Question Period Note: BASIC INCOME

Growing interest in the idea of a basic income in Canada

• This is a challenging time for all Canadians, and the Government of Canada has taken significant actions to help people facing hardship because of the COVID-19 outbreak.

• Since April 2020, the Government has invested billions of dollars in measures to help Canadians facing challenges related to the health, social, and economic impacts of the COVID-19 outbreak.

• The Government of Canada already has programs with features of a partial basic income, such as the Canada Child Benefit for families with children, and the Old Age Security pension and the Guaranteed Income Supplement for seniors.

• We will continue to monitor research and analysis on basic income and we are exploring potential shorter and longer-term policy responses to address the needs of Canadians.

Responsive only – Is the federal government planning to work with provinces or territories, such as P.E.I., to support a basic income pilot?
• The Government of Canada recognizes the importance of working with provincial and territorial counterparts to find solutions to common challenges. It is important to recognize that provincial and territorial governments have an important role in decisions about the design and delivery of income support programs.

• If a provincial or territorial government decides to proceed with a basic income pilot, the Government of Canada would be pleased to share federal-level administrative, survey, and tax data that could support program design and evaluation.

The debate over basic income
• The economic impact of the COVID-19 pandemic has led to increased calls from a range of stakeholders and experts to introduce a basic income, with the goals of reducing poverty and inequality, addressing the changing nature of work (including automation and increases in precarious employment), and improving population health and well-being. Some basic income advocates also foresee economic benefits from a basic income, such as increases to employment and the Gross Domestic Product.

• In April 2020, fifty senators signed a letter that advocated building on the Canada Emergency Response Benefit (CERB) to establish a “crisis minimum income” for the short-term and then pursue further social and economic reforms.

• In February 2021, Liberal MP Julie Dzerowicz introduced Bill C-273, a Private Member’s Bill that would establish a national strategy for a guaranteed basic income. This bill, and New Democratic Party MP Leah Gazan’s Motion M-46, both attracted attention from basic income advocates. The bill and/or the motion may be revived in a forthcoming Parliamentary session.
• Critics of basic income express concerns about the anticipated costs and disincentives to work, and many oppose payments without requirements to work or seek employment. There are also concerns that important needs-based programming might be cut back or eliminated to help contain costs if a basic income were introduced, potentially leaving some vulnerable individuals worse off. As well, some critics suggest that, rather than a basic income, governments should increase expenditures on social services such as Pharmacare, dental coverage, childcare, and housing.
Existing federal programming
• Provinces and territories have significant authority in the area of income support. Previous communication from ESDC has indicated that the Government of Canada recognizes the importance of working with provinces and territories to find solutions to common challenges, while stating that it is up to the provincial and territorial governments to make decisions around the design of social assistance systems and policies in their own jurisdictions.
• Some Government of Canada initiatives have many of the features of a partial basic income for specific groups. This includes the Canada Child Benefit (CCB), which provides income support to families raising children. For Canadian seniors, the Old Age Security (OAS) program play a significant role in providing income security. OAS pensioners who receive little or no income, other than the OAS pension, are eligible for additional assistance through the Guaranteed Income Supplement (GIS). The GIS is income-tested to ensure that this additional assistance is provided to seniors most in need. The Goods and Services Tax/Harmonized Sales Tax Credit (GST/HST) Credit and Climate Action Incentive payments, while small in amount, also have many characteristics of basic income.
• The government has made significant efforts to address the short-term needs of Canadians facing hardship as a result of the COVID-19 outbreak. These initiatives include programs such as the Canada Emergency Response Benefit (CERB) and Canada Recovery Benefits to help replace lost incomes. In addition, one-time enhancements to the GST/HST Credit, Canada Child Benefit, and Old Age Security/Guaranteed Income Supplement were provided, along with one-time payments to persons with disabilities.
• Budget 2021 contained several measures that will help to reduce poverty and inequality and ensure an inclusive recovery. These measures include: working with provincial, territorial, and Indigenous partners to build a Canada-wide, community-based system of child care, with new investments totaling up to $30 billion over the next 5 years, and $8.3 billion per year ongoing; increasing regular Old Age Security payments for pensioners 75 and over by 10 per cent as of July 2022; changes to make Employment Insurance more accessible and simple for Canadians; expanding the Canada Workers Benefit to support about 1 million additional Canadians in low-wage jobs; investing in housing; taking action to create almost 500,000 new job and training opportunities for workers; and establishing a $15 federal minimum wage benefiting more than 26,000 workers in the federally regulated private sector.

Ontario pilot project
• In April 2017, the Ontario Government launched a three-year basic income pilot project. The 4,000 participants were low-income people aged 18 to 64 in selected communities. Payments were based on 75 percent of Statistics Canada’s Low-Income Measure (LIM). A single individual received $16,989 annually, less 50 percent of earned income, while couples received $24,027 less 50 percent of any combined earned income. People with disabilities received an additional $500 per month. Participants were also eligible to receive certain benefits including the CCB.

• The Ontario Basic Income pilot tested a potential new approach to income support that would replace social assistance, and possibly other programming, if it were fully implemented.

• The Ontario Minister of Community and Social Services announced in July 2018 that the basic income pilot would be cancelled. Payments to participants continued only until March 2019.

• Legal action to overturn the Ontario government’s cancellation of the pilot was pursued. The Ontario Superior Court ruled against the challenge in February 2019.
• A separate class action lawsuit was launched against the Ontario government seeking damages due to the cancellation of its pilot. The plaintiffs, participants in the pilot, sought damages on various grounds, including breach of contract, negligence, breach of public law duty, and violation of section 7 of the Charter of Rights and Freedoms (life, liberty, and security of the person). The lawsuit was dismissed in December 2020, and the plaintiffs’ lawyers have indicated that they will appeal the decision.
• In March 2019, Basic Income Canada Network reported on an unofficial, non-random survey of 424 participants in the Ontario pilot. Key findings include:
• 34 percent of participants found that the basic income supported employment by enabling transportation, childcare, or the ability to start or expand a business.
• 74 percent of respondents said they were able to make healthy food choices.
• However, when the cancellation of the pilot was announced, 80 percent of respondents experienced previous problems returning, and 61 percent had to alter future plans.

• In March 2020, economist Wayne Lewchuk of McMaster University and colleagues released a separate unofficial report, based on surveys and interviews with 217 former pilot participants in the Hamilton area. Findings of the study include:
• For some participants, basic income was “transformational, fundamentally reshaping their living standards as well as their sense of self-worth and hope for a better future.”
• A majority of respondents who were employed before the pilot continued to work while receiving a basic income. Some moved to better paid jobs.
Other provinces and territories
• Other provinces have shown interest in the idea of a basic income. Ernie Hudson, P.E.I.’s former Minister of Social Development and Housing, asked the federal government “to consider additional partnership, such as funding support” for a BI pilot project, and P.E.I. Premier Dennis King has made a similar request. The P.E.I. government also launched a “secure income” pilot with means-tested benefits for individuals with severe barriers to entering the workforce (i.e., it is narrower in scope than a full basic income).

• The provincial legislature’s Special Committee on Poverty in PEI, following public hearings, issued a report in November 2020. The committee recommended that the provincial government pursue a full basic income program and seek to begin negotiations with the federal government to support this goal; if federal interest is insufficient it recommends that the PEI government pursue a basic income pilot instead.

• The B.C. government examined basic income in the context of its poverty reduction efforts. In January 2021, an expert panel issued a report and a set of research papers. The panel recommended that B.C. not introduce a basic income, or pursue a pilot project. Instead, it proposed 65 recommendations to improve the province’s income and social support system. These recommendations include a targeted income support program for people with disabilities; changes to temporary income assistance to reduce the “welfare wall”; extended health benefits for all lower-income individuals; improved support for low-income renters; measures to support participation in the labour force; and improvements to benefit delivery platforms.

• In November 2017, a committee established by the then-government of Quebec recommended establishing a guaranteed minimum income. In May 2018, that government introduced a targeted income support program for persons with a severely limited capacity for employment.

• In November 2020, the Newfoundland and Labrador legislature passed a motion to establish an all-party committee to examine the concept of basic income.

• Yukon and Nunavut are taking steps towards completing research studies on basic income.

• The federal government has offered to share available data with provinces and territories interested in implementing BI pilots or programs within their jurisdictions, including tax, administrative, and survey data.

The new report on basic income from the Parliamentary Budget Officer
• On April 7, 2021, the Parliamentary Budget Officer (PBO) issued a report on the impact of basic income on poverty. Examining a hypothetical program modelled on Ontario’s basic income pilot (described above) but with full-scale implementation across Canada, the report indicates that such a program would reduce the number of people in Canada in poverty by almost half (by 49.0 percent, using the Market Basket Measure (MBM) with the 2008-base of the measure).
• The report indicates that the redistributive effect of this basic income model, with a set of assumptions about the elimination of certain federal and provincial programs and measures to offset costs, would include a 17.5 percent increase in the average household income for the lowest-income quintile. There would be declines in average income for the three highest-income quintiles (because of the elimination of many refundable and non-refundable tax credits, a reduction in disposable income averaging below $2,000 per household). As well, the report indicates declines in income would occur for some households in the second quintile (even though the average household income for that quintile would rise slightly).
• While these effects may not align with efforts to prioritize the middle class, and show possible consequences of eliminating measures in conjunction with the introduction of a basic income, they are results of just one possible way of offsetting the costs – one the PBO analyses without taking a position on its merits. There is considerable potential for different program designs and approaches to offset costs of a basic income that would have different redistributive effects. For example, analysis by Basic Income Canada Network, briefly discussed below, features an approach in which declines in income are more concentrated among higher-income earners.
• The report projects that basic income would have only a small effect on incentives to work, from workers either working fewer hours or entirely withdrawing from the labour force. It projects a decrease in the labour supply with just a 1.3 percent decline in hours worked and a 0.5 percent reduction in total payroll. The PBO’s analysis therefore supports existing research that indicates that basic income would not have significant or undue effects on workforce participation.
• The projected gross cost for the basic income in 2022-23 would be $87.6B, including the estimated impact of the change in labour supply ($3.1B to $3.3B per year between 2021-22 and 2025-26) and the cost of disability benefits ($3.5B to $3.9B billion per year during the same period).
• The PBO suggests that the cost could be offset by various program and tax changes. It tentatively puts forward a list of federal and provincial tax credits that could potentially be eliminated in conjunction with the introduction of a basic income (while anticipating compensation for resulting losses to children and seniors with separate transfers, to ensure a “net-zero change” for these groups). Examples of these measures include the basic personal exemption, disability and caregiver tax credits, sales tax credits, provincial medical expense tax credits, energy-related tax measures, and the Canada Workers Benefit.
• The PBO’s report does not explore potential benefits or cost savings from tackling poverty, such as the impact on costs associated with health care and the criminal justice system.

The PBO’s previous work on the cost of a national basic income
• In 2018, the Parliamentary Budget Office (PBO) estimated the gross annual cost of a basic income modelled on Ontario’s pilot project and implemented across Canada: $76B for the 2018-19 fiscal year. The PBO also calculated that $32B of existing federal support could be eliminated, leaving a net cost of $44B. As well, economist Evelyn Forget builds on the PBO’s estimate and calculates that if provincial income assistance expenditures could be reallocated and directed towards basic income expenses, the annual cost of a BI program could be cut to $23B. In any case, to offset costs, a basic income would almost certainly require taxation changes and/or modification or elimination of some programs.

• In July 2020, the PBO issued a separate report, which estimated the gross cost of a BI program for six months, starting in October 2020, at $47.5B if designed following the model of the Ontario pilot. The PBO also showed that lower phase-out rates, with more generous treatment of earned income to reduce disincentives to work, would lead to substantially higher gross costs (potentially as high as $98.1B for six months).
Basic Income Canada Network (BICN) report
• In January 2020, BICN issued a report advocating the introduction of a basic income in Canada. The report proposed three options featuring benefits of $22,000 per year for individuals ($31,113 for couples in two cases), either targeted to Canadians with low incomes or universal with a significant portion of costs recovered through the tax system.

• BICN’s report explains that each of the options could be paid for mainly through changes to the tax system, along with modifications to or elimination of certain existing federal and PT programs.
UBI Works report
• In December 2020, UBI Works, an organization that brings together businesspeople who advocate basic income, released a report on the economic impacts of basic income in Canada. The report provides analysis indicating that a basic income of $2000 for individuals (and a higher amount for couples) would not only dramatically reduce poverty, but would also contribute to increases in employment and the Gross Domestic Product.
Examples of basic income pilots and measures
• Governments in several other countries are in varying stages of experimentation with basic income projects. Basic income pilots and experiments are in various stages in a number of jurisdictions including the Netherlands, Germany, and American municipalities such as Stockton, California and Hudson, New York.

• In February 2019, the Government of Finland issued the preliminary evaluation of a two-year pilot project with 2,000 unemployed participants receiving monthly payments of €560 (about $840 Canadian). The evaluation showed that these payments contributed to the health and happiness of the beneficiaries; however, there was no positive or negative impact on the likelihood of recipients participating in the labour force. The final evaluation, issued in May 2020, showed largely consistent results; recipients had slightly higher workforce participation than members of the control group.

• Overall, other research and pilots, including a study in Manitoba in 1975-78, generally indicate that a well-designed basic income program would avoid undue work disincentives, address poverty, and promote health and well-being.

• Since 1982, Alaska has paid a partial basic income for all residents, usually about $1000 to $2000 U.S. per year. A campaign is underway in Oregon to hold a referendum that would establish a similar partial basic income.

• In 2020, Spain implemented a partial basic income-like program for lower-income households, with monthly benefits for eligible individuals of €462 (about $700 Canadian), and higher benefits for households.

• While the term “basic income” (BI) has multiple meanings, it usually refers to programming that provides recipients with guaranteed incomes sufficient to meet basic needs, with few conditions and no requirements to have or seek employment. While benefits could be universal with tax-back provisions for higher-income recipients, Canadian experts generally anticipate income testing so that payments are only made to people with incomes below a specified threshold. A partial basic income would feature payments that cover some but not all essential needs and would supplement other income sources.

• In the context of concerns about poverty and the changing nature of work, public interest in a basic income has been increasing, and some experts and stakeholders have advocated research such as pilot projects or other steps towards implementation.

• The Government of Canada recently made several commitments that will help to address poverty. We are laying the groundwork for a Canada-wide Early Learning and Child Care system; supporting affordable housing; creating jobs; supporting initiatives to improve food security; and bringing forward a new benefit and employment strategy for Canadians with disabilities.