The end of poverty
Poverty is a cancer on our social fabric. Five million Canadians live at or below the poverty level and 40 percent of children in single parent households live in poverty.
Children raised in poverty face almost impossible odds against escaping the consequences of their upbringing. Such children suffer from malnutrition, poor health, mental health issues brought on by extreme stress, diminished learning capacity and often leave school early.
They are thereby condemned, at best, to only marginal participation in the labour force. If governments wanted to assure a growing supply of second class citizens ever more dependent upon social services provided by the state, they would adopt child poverty as a key strategy.
For more than a decade, governments at all levels have promised to eliminate poverty but success is elusive. Efforts on this front are often half-hearted or unfocused. All too frequently they focus on making sure that expenditures on poverty reduction do not provide public assistance to those deemed “unworthy” by virtue of being lazy or feckless (i.e. an unemployed parent).
That concern, in turn, creates a stigma associated with being poor and accepting assistance. There are limited political gains to be had from effective poverty-reduction policy.
On the other hand, Canada is a rich country and has the capacity to eliminate poverty if we have the will.
There are two alternative approached to achieving that goal. One is called a “negative income tax” and the other is called a “universal basic income” payment (UBI). Both schemes would pay every adult resident in Canada a monthly amount with no strings attached. In effect, every household would receive income equal to the poverty line taxfree.
If people earned income in addition to this, their total income would become taxable (though still on a graduated scale with applicable personal deductions).
These ideas are neither new nor limited to Canada, but Canada is a leader in figuring out how a program would work best. Most recently, however, a pilot project in Ontario, the new Conservative government led by Doug Ford has cancelled what was a planned three-year project after less than a full year of operation.
Similar pilot projects have taken place both in Canada in the 1970s and more recently in Europe. The questions addressed in the studies were not limited to whether the UBI would be efficient or cost-effective; they also examined whether help should be contingent on circumstances and if such payments change citizens’ relationship with work.
Pilot projects both here and abroad showed that work effort is reduced only a modest amount. Basic income security appears to keep young people in school longer, extend job searches by the unemployed (presumably with better results) and allow mothers to spend more time with their children.
Declines in hospitalizations and reduced diagnoses of mental health conditions were also documented. Moreover, family consumption patterns did not change significantly, meaning the cash is not squandered.
The Canadian test, because it took place in only one location and every resident participated, eliminated any stigma associated with accepting the cash. Limiting the monthly payment to the poverty level meant people did not stop working but rather cut back on overtime or holding more than one job, using the benefits to supplement their current income.
A former Premier of Ontario said, “We need to believe that people want to work and don’t want to be looked down on and seen as not being useful parts of society.”
Implemented nationally, such a program would not be cheap; estimates range up to $40 billion annually. But, the long-term benefits to society as a whole would more than offset the costs by eliminating spending on various welfare programs and reducing the demand on the healthcare system.
Over time, better-educated workers would increase the productivity and wages of the labour force and increased taxes on employment income would flow into the national treasury.
David Bond is a retired bank economist who resides in Kelowna.