Instead of a universal basic income, governments should enrich existing social programs
Amid the COVID-19 pandemic, the idea of a universal basic income (UBI) has been touted by those across the political spectrum as a prospective model of social security that would provide guaranteed cash to citizens.
But while UBI is desirable in principle, it’s not a magic solution to the intricate and perennial problems of poverty and income inequality. Furthermore, its implementation in Canada is not financially, administratively, politically or constitutionally feasible.
Within emerging literature on the implications of the COVID-19 pandemic on employment and earning levels, UBI has been elevated to the status of a panacea that could ease all the social and economic ills that societies are encountering during the crisis.
Ardent advocates of UBI have argued that it has the potential to reduce poverty, narrow income inequality gaps, address automation, eradicate the stigma associated with collecting government assistance, enhance the social well-being of citizens, diminish dependency and streamline existing complex and fragmented social transfer programs and public services.
The appeal of UBI in Canada has become so strong that several Liberal MPs have asked Prime Minister Justin Trudeau to elevate UBI to the top of his policy agenda.
From CERB to a universal basic income?
Some advocates of UBI contend that the gradual conversion of the CERB (Canada Emergency Relief Benefit) into UBI is a logical progression.
However, if UBI is set at a monthly, $1,000 unconditional benefit for every adult Canadian, the total net annual cost would be $364 billion. Obviously, that’s not only financially unsustainable, it’s also politically suicidal.
On the other hand, according to a report released by the Office of the Parliamentary Budget Officer in 2020, the estimated cost of a watered-down version of UBI — called a guaranteed basic income — covering only low-income, working-age Canadians (estimated at 9.6 million Canadians between the ages of 18 to 64) would be in range of $47.5 billion to $98.1 billion for a six-month period.
Under this attenuated version of UBI — similar to the Ontario basic income pilot project introduced by the former provincial Liberal government in 2017 and later abandoned by Doug Ford’s government — individuals and couples would receive an annual income of $18,329 and $25,921 respectively.
The projected cost range depends on how much of the benefit is clawed back from recipients when any other income increases above an established threshold.
Even under this trimmed version of UBI, however, there could be pressure to significantly raise taxes to pay for it, which could inflict colossal costs on the economy.