Why the rush for a guaranteed income?

The tsunami of temporary government income support programs unleashed to cushion the shutdown of large swathes of the economy has renewed calls to introduce a guaranteed annual income (GAI). Over time, a GAI has garnered support and opposition from both liberals and conservatives. On balance, however, there is more reason to oppose it.

The idea of a GAI dates back to Sir Thomas More’s “Utopia” in 1516. Liberals are attracted by its promises of reduced inequality and protection of vulnerable workers against job-killing technology or the whims of employers. Conservatives like the possible elimination of many government social programs, maybe even the minimum wage. Some defenders of capitalism see GAI as one way to preserve support for free enterprise in the event of massive technological unemployment.

On the other hand, some liberals object to a GAI because they fear it solidifies inequality, creating a permanent underclass that society can ignore because it has been provided with a basic standard of living. Conservative reservations about a GAI reflect misgivings about its impact on character and morality, not to mention the steep tax hikes needed to pay for it. Opponents also emphasize the need to protect taxpayers from people taking advantage of the generosity of gullible governments, recalling the aphorism that, “A fool and his money are soon partying.”

For years, Canada has been moving by stealth toward a universal basic income — though without a full debate because those with reservations about policies aimed at reducing poverty among children or the elderly were afraid of appearing hard-hearted. First, in 1967, we adopted the guaranteed income supplement (GIS), which, after periodic increases in its generosity, eventually eliminated poverty among seniors. Then in the late 1990s, in one of those fatuous declarations of aspiration politicians love so much, Parliament unanimously endorsed the goal of eliminating child poverty. This was literally a motherhood issue, as achieving it required more benefits for single parents, who were mostly moms. Years of increasing transfers to parents culminated in the 2016 Canada Child Benefit.

Although these policies have lowered poverty rates in the vulnerable populations they targeted, people’s heightened sense of vulnerability during the current crisis is being used as a Trojan Horse to try to smuggle in a minimum income for most working-age adults.

Affordability remains a major roadblock to a GAI. The argument that a GAI would allow us to abolish some existing social programs is a double-edged sword for proponents of big social spending: if existing programs are so costly and unwieldy, reforming their design and delivery should be the first step in policy reform, not broadening their scope. On the other hand, if cost savings are not substantial, then taxes will have to rise sharply to finance a universal income. Most credible estimates are that the net cost will be substantial. The University of British Columbia’s Kevin Milligan estimates that even if it saved $100 billion in existing programs, a guaranteed income would still cost an additional $400 billion, an eye-watering amount even by today’s standard of noquestions-asked government spending.

Another problem, as researchers at the University of Calgary’s School of Public Policy have pointed out, is that the amount of a GAI is independent of the varying needs of recipients. In Ontario, the Ford government’s attempt to simplify its autism aid program with a flat $20,000 benefit per child floundered precisely because it was not tailored to the individual needs of autistic children, some of whom require more help than others.

But the most fundamental objection to a GAI remains its effect on people’s incentive to acquire the personal characteristics that assure them of success in both life and the labour market. As Charles Murray has observed, “free lunches don’t nourish.” Studies of the Bill Clinton-era tightening of eligibility for American welfare benefits — which slashed caseloads in half — found that the reform raised both employment and earnings, which suggests welfare had in fact discouraged people from working. Daniel Patrick Moynihan, an early advocate of a GAI, withdrew his support after finding that “the issue is not what it costs those who provide it, but what it costs those who receive it.”

How the current rollout of wide-ranging income support affects the supply of labour will be revealing. Economists can and should study what per cent of Canadian Emergency Response Benefit applications were fraudulent and how many workers refused to go back to work so as not to violate their restriction on earnings. Will the $9 billion paid to students this summer induce them to work 15 hours a week or less so they can pocket $5,000 with no questions asked? If so, we could have the twin problems of high youth unemployment and jobs going begging in seasonal industries such as accommodation and food.

It would be rash to fundamentally restructure our social programs based either on what we all hope is a temporary emergency or on forecasts about future technology, which have rarely proved accurate in the past. If the pandemic proves permanent, or if artificial intelligence and the robot revolution ever do simultaneously create high incomes for a lucky few and mass unemployment for everyone else, governments have shown over the last few weeks that they can move quickly when the need arises.

AS CHARLES MURRAY HAS OBSERVED, ‘FREE LUNCHES DON’T NOURISH.’