While there is still strong public resistance in Canada to abandoning the vulnerable and less able in society, there has been an unrelenting effort to "manufacture consent" for substantial reductions in social security expenditures and a much-heralded switch "from passive to active" social support--i.e., from welfare for the long-term unemployed to skills training for this group and income supplements for those who do not secure employment.
There is nothing intrinsically wrong with this tack. But to continue to blame those made redundant by smart machines and global employment restructuring is not acceptable.
Politicians praise training, together with some type of on-the-job experience, as the ultimate cure for unemployment and poverty. Bureaucratic insiders laughingly call this the "field of dreams" solution--train the people and the jobs will come!
Training may be key in the short term for matching suitable people and some types of jobs, such as those that involve the latest high-tech skills or hands-on personal service. But there is some suspicion, even among those responsible for designing and implementing each new round of skills training, that over the longer term the hottest job market to emerge may be for trainers.
If there is a skills-jobs match problem, addressing it should be a straightforward government and private-sector priority. But rapid technological change coupled with continuing demands for a flexible work force mean that governments are always playing catch-up...Many Canadians doubt whether they will ever have a secure livelihood under the new rules.
A Basic Income (BI)--sometimes called a "guaranteed annual income"--would help spread around any jobs that materialize, and would assure everyone a decent living. Canada needs a BI primarily because we need alternative approaches to distributing paid employment, goods and services. Canada needs a BI because, while the welfare state was a notable post-war accomplishment, it was created to provide a safety net for post-war industrial workers with certain stable employment patterns. But times have changed.
Welfare costs have been slashed, primarily because eligibility requirements have been tightened, but the system is still costly, complex, and essentially a poverty trap. It too often leaves "beneficiaries" with no recourse but the food bank, no place to hide from the humiliation of the system's probing. BI allows society to deal with the growing infeasibility of a generous welfare state for which the conditions can no longer be guaranteed: stable, adequately waged employment...BI spreads the work...We need a BI to move today's governments beyond fighting yesterday's welfare battles. Canada also needs a BI to maintain social cohesion during the transition to a fundamentally changed world of work. A society that excludes many of its members from full citizenship puts itself at risk.
New kinds of jobs will materialize; it's already happening as twenty-somethings start their own multimedia production companies and home-delivered gourmet meals fly out of new catering establishments. But we don't know how soon, how much, or what kind of work this will be--though it will almost certainly, at least in the near term, be less secure and more contingent for a majority of Canadians than were the good jobs of the 1950s, 1960s, and 1970s. For people with no post-secondary education or training, the prospects for earning an adequate living are especially bleak. A BI is needed to prevent a win-lose polarization of society and avoid creating a permanent underclass during this societal transition.
* It is immoral to stigmatize and penalize people who cannot find enough work to support themselves and their families, and to participate fully in community life. The right to an adequate income was recognized by Canada when it signed the Universal Declaration of Human Rights in 1948. Without a minimum guaranteed income...many people will remain highly vulnerable and dependent on the charity and good-will of others.
* "Economic democracy" requires that all citizens have sufficient resources to make uncoerced economic decisions. This requires a BI so people can turn down undesired jobs. A BI offers more choice under capitalism: you can live at the minimum, go after more money, or take a job you like part time or at low pay.
* BI is a rightful dividend for taxpayers' social investment in health, law and order, education, research and development, and infrastructure over many decades. It is this social investment that has made possible the current technology-based prosperity...The fact that this prosperity will depend less and less on the paid labour of taxpayers requires redress. BI is that redress, and would constitute recognition of the extent to which the success of a society depends centrally on the contributions and well-being of its citizens.
* Because the Earth is the heritage of all, it is right that all should benefit from the use of it. BI constitutes land rent to the landless and user fees for private-sector use of natural resources.
* A BI can serve as the keystone of a new set of social arrangements to ensure each individual's economic security, opportunities for meaningful work and engagement in family and community life. With BI as a foundation, new ways of living and working can be considered: shorter work weeks/years, sabbatical leaves, lifelong learning, community service, even more time for the kids.
* A well-designed BI promotes widespread employment and fights poverty traps--i.e., improves the work incentive structure at the lower end of the income distribution--since BI is not taxed nor is it reduced or withdrawn when additional money is earned. Coupled as it should be with a minimum wage, a BI would open up employment for the low-skilled.
* A BI facilitates different kinds of useful non-market work and of productive time for personal development. Both activities complement paid work in the era of the flexible workforce. The fact that more people will choose to study or pursue idealistic or artistic endeavours will benefit society in the long run; and if some withdraw from paid work, there will be more for those who want it.
* A BI maintains consumer demand in the face of unemployment, contingent employment and inadequate wages.
* A BI reduces transaction costs by allowing most of the complex and costly welfare bureaucracy to be dismantled.
(Sally Lerner is Associate Professor Emeritus, University of Waterloo; Charles M. A. Clark is Professor of Economics, St. John's University, New York; and W. Robert Needham is Director of Canadian Studies, University of Waterloo. This article was excerpted from their book, "Basic Income: Economic Security for All Canadians," published last year by Between The Lines, Toronto. CCPA members who would like to have all the details and arguments advanced by the authors are urged to buy and read the book.)
The proposal for a "basic income" (also called a "guaranteed annual income") has been discussed and debated for years, and is currently experiencing a resurgence thanks to the Lerner-Clark-Needham book. Even John Ralston Saul, the Governor-General's husband, has recently spoken in favour of the idea.
The proposal is that every person in Canada would receive a basic annual income from the federal government. Each household would receive a basic grant of $5,000. It would then receive an additional $5,000 for each adult in the house, and $3,000 for each child. So a single adult would receive a total of $10,000, a family with two adults and two children would receive $21,000, and so on.
This basic income would be tax-free. But households would then pay a relatively high rate of tax on all other income that they receive. This allows the government to finance the BI payouts--which are incredibly expensive, since they are paid to every person living in Canada. The cost of the Lerner-Clark-Needham scheme would be around $200 billion a year.
They propose that Canadians would pay a flat-rate income tax of over 40% to the federal government on all income other than the BI payments. This would incorporate existing federal income taxes--but not provincial income taxes or other taxes such as the GST.
The idea has some merits. It represents the ultimate in "universality"--everyone gets the program, no matter what their income. It would offer a minimum guaranteed income to those who fall through the cracks of the current social safety net (like the hundreds of thousands of unemployed workers who no longer qualify for unemployment insurance benefits). It would also nicely supplement the incomes of the working poor who currently receive no social benefits, but whose wages are inadequate to provide a decent standard of living.
It would also be a "simpler" social system, replacing the existing myriad of programs with a single unified system (although the benefits of this simplicity should not be overstated). It would remove the current problem of "welfare walls" and other difficulties that result from targeted social programs, which are typically clawed back from low-income earners at very high rates.
But there are several fundamental problems that make it impossible for us to support this type of plan.
In the first place, the level of benefits that would be paid, even under this very expensive version of BI, is minimal. The benefits envisioned in the Lerner-Clark-Needham BI system are below the poverty line for every type of family group.
Moreover, the benefits are often inferior to benefits paid out by existing targeted social programs. For example, a single unemployed worker would receive $10,000 under this proposed BI system, compared to the maximum of $21,500 they can currently receive from UI (assuming, of course, that they qualify for coverage). Similarly, some types of families in some provinces make more from existing welfare plans than they would from this BI package. And poor seniors would typically make more from the maximum OAS-GIS combination.
In practice, of course, a $200 billion BI program has no chance of ever being implemented, and certainly not in the current climate. If a BI ever were to be enacted, its benefits would turn out to be significantly lower than the rates envisioned by these well-meaning advocates. Newfoundland Premier Brian Tobin recently proposed a BI-type federal program that would pay every Newfoundlander just $1,500 a year--and even that was rejected as being too expensive!
Clearly, we can't allow the BI movement's slogans about providing basic coverage to every Canadian to be used to bring about a racheting-down of hard-won and already-threatened social benefits.
There is also a deeper philosophical problem about relying so exclusively on a massive and expensive state program of taxes-and-transfers to address the problems of poverty and unemployment in Canada (including widespread poverty among low-income workers).
Progressives should be demanding a living wage for everyone. The BI proponents are right when they say that a country as rich in resources as Canada can well afford to lift every one of its citizens out of poverty. But it's not a foregone conclusion that it should be entirely up to governments to make that happen. We should also be holding private employers accountable for their role in creating poverty and unemployment. Strengthening collective bargaining, raising minimum wages, and improving other forms of labour market regulation can also force the private sector to do its part in raising overall living standards.
Lerner and her colleagues are typical of most BI advocates in approaching the problems of poverty and unemployment from a compassionate and progressive point of view. We can support their efforts to expose the existing gaps in the social welfare system, and join with them in demanding that the system (not just the government) offer every Canadian the opportunity to live a life free from poverty, hunger and deprivation. In that context, the proposal for a "basic income" or a "living wage" holds a lot of potential.
But we should remain highly skeptical of their concrete policy proposal of replacing our existing network of social programs with a universal but below-poverty-level basic income.
(Jim Stanford is an economist with the Canadian Auto Workers, and also a CCPA Research Associate and author of the CCPA/Lorimer book "Paper Boom.")
It's encouraging that Jim Stanford is willing to engage in a discussion of Basic Income (BI) and that he takes issue with the idea of a BI for Canada on only two major points: one related to the dollar figures and the tax provision contained in what he characterizes as the BI "proposal" presented in our book. Yet we stated clearly (p.43) that this BI scenario for Canada was developed "not as an actual proposal, but as a hypothetical proposal that allows the issues raised by a BI proposal to be discussed."
As such, the dollar figures are simply examples (levels of actual BI payments would have to be subject to political debate and determination), and "a flat income tax is used because it is the easiest source of tax revenues for the person [with limited research resources] developing a BI proposal to estimate and model." (p.42). These BI parameters would be the stuff of negotiating a workable BI for Canada.
As Stanford notes, social benefit programs have been cut and are still under threat. Targeted programs are always vulnerable to manipulation of public opinion about how "deserving" or not recipients are. And recipients are always stigmatized. If you've been alive in Ontario for the past five years, you know this.
Since UI became EI, only about one-third of those who lose their jobs qualify for benefits. More and more of the employed are recognized as the working poor; dual-income families with children are increasingly faced with the dilemma Mel Hurtig flags as "Pay the rent or feed the kids" in the title of his recent book. We should be wary by now of relying on targeted social benefit programs to underpin our social cohesion.
The "deeper philosophical problem" that Stanford has with BI (its reliance on a state program to address the problems of poverty and unemployment) seems to fly in the face of the new world of work created by globalization and technological change. One reason we have governments is so that we can instruct them to address fundamental problems of social change that the private sector can't or won't deal with. We can demand living wages, but, to the extent that employers can find low-wage workers elsewhere, and replace demanding workers with smart machines, there is little leverage to get those wages.
These are current, and quite probably future realities that a BI can be designed to address. We need more informed discussion of BI as a policy option.
--Sally Lerner.