Blast From The Past

There’s an old idea that’s been getting some traction in the national press over the past few months. It’s the idea of having a guaranteed minimum income. What might be most interesting is the fact that voices on all sides of the political spectrum have been supportive of the idea.

For a little historical background, let’s look back to 1974. ‘Mincome’ as it was called, was an experimental Canadian basic income project that was implemented in Dauphin, Manitoba. The project was funded jointly by the provincial and federal governments of the day. The purpose was to determine whether a guaranteed unconditional income would improve individual health and community life.

The project was fairly simple. 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 if they didn’t.

A final report was never issued when the experiment was stopped in 1978, but a University of Manitoba professor did an analysis of the results in 2009 and published her report in 2011. One of the arguments against this type of program was that it discouraged people from working. According to the report, only teenagers and new mothers worked significantly less. It was concluded that mothers of young children who wanted to stay home longer with their children were now able to, without fear of putting their family in financial peril. Teenagers worked less because they weren’t under pressure to help support their families (often causing them to leave high school before graduating), which directly resulted in more teenagers graduating from high school during that period.

Some of the observations related to health were that hospital visits during the Mincome experiment dropped 8.5% with fewer work related injuries and fewer emergency room visits from accidents. There was also a reduction in rates of psychiatric hospitalization and the number of mental illness related consultations with health professionals. The conclusion was that stress and anxiety about poverty was reduced, and therefore people were healthier both physically and psychologically.

Another argument against the program was that it would cost too much. However, based on the drop in health care costs due to reduced frequency of use, the cost savings of eliminating government programs like CPP, Employment Insurance, disability and other welfare type government programs designed to keep people from falling into poverty and throw in a reduction in WSIB claims due to a decrease in work related injuries, accidents and illnesses and it sounds like the potential for significant savings. This would also eliminate the frustrating application process for these programs which too often denied benefits to the people that needed them based on technicalities or a lack of recognizing unique circumstances. In fact, according to several Queen’s University professors, the cost of replacing these programs plus providing every adult with an annual income of $20,000 and children with an income guarantee of $6,000, would be $40-billion. The Fraser Institute calculates the total cost of Canada’s current income support system (payout plus administrative costs) at $185-billion in 2013.

Another positive impact would be the possibility of increased economic activity. Lower income people spend between 95-115% of their income on goods and services. So, if lower income people have more money because of a guaranteed income, they’ll spend more on goods and services which could be a nice boost for the economy and local businesses. Also consider the amount of increased tax revenue that could be collected.

Recently, the Ontario and Quebec governments have expressed interest in reviving the idea and trying it in their provinces. There’s also been a desire on behalf of a federal cabinet minister to review the possibility.

The conclusion from the professor’s report was a very important one – “people appear to live healthier lives when they don’t have to worry about poverty”. If improved health, more educated people, increased economic activity and eliminating poverty are the potential results of this type of program, why wouldn’t our elected officials implement this program? Why not try this program in an area like Eastern Ontario that has higher rural agriculture activity and higher self employment, where an illness, a disability, financial problems or severe weather events can be financially devastating to families?

What do you think?

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