GAI – Proceed With Caution
Conservative Senator Hugh Segal is actively promoting the very old new idea of a Guaranteed Annual Income (GAI) and Senate Committe hearings may soon follow. I’m all for providing more money to low income families and would willingly scrap social assistance as we know it for something that is more generous and less punitive – and will concede that Segal has some progressive instincts – but I have three key concerns re GAI.
Will it, like the Macdonald Commission version of the GAI, be funded by folding in income security programs, notably EI, which have important family and individual income stabilization objectives above and beyond a simple anti poverty objective? I fear so, in which case GAI risks robbing ordinary working people and the the near poor to give to the very poor – not what most of us have in mind in terms of progressive income redistribution. Also, GAI would be family income tested while EI benefits flow to individuals and are not family income tested, which is hugely important for gender equity and the economic independence of women and young people.
Second, will GAI supplement or substitue for higher minimum wages? Friedmanites have long supported a GAI as a “work friendly” alternative to welfare and decent wages, the basic idea being that a near starvation GAI would provide incentives to work and still make the job market more “flexible.” But even the OECD now concedes that income supplements must go hand in hand with a wage floor if we are to avoid subsidizing low wage employers. (See 2006 Employment Outlook.)
Third, how will the GAI interact with the tax/transfer system? If the GAI is “generous” in the sense of lifting people out of poverty- as it has to be to address the key anti poverty objective – it will have to be funded by a very quick phase out of the GAI as earned income rises. This means punitive marginal tax rates on the near poor (unless, of course, we contemplate funding it through truly progressive tax reform, which is probably not on the good Senator’s mind.)
In short, we have to be cautious re GAI proposals. IF we have decent minimum wages and IF we reform EI to increase access and benefits, then there is a role for a GAI in the sense of a Guaranteed Basic Income for those who can’t work (in place of welfare as we know it) , and in the sense of wage supplements for the working poor who fall though the cracks of precarious work and EI. But it should be a residual program, rather than a building block for a new welfare state.