Money for nothing

Almost 50 years ago, a Canadian Senate report declared that a basic income “is an idea whose time has come.” Ever since, the idea has resurfaced every so often, with support that spans the political spectrum.

A recent Parliamentary Budget Office (PBO) report reinvigorated the debate by estimating the cost of a particular version of a basic income program. Proponents (including National Post columnist Andrew Coyne) go so far as to claim a basic income will end poverty. That is an oversimplification and, in our view, an unconditional basic income is a bad idea whose time should never come.

In theory, a basic income would replace the existing web of income-support programs (welfare, the GST tax credit, Old Age Security, employment insurance, etc.) with a single simple program that provides a cash transfer to Canadians. The PBO’s version is based on a pilot program currently taking place in Ontario and would provide a maximum unconditional cash transfer of $16,989 for single Canadians (couples would receive $24,027).

There are several reasons why this is a bad idea.

A basic income would weaken the incentives to work for lower-income Canadians and people not strongly tied to the labour force (i.e., youth, secondaryearning spouses) in two important ways. First, the transfer does not have a work requirement — even for able-bodied recipients — which raises serious concerns about the potential to encourage dependency on government and discourage people from improving their situation through gainful employment.

Second, because additional income earned triggers a reduction in the transfer amount, a basic income will discourage additional work effort or the willingness to report additional income. in Canada and the United States in the 1960s and ’70s with various designs of basic incomes showed that recipients — especially married women — responded by reducing the hours they worked. More broadly, however, proponents of an unconditional basic income ignore the lessons from Canada’s welfare reforms in the mid-1990s and early 2000s, when stronger work requirements and tighter eligibility rules helped reduce dependency.

In 1994, about one in eight Canadians (12.2 per cent) were on social assistance, and welfare benefits reached levels comparable to what a full-time minimum wage