Guaranteed Income Is Not the Answer

COVID income support programs have revived calls from some advocates for a guaranteed income plan for adult Canadians. This idea is deeply impractical from a financial point of view. It would also undermine the economic prosperity that allows Canada to protect vulnerable groups like seniors and children. Instead of expanding welfare, governments should increase supports to low-income earners.

Read the full article below or click the button to download a PDF.


Guaranteed Income Is Not the Answer

By Rick August

New COVID programs to support workers and businesses have revived advocates’ calls for a guaranteed annual income for all Canadians. Is this, as some now claim, an idea whose time has finally come?

Government benefits already play an important role. Seniors’ benefits have made poverty among older people rare, and federal child benefits, now edging towards $7,000 per child per year, have bitten into child poverty. Some now argue that government should do the same for working-age adults, to eliminate poverty for all ages.

Child and seniors’ benefits have been effective for two reasons. First, we generally agree that seniors and children should not have to work. Second, our society is wealthy enough that tax revenue from working adults can be transferred to low-income seniors and families through social benefits.

A guaranteed income does not fit into this model. A program at the scale of welfare, but paid to most of the adult population, would obviously be very expensive. Government borrowing to fund COVID benefits is a temporary necessity. A broad-based guaranteed income would require deficit financing in perpetuity to pay benefits to citizens. This is clearly not sustainable.

The fiscal problems of a GAI would become even worse over time. Everyone’s work motivations are different, but it’s obvious that some adults, guaranteed a comfortable benefit income, would either stop working or work less. New benefit costs would rest on a shrinking tax base—a path, in effect, to economic and fiscal suicide.

Given the risks, we might ask what problem a GAI would address. The national poverty rate in 2018, pre-COVID, was 8.7%—about half the rate of fifteen years ago, and on a declining trend. Seniors poverty is largely defeated, and child poverty is in decline.

In fact, the income guarantee from current targeted programs is already quite large. A welfare mother with two children receives a minimum tax-free income from federal and provincial benefits of over $29,000 per year. This is equivalent to full-time work at about $17.50 per hour. It’s true that singles on welfare now have low benefits, but they also have lower needs, and fewer barriers to work.

If there is a priority for improving social benefits, it should be to help adults get steady employment and build skills so they can increase their wage income. A recent expert study commissioned by the British Columbia government explicitly rejected the guaranteed income option, focusing instead on making adult and family income from employment more stable and secure.

Fighting poverty through employment was, in fact, the original goal of federal child benefit reform and Saskatchewan’s Building Independence programs in the late 1990s. These measures had the most impact on single welfare parents, producing a caseload decline of 40% in a very short time. Further programs were planned to extend Building Independence to single adults.

This strategy eventually lost political backing, and the Saskatchewan government now follows a welfare-based social policy. Expanding welfare programs has pushed up dependency and nearly doubled welfare costs. This is no solution, for low-income people or for taxpayers.

In the long run, governments, like people, generally get what at they pay for. If we are serious about eliminating poverty, we should support adults in employment, rather than paying them not to work. We should devote our reform energies—and our tax dollars—on helping adults get a stable, decent income from work.

© RJ August 2021


Contact Rick August for more information about this article.

Contact Us

We're not around right now. But you can send us an email and we'll get back to you, asap.

Not readable? Change text.