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The Progressive Economics Forum

Pondering a Guaranteed Annual Income

Senator Hugh Segal reviews the history and the need for a Guaranteed Annual Income:

Canada’s on-again, off-again relationship with a guaranteed annual income (GAI) has made the rounds for many years. The most renowned recommendation for the GAI came out of the 1985 report of the Royal Commission on the Economic Union and Development Prospects for Canada, chaired by Donald Macdonald, known as the Macdonald Commission. The report stated unequivocally that a universal income security program is “the essential building block” for social security programs in the 21st century.

A guaranteed annual income or basic income is the concept of a floor income provided on a continual basis varying on family size, age, and other sources of income. Now, more than 20 years since Macdonald’s recommendation, the newly released report by the National Council of Welfare paints a scathing picture of the assistance programs currently available in Canada to our neediest Canadians. It concludes that those on welfare were actually worse off in 2005 than they have been since the late 1980s when the council began tracking the numbers. According to the report, 1.7 million of our fellow Canadians are forced to rely on welfare; more than 500,000 of these people are children.

The first official proposal for a GAI in Canada was made in 1971, by the Castonguay-Nepveu Commission in Quebec, which proposed a three-tiered income security program for Quebec. Later that year, the Special Senate Committee on Poverty proposed a uniform guaranteed income to cover Canadian families living in need.

In 1973, the federal government published its Working Paper on Social Security in Canada. This became the basis for the social security review of the 1970s, and eliminating poverty and providing an acceptable minimum income for all Canadians was a substantial part of the review.

In the 1980s many policy documents appeared in support of fundamental reform: the 1984 Quebec White Paper on the Personal Tax and Transfer Systems, the 1985 Macdonald royal commission, the 1986 Newfoundland Royal Commission on Employment and Unemployment, the 1987 Forget Commission on Unemployment Insurance, and the 1988 Ontario Social Assistance Review Committee, along with numerous other reports from private and social agencies.

For more than 30 years, I have been a relatively lonely Conservative proponent for a guaranteed annual income, or a basic income floor. I do not believe that, in a country such as Canada, fellow citizens must live so far below what we consider a poverty line that they are unable to provide the basic necessities of shelter, food and clothing for themselves and their children. And based on the current allowances provided by the welfare system, I also refuse to accept that people purposely choose to avoid employment in order to subsist on such a paltry income.

Individuals who turn to welfare do so as a last recourse. Whether the situation is the result of abuse, job loss, lack of education or training, addiction or single-parent households, our duty as Canadians and human beings is to guarantee an income that allows people to provide for themselves and their families while affording them a level of dignity that boosts confidence and inspires hope.

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Comment from Mark Tilley
Time: November 8, 2006, 10:02 am

Why should the floor amount vary with circumstances?

Make the floor amount universal and substantial and let people govern themselves accordingly.

ie. make the floor amount comparable to today’s welfare amount for a single parent with one child and then give it to all adults and tax it back as they earn outside income at the same rate as the lowest marginal rate so there’s no disincentive to get a job. Do this in tandem with making the basic personal exemption a realistic amount and again available to adults only but transferrable between spouses so that the entire guaranteed income has been taxed back by the time outside income reaches the level of the basic personal exemption. For example, with a basic personal exemption of $20,000 per adult and a marginal rate of 37.5% (25% fed. and 12.5% prov.) a family of two adults would be guaranteed $15,000 and their income would rise as they earned outside income until they were earning $40,000 at which point the guaranteed income would be completely offset by the tax. Eliminate ALL other personal tax deductions/credits and keep the 37.5% combined rate for all levels of income (believe it or not it doesn’t change total federal personal income tax revenue appreciably).

Pingback from Signs of Life in Canada’s GAI Movement « Relentlessly Progressive Economics
Time: December 14, 2006, 11:08 am

[…] o     Senator Hugh Segal, a Martin appointee, red Tory and influential insider in the Harper government, is using his pulpit to spread the good word. He’s written a column on a GAI in the Toronto Star and makes the case wherever and whenever he can in his media appearances (see for example his recent TV Ontario appearances here and here). […]

Comment from Teya B.
Time: March 30, 2008, 9:02 pm

Canada is a progressive nation with ‘values’ and one of them is compassion–to see that all are sheltered, fed
and clothed in terms of meeting the requirements of living in this physicality/material world.

In helping to advance the human condition, this earth contains sufficient abundance for all.

We, humanity, should be well on our way towards self-actualization. I advocate for a universal basic income for all Canadians regardless of current income or circumstance. I say this because we (the public whereby the government supposedly still act on our behalf) already expend an inordinate amount of resources, programs and real dollars in social assistance which are proving ineffective in alleviating or freeing people to self-actualize. The struggle to make ends meet in holding down some structured position dates back to the industrial revolution. Very old paradigm. Our progress is overdue for an overhaul in the way we think, of how we live, of why we are here on this earth, and what we are doing to this earth.

Generally speaking, the equalizers are birth and death. We (humans) have been endowed with five physical senses, namely, sight, hearing, taste, touch and smell. Quite frankly, how well have perfected our listening? Do we listen well? . . . From my perspective, until every child on this earth has been able to perfect their taste buds of having tasted 124 flavours of ice cream for example. Well people, have we arrived yet? . . . What do you think? . . . more to come. Thanks for listening.

Comment from Art Campbell
Time: May 17, 2008, 2:19 pm

There is such a tremendous benefit to a Guaranteed Annual Income that it should go forward immediately. This analysis starts with two quotes from Senator Hugh Segal’s blog.

“Critics argue the program would be far too expensive”; the analysis below suggests that this approach would be much less expensive than the present myriad of social programs, and much more effective.

“the one-size-fits-all approach of a guaranteed annual income would overlook the specific needs of the disabled, seniors and children.” Nonsense. All of those groups include people who are perfectly capable of looking after themselves; they have the necessary financial resources and the intellect. The proposal belows targets the poor, and only the poor, no matter what their physical condition or age.

Looking at a comparison of the U.S. and Canadian health care systems may be useful to show where I am going. Comments typically start with “In the U.S. there are 47 million uninsured…”. That is about 15% of the U.S. population. That means that 85% are covered. Pretty good. It is conventionally assumed that the 15% can’t afford health insurance. There is room for discussion of this figure, but it is used below simply because it is convenient. The percentage of people requiring help is not important for this analysis.

The Canadian answer to take care of the 15% is to compel 100% of the population to be part of a government run health care system. The U.S. answer appears to be to use private sector facilities but pay less than insurance companies and individuals pay. Pay less, get less.

Both the U.S. and Canadian systems have a common fault. They don’t recognize poor people as being whole people, complete people, just like the rest of us. The poor not only need health care, they need food, and housing and clothing and dental care and..the same things we need. Both countries treat those needs as separate needs and provide health care, social services, government run housing, allowance for food, coupons, etc. as separate services. Clearly it would be helpful if all the services required by the poor were available in one package. That package is available and it is called money.

Now we all should know that the private sector is far better than government in providing services. Government services frequently fail. We have our own examples, social housing, health care, day care, both in Canada and the U.S.. Private sector services are always available. We may object to the price.

So the answer is, first, to do away with government run universal health care, social housing, day care subsidies and the multitude of other social programs. Second, leave the 85%, the financially and intellectually capable people, alone to do their own thing. Third, provide the 15%, the poor, with money so they can access the private sector for all their needs, just as the 85% would. Of course, there are some people who simply don’t have the intellect to take care of themselves. They should be taken care of as individuals, with varying needs, much like occurs now; some institutionalized, some provided with advice and guidance. The principle is to give people as much independence as possible. (I know that if I became poor I would appreciate receiving equivalent money so I can look after myself, rather than being given social housing, a health care plan, food stamps or equivalent, bus passes, etc. I suspect that most Canadians feel the same way.)

So give the poor who are capable, money so they can look after their own needs, in their own way. No longer would the poor have to tap into several programs to get the help they need. The system would use the best feature of the private sector, namely that services provided by the private sector are always available. We may not like the price. But it is less costly than government provided services. Government regulated, private sector run systems have resulted in the vast array of services we now enjoy. Compare that with government run systems where social housing is in short supply and often inadequate and poorly maintained, the health care system has shortages and waiting lines, day care is inadequate and unfair. There are of course the examples from the Communist countries where “government run everything” was a disaster. Only when some free enterprise was allowed, the Chinese experience being a good example, did shortages decrease, and wealth increase.

Please note that under this system there should be significant cost savings along with better service. For example, Canadians can, and do, go to doctors and emergency departments for services that do not require professional attention. It costs nothing directly to the individual to do so. In the revised system, everyone would be using there “own” money, money over which they have control. They would no doubt spend it with more thought. In day care, there would be no subsidized spaces; the poor would have the money to decide on using licensed day care, or, a casual arrangement with a neighbor, or Grandad and Grandma to provide the service. Further, the poor would be able to select where they want to live, within their subsidized funds, rather than having to go to social housing. People who are not poor would not be subsidized, such as occurs now with seniors, children and the disabled. The poor would be subsidized, period.

Note that a considerable reduction in taxes would be possible since people would be paying directly for health care, for example, and not through a government agency, as occurs now – from taxpayer to Revenue Canada to federal government departments to provinces, to hospitals and doctors…. Similarly with day care, and housing. With a reduction in taxes the lower middle class should have the money to buy the services now run by government. If they don’t then they become the poor, and receive financial help.

In summary, take the money which is now used for housing for the poor, health care for the poor and all the other social services designed to help the poor, and give the money to the poor, with controls only on the poor who do not have the intellect to look after themselves. There would be additional money available from programs which have been cancelled, namely for the elderly, and for children, and for the disabled. Only the people who need help, namely the poor, would receive help.

The system of government regulated, private sector run services has served us well, in all our needs and wants in the areas it has been allowed to operate. It should be allowed to work in health care, day care, housing of the poor and all other all social services.

There are a number of ways to implement Guaranteed Annual Income. The benefits are so overwhelmingly good that to quibble seems pointless – choose a system and go for it. Adjustments will probably be required because, for example, of the effects of inflation. That would be the time to make adjustments which no doubt will be desired.

Comment from Bill T
Time: August 12, 2009, 1:48 pm

GREAT post, Art Campbell. I’m probably more “liberal” than you are, but your BASIC points (if I’m reading right) are spot on:

– Control the growth of and/or reduce the public sector
(public housing, etc.)
– Reduce the number of income support programs
– From this streamlining, use the money saved to provide a (more-than) adequate income to those who need it.
– Everyone gets their goods and services from the same vendors (i.e. everyone shops at a grocery store for food)

The private health care might be a bit much for me – but I’m open to hearing solutions that worry more about “everyone getting health care,” rather than “who’s going to control the hospitals and health staffing.”

Comment from Werner
Time: February 1, 2010, 1:50 pm

Some of the resistance to the GAI may be due to the perceptions people of it’s supporters, ie “political correctness” of both left and right. Just as the words ” socialism” and “communism” did at one time have no connection with state ownership the notion that big bad tories could support a guaranteed income seem too much outside the box for some. In the 1950s in the province of Saskatchewan rural voters supported the very left wing CCF on provincial elections which voting for the PCs (progressive conservatives) in national campaigns.

Comment from kerry vaughan
Time: April 11, 2010, 2:16 pm

the 10s of billions wasted killing and maiming women and children in afghanistan would go a long way toward serving the needy ,old, infirm ,disabled and injured people who PAYED those taxes that the canadian government is squandering like it is monopoly money. the canadian military could be fixing our infrastructure rather than blowing up someone elses , do our politicians{especially stephen harper ] have so little respect for canadians that murdering innocents half the world away is more important than the people we elected you to serve and protect ,STOP WASTING OUR TAX DOLLARS!!!!!

Comment from al dimskis
Time: November 25, 2010, 6:53 pm

GAI…isn’t it the right thing to do no matter what the cost.

Comment from al dimskis
Time: January 10, 2011, 1:10 pm

the bottom line is, its the right thing to do period. the money all goes back into the economy anyways!!!!

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