20 June 2008

Guaranteed Annual Income

In her column in today's Star, Carol Goar writes of the need for a pan-Canadian anti-poverty strategy and the support, by Senator Hugh Segal, for a guaranteed annual income.

Goar lists what she considers to be the advantages and disadvantages of a GAI.

It would provide all Canadians with enough income to meet their basic needs. Because the benefit would go to everyone, there would be no stigma, no means test, no auditing of bank accounts, no fraud investigations and no intrusion into people's privacy.

It would be administratively efficient. Because the payment would be delivered through the income tax system – in the form of a negative tax for those with no income – there would be no need for legions of bureaucrats.

It would give governments a new tool to reduce poverty. Most research shows a revenue-neutral plan – one costing the same as the programs it replaced – would produce a slight drop in the poverty rate.

But a universal entitlement would have four major drawbacks:

It would be an expensive way to fight poverty. Economists have calculated the price of bringing everyone up to 70 per cent of Statistics Canada's low-income cut-off at roughly $20 billion...

A guaranteed annual income would not include job training for the unemployed, support services for people with disabilities, subsidized child care for single parents, student aid or social housing.

It would induce some people not to work. The impact would depend on the size of the benefit. Various experiments conducted in Canada and the United States have shown a 1-to-20 per cent drop in labour force participation.

It would require an extraordinary amount of federal-provincial co-operation to enact a new national program...

WISE, a former group and national movement of low-income women, included a GAI as one of its major goals. However, we did have one reservation - which is why it ranked as our third, not first or second key goal.

Contrary to Goar and the "various experiments" to which she alludes (would like to see them), WISE's project Policies of Exclusion, Poverty & Health: Stories from the front and other work with women in poverty make clear that low-income women, at least, want to work.

It's not the money driving this desire, either. It's the need to feel connected with our community and to know we're contributing to its vibrancy.

Goar does not include in her list the one reservation WISE women had about a GAI.

That reservation was based on this: Supposing Canada implemented a GAI with the intent of bringing everyone up to 70 per cent of Statistics Canada's low-income cut-off (LICO). Wouldn't the market simply adjust everything upward?

Rents, for example, would begin rising as more people could pay them. Wages would go up, in order to provide additional incentive to work. So would the price of the products or services workers provided.

Therefore in the end, after market adjustments, the chief benefit cited of a GAI - that it would lift more people out of poverty or at least enable everyone to meet their basic needs - would reduce to nothing.

However, one other original benefit would remain: the reduction of stigma, through both the removal of means-based criteria and the return of privacy. For this reason, because we'd seen how much stigma plays a role in our own lives and those of the storytellers, WISE supported the push for a guaranteed annual income for all.

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