Some thoughts on ecology, evolution and economics

End of poverty?

Huff Post

Bill C-223 was introduced in Canada’s parliament on December 16, 2021 as part of a long tradition of anti-poverty legislation. Sadly, as a private member’s bill, there is little chance of it coming into force.  However, there is increasing optimism that the bill’s approach of introducing a framework for a guaranteed basic income for all working age Canadians will soon be part of the country’s safety net. In creating such a framework, there are three questions to keep in mind:

Is the basic income generous enough to address poverty?

Is the program affordable in the long term?

Does the program still encourage people to get a job?

Getting a “YES” to all three questions is difficult, some would say impossible.  Naturally, guaranteed incomes result in people working less.  The experiments that have been done in Dauphin, Manitoba (1974-79) and Ontario (2017-18) have shown that the opportunity to forgo work was largely used for education and child-rearing.  The difficulty is that the more generous the program, the greater the disincentive to work and,  of course, the less likely that the program will be affordable in the long run.

Recently, the Parliamentary Budget Officer estimated the cost and impact of rolling out the pilot program from Ontario to the entire country. The report found that the program would reduce poverty rates by half, cost an eye-watering $90B ($71B US)  per year and yet have little effect (a 1.3% drop) on the hours worked by Canadians.  It also found that the costs (even though they represent 26% of pre-Covid spending) could be made up entirely by eliminating current income tax deductions that are designed to reduce poverty. There is a long list of such deductions but the primary source of funds would come from eliminating the personal deduction (~$13,000; $10,300 US ) on each return.  The net effect would be to raise the  income of the poorest 20% of Canadians at a minor expense (~2% drop in income) to middle-income and wealthy taxpayers. The Fraser Institute estimated a much higher price tag for extending the Canadian Emergency Response Benefit (CERB; the Covid-19 stopgap) to all working age Canadians – $ 465 B ($369 US)! At 132% of pre-Covid spending, it would dwarf any other government program. However, the CERB payment was never meant as a permanent or basic income.  The Ontario pilot program used 75% of the poverty line as the basic level of income, providing security along with an incentive to work.

The reason I spoke of optimism at the outset is because the Liberal government has already committed to cut poverty rates in half by the year 2030.  Something like the approach outlined by the Parliamentary Budget Officer is likely to be tried in the coming years.  Whether such an approach can be sustained during hard times, inflation or even Canada’s current housing bubble is another question.  Reducing poverty by half is a laudable goal but continuing to reduce poverty after that will require a level of committment that comes from personally knowing the people we are trying to help. We will have to keep reaching out to our fellow citizens if poverty is to become a thing of the past.