April 24, 2017 3:58 pm
Updated: April 24, 2017 8:08 pm

What you need to know about Ontario’s basic income plan

WATCH ABOVE: Ontario is about to give monthly cheques to 4,000 people living below the poverty line, with no strings attached. It's to provide a basic income for those who don't have one. As Shirlee Engel reports, the idea is gaining traction around the world.

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The Ontario government unveiled details of a pilot project on Monday that will see some low-income residents in three communities receive a guaranteed minimum income, regardless of whether they are working or not.

Eligible individuals will receive up to $16,989 per year, less 50 per cent of any income they earn. Couples will receive up to $24,027 per year, less half of any income earned. Ontario residents with disabilities will receive up to an additional $6,000 per year.

READ MORE: Ontario basic income pilot project to be tested in Hamilton, Lindsay, Thunder Bay

Sound like a great perk?

It depends on who you ask. So-called basic income has been the subject of serious —  and heated — debate among academics and policy makers for years.

WATCH: Premier Wynne announces Ontario basic income pilot project to be tested in Hamilton, Lindsay, Thunder Bay


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What is basic income?

It’s the idea that the government can fight poverty and income inequality more efficiently through income transfers that, unlike current welfare benefits, come with few strings attached. In its purest form, basic income entails a universal, unconditional and regular transfer of income from the government to all citizens, regardless of whether they work and how much they earn.

READ MORE: Elon Musk says universal basic income will be necessary as robots take your jobs

What supporters of basic income say

Proponents of a basic income — like its detractors — span the political spectrum. In Canada, supporters of the idea include former Conservative senator Hugh Segal, who advised the Ontario government on the current pilot project, and NDP leadership hopeful Quebec MP Guy Caron.

WATCH: Halifax conference focuses on guaranteed basic income concept

Canadians are not alone in their fascination with basic income. Finland, for example, recently became the first country in Europe to roll out a basic income program for its unemployed citizens.

READ MORE: Support for guaranteed minimum income rises in Ontario, poll finds

Governments need to rethink their welfare systems

The main argument for basic income is the idea that the current welfare state hasn’t kept up with market and technological forces that have exacerbated income inequality and eliminated scores of well-paid jobs.

For example, unemployment benefits are a big part of the current welfare system. But supporters of basic income note that a large share of those who live in poverty today have jobs but don’t make enough to get by.

A basic income will encourage people to work

Supporters of basic income argue that it is more likely than current social programs to get people to work.

In Finland, for example, recipients of basic income get to keep receiving the transfers even after finding a job. This, proponents argue, should reduce the incentive that the unemployed currently have to turn down a low-income or short-term job for fear of seeing their social security benefits dramatically cut back.

Basic income can save the government money

Proponents of a basic income program generally acknowledge it would come at a cost but also argue that it would reduce government spending in other areas.

“In the long run it will actually save us money,” according to Caron. “Less poverty means less stress on healthcare, social programs and public safety resources.”

WATCH: Is a guaranteed income the answer to the problem of poverty?

What critics of basic income counter

Basic income costs so much, it’s impractical

Critics of basic income argue that in its purest form, it would be utterly unaffordable.

In Canada, a monthly transfer of $1,200 per person per month would cost a net $400 billion per year, even after eliminating other social programs, University of British Columbia economist Kevin Milligan wrote in the Globe and Mail a couple of years ago.

READ MORE: Commentary: The problem(s) with a guaranteed annual income

A basic income for all is welfare for the rich

What would make a basic income program so expensive is the idea of giving everyone a living stipend, Wayne Simpson, a professor of economics at the University of Manitoba told Global News.

A basic income for all would be “a bloated scheme [that] would simply pay out big cheques to those who don’t need them, doing little to help those who are struggling,” Milligan wrote while commenting on the broad outlines of Finland’s program before it was implemented.

A basic income will discourage people from working and won’t really alleviate poverty

Critics of basic income also worry that it will actually discourage people from working, while doing little to address poverty.

“Poverty is much more than just a lack of income,” Charles Lamman, director of fiscal studies at the Fraser Institute, said. “There are fundamental root drivers of poverty, things like mental health, addiction that a guaranteed income can’t fix.”

READ MORE: Ontario government, Senator calling for guaranteed annual income pilot project

What Ontario’s pilot project actually does

Ontario’s trial follows in the steps of Manitoba’s “Minincome” program, a three-year federal and provincial program that transferred monthly payments to low-income families in the 1970s. However, as University of Manitoba’s Simpson noted, neither it nor Ontario’s plan are basic income policies in a strict sense. In both cases, transfers are meant only for low-income residents.

In Ontario, people will lose $1 of the basic income transfer for every $0.5 they make, meaning that anyone with earnings around $34,000 and over doesn’t get anything, Simpson noted.

READ MORE: Will you be replaced by a robot? A look at what jobs are going to the bots

He compared the Ontario plan to the Guaranteed Income Supplement (GIS), which provides a monthly non-taxable benefit to Canadians who receive Old Age Security. The amount of GIS you receive depends on your marital status and your previous year’s income.

READ MORE: It’s mainly robots, not NAFTA or China, stealing millions of jobs from U.S.

A key report with recommendations on how the Ontario government should implement a basic income experiment specifically references the GIS as a model.

“A pilot must take into consideration how the [GIS] in Ontario in the mid-1970s, aimed at residents over the age of 65, radically reduced poverty for this group,” the report reads.

— With a file from Global News producer David Shum

 

 

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