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Basic income would ease poverty but require higher taxes, spending cuts: Study

Click to play video: 'Advocates call on Nova Scotia to adopt basic income guarantee' Advocates call on Nova Scotia to adopt basic income guarantee
Supporters gathered in Halifax on Saturday to raise awareness and push government in Nova Scotia to implement a basic income. Jesse Thomas reports – Sep 25, 2021

A guaranteed basic income in Canada would help alleviate poverty but could also put the fiscal sustainability and labour supply of some provinces at risk, a new study published Thursday says.

The report by the Atlantic Provinces Economic Council, a Halifax-based economic think tank, said providing people with a monthly cheque would ensure everyone has enough money to meet their essential needs, including food, housing and clothing.

The income support would reduce inequality, establish a sense of financial security and encourage savings, the study found.

Yet a basic income program — whether needs-based or universal, with the amount paid to higher income earners recouped through taxes would be more complex than it seems, the report said.

Read more: Basic income program could cut national poverty rates in half, PBO says

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Funding the program would likely require increasing taxes or cutting government spending, it said.

“One of the biggest risks is how this program would be funded over the long term,” said Lana Asaff, a senior economist with APEC. “It’s quite expensive.”

A report by the Parliamentary Budget Officer estimated a national guaranteed basic income would cost about $88 billion in 2022-2023.

If social programs are cut to help pay for a basic income, there’s a risk that certain groups in society could be worse off, Asaff said.

Click to play video: 'Looking at a basic income in Canada' Looking at a basic income in Canada
Looking at a basic income in Canada – Apr 12, 2021

The risk for some regions, such as Atlantic Canada, could also be worse, she added.

Meanwhile, a guaranteed income could also create a disincentive to work, potentially worsening existing labour shortages.

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“There’s a concern that it could discourage people from working,” Asaff said. “That could be a challenge especially in lower-wage industries, which is where we’re seeing a lot of labour shortages.”

No programs being tested

The idea of a guaranteed basic income program gained renewed interest during the pandemic.

The roll out of the Canadian Economic Recovery Benefit, or CERB, and other pandemic benefits spurred discussions on the adequacy of our country’s social safety net.

In December 2021, Senator Kim Pate and MP Leah Gazan introduced bills aimed at creating a national framework for “guaranteed livable basic income,” the APEC report said.

“A basic income is a concept that’s been around for a while … but it’s becoming a more mainstream topic,” Asaff said. “There are potential advantages and disadvantages of the program but some are more theoretical in nature.”

Read more: Nova Scotia’s ‘low-wage economy’ and the impact it’s having on people

No basic income programs are currently being tested in Canada.

In 2018, the B.C. government commissioned an expert panel to study basic income, including the feasibility of a program and the potential to reduce poverty.

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It found that shifting to basic income would be a complex undertaking and not necessarily the most cost-effective way to reach poverty goals.

Ontario launched a three-year basic income pilot project in 2017, but it was cancelled before it could be completed after a change in provincial government.

The APEC panel said income support targeted at certain groups may be a better alternative, the report said.

This report by The Canadian Press was first published June 16, 2022.

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