you give people money, they make choices to help give them and their families some comfort. It’s pretty egregious when you see stories criticizing workers for taking CERB and then going on a trip or buying a bottle of beer. It’s just giving workers choices in a way they didn’t have before.
“UBI will never be enough to offset the market power capitalists have,” says Smith. “Obviously, a capitalist state will never give workers enough money to actually allow UBI to do what its advocates want. But it does provide workers with a degree of material support to make some real choices. And the pushback from business on the existing benefit, which is so minor, demonstrates how threatening it actually is to Canada’s ruling class.”