Canada to trial guaranteed minimum income

Canada to trial guaranteed minimum income

Canada is seeing increased public and government support for a guaranteed minimum income, with a pilot-project set for 2017.

As automation, digitization, and globalization alter labour market dynamics, calls are increasing for governments to augment their poverty strategies. One such proposal is the introduction of a guaranteed minimum income in order to provide for essentials and reduce poverty. Canada is planning a pilot project in Ontario to study the potential benefits of a guaranteed minimum income scheme.

2016 marks turning point for guaranteed minimum income in Canada

The provincial budget released by Ontario’s Liberal government in March includes a plan to launch a guaranteed minimum income pilot project. Ontario Premier Kathleen Wynne and finance minister Charles Sousa  announced the trial project earlier this spring, as part of the new budget. The pilot is slated to start in 2017, although the location of the trial has not yet been determined. Some are suggesting industrial cities hit hard by decreased manufacturing, such as Windsor on the Canadian border with Detroit.

There is an increasing interest in Canada to implement a guaranteed minimum income scheme. Sheila Regehr, chair of Basic Income Canada points to the changing attitude following the Liberal victory in the general election. “Given the past federal election you see a completely different mood in Canada now. I think a lot of people have been interested, but lying low – and it’s just bubbling up now all over.”

Kathleen Wynne and Charles Sousa

Kathleen Wynne and Charles Sousa

Indeed, in a recent poll, 41% of Ontarians expressed support for the idea, with 33% opposed and 26% remaining unsure. The drop in oil prices and sluggish growth in Canada are likely important elements influencing public opinion, especially after years of increasing poverty and austerity from the previous Harper government. Canada has already conducted a successful trial in Dauphin, Manitoba in the 1970s, yet the developments of 2016 are especially interesting. While the New Democratic Party and Green Party have expressed their support, the fact that Liberals, Canada’s historical governing party are on board, is vital.

In 2014, during their party convention, the Liberal Party adopted a resolution to create a basic annual income. While a guaranteed minimum income is currently not part of the government’s platform, its inclusion in the party manifesto is not empty rhetoric and the Prime Minister’s progressive vein makes it likely to move forward. Minister for Families, Children, and Social Development, Jean-Yves Duclos stated in February that the concept has merit as a policy to consider for national implementation after more immediate reforms are tackled.

Were Ottawa to move ahead on the issue, it would find considerable provincial and municipal support. Ontario is already going ahead with a trial, and Quebec has assigned a minister to study the idea. The potential exists for pan-provincial support for a guaranteed minimum income if Ottawa and provincial governments work together. Alongside the large majority enjoyed by the Trudeau government, both Ontario and Quebec – the two most populous provinces – have majority Liberal governments, so do seven of Canada’s ten provinces.

Even Alberta, the heartland of Canadian conservatism, has a majority NDP government which would be a willing partner in any larger implementation efforts. Similarly, both the mayors of Calgary and Edmonton – Alberta’s largest cities – have expressed support for guaranteed minimum income, offering their cities as test locations; offers inspired in no small part due to weak oil.

Not a silver bullet

While some Canadian conservatives are supportive, the idea of a guaranteed minimum income is generally associated with the Left and finds less support from conservatives. Opponents of the issue raise concerns about disincentivizing work and welfare abuse. There are also the familiar ideological reservations about the welfare state and entitlement programs. That being said, it is interesting to note that guaranteed minimum income actually has an impressive conservative (especially libertarian) pedigree.

Firstly, with regards to disincentivizing work, the Dauphin trial found that workplace decreased for only two groups: new mothers who opted to stay home longer, and teenage males, who opted to continue until graduation. Furthermore, a poll in Switzerland (itself voting on a guaranteed minimum income in June) found that only 2% of respondents said they would stop working.

Around the same time as Canada was testing the idea in Dauphin, Richard Nixon set up a committee run by Donald Rumsfeld and Dick Cheney to research the idea. Nixon even went so far as to attempt to (unsuccessfully) implement a version proposed by Milton Friedman. Friedrich Hayek also endorsed the idea, positing “a certain minimum income for everyone…a sort of floor below which nobody need fall even when he is unable to provide for himself.” A more high-profile list of conservative endorsements would be hard to find.

Conservatives can point to the emphasis on personal freedom and choice; allowing individuals to determine what they need and how to acquire it, as opposed to a paternalist state mechanism.

A guaranteed minimum income could see increased consumer spending as individuals can afford to purchase food and clothing as opposed to relying on charity, food banks and government largess. This could act as a sort of stimulus boost, potentially more effective than tax rebates for high-income earners or large corporations (which can be saved or used overseas), as all funds from a guaranteed minimum income system would quickly return into circulation.

Conservative supporters can also point to the idea as a way of reducing the size of government, getting rid of a web of complicated programs. While many would like to have guaranteed minimum income fully replace the welfare system, the idea is not a silver bullet for either the Left or the Right.

It remains important to integrate any future guaranteed minimum income plan into existing complementary and effective programs. Tim Richter, President of the Canadian Alliance to End Homelessness, highlights the intersectional nature of poverty. “Income is always a part of poverty and poverty reduction, but there are structural issues related to housing and childcare, and other things that will need to be addressed in addition to the income equation if we’re going to lift people out of poverty.”

As to how far Canada will go remains to be seen, but one thing is guaranteed: there is anything but minimal interest.

Categories: Economics, North America

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Jeremy Luedi

Jeremy is a widely referenced political risk expert and weekly columnist for Global Risk Insights (GRI). Jeremy's writing has been featured in Business Insider, Huffington Post, Nasdaq.com, The Japan Times, MSN Money, and Yahoo Finance. His work also has been quoted and recommended by Time Magazine, Politico, Transparency International, and Greenpeace, among others.