Social Innovation

Canada's basic income experiment - will it work?

People are reflected on a soap bubble lying on a road during the evening in New Delhi, India, June 23, 2015. REUTERS/Anindito Mukherjee      TPX IMAGES OF THE DAY      - RTX1HR5X

Dr. Helena Jaczek discusses the feasibility of Ontario's basic income programme. Image: REUTERS/Anindito Mukherjee

Dr. Helena Jaczek
Minister of Community and Social Services, Canadian Government
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How will getting money for nothing change the people who receive it?

The Canadian province of Ontario is to start giving some 2,500 people a basic income – money with no strings attached.

The project, which is expected to start later this year, is being designed to test whether a basic income should be given to all Ontarians living in poverty.

‘The government basically believes that if people have the security of knowing their basic necessities are taken care of, they will contribute to society,’ Dr Helena Jaczek, the minister running the scheme, told Apolitical. ‘And this is the point of the pilot, to see: what is the behaviour change? Does that security give you the capacity and willingness to improve education, get retrained, have fewer trips to the emergency room because you’re not subject to that ongoing stress?’

“Welfare programmes keep people trapped in poverty"

People in the trial are to receive C$1,320 (around US$970) per month, equivalent to three-quarters of what is defined as a low income (although the amount and the number if people it will be given to are still under discussion, albeit that the government has budgeted $25 million for three years). Depending on how the trial is designed, the recipients may continue to get that amount regardless of whether they find work and earn extra money. In any case, the government will guarantee that those people will always have an income of at least that amount, one way or another.

‘One of the problems we have with existing systems is that if someone does find work, there will be a clawback of benefits, not just financial benefits, but things like free medical care and housing support,’ Hugh Segal, a former senator and basic income advocate who wrote the study on which the trial is being based, told Apolitical. ‘You end up with the contradiction that welfare programmes keep people trapped in poverty. So the challenge becomes: can you craft a programme that has a better impact than that?’

It also implies an altered view of humanity itself. Instead of traditional welfare systems, which assume that the poor are fundamentally lazy and have to be incentivised to work with an intricate system of carrots and sticks, basic income assumes that if you support people, they will go on to greater things.

The nature of work is changing

Said Jaczek, ‘The classic image of fraudulent access to social assistance is a bit of a myth. It happens, but our analysis is that fraud is very small. We have a basic belief that the vast majority of people do want to be included in society and they do want to contribute.’

Or, as Segal has put it, ‘[Traditional welfare systems] assume that poor people can’t make rational decisions and shouldn’t be allowed to make their own choices. That in my view is a huge mistake.’

The idea of giving people a basic income is en vogue across the developed world. Proposed by Richard Nixon in the 1970s and tested in the Canadian town of Dauphin, Manitoba, in the 1960s, it is now seen as a solution to the way jobs are being changed by technology and economic stagnation. Trials are going ahead in Finland and Holland, while Switzerland recently had a referendum on the subject (rejecting the proposal) and the investment firm Y Combinator is planning a pilot in California.

Proponents see in it a way to look after people whose employment is precarious – a few shifts here, a temporary contract there. Headline examples are companies like Deliveroo and Uber, which pay by the number of deliveries or journeys rather than giving drivers a salary. In this so-called gig economy, people may earn more when the going is good, but are more vulnerable to any change in the situation.

Said Jaczek, ‘I’m a politician, so I go door to door, and a lot of parents I spoke to last time were worried about their twentysomething kids, because of the way the nature of work is changing.’

The most enthusiastic supporters of basic income also believe that it will provide the foundation for a society in which huge sections of the population are made unemployed by automation. In this optimistic reading of our societies’ future, the machines will do the work and humans will have a minimum standard of living guaranteed. (The pessimistic position is that the handful of people in California who built the machines will be unimaginably rich and everyone else will sink back into medieval serfdom.)

Ontario has 812 rules for working out social assistance

Nevertheless, there is also a more prosaic reason for governments like Ontario’s to switch to a basic income: the present welfare system has become so complex that it is almost unmanageable. As all manner of allowances and exemptions – such as, at the height of the AIDS epidemic, a diet supplement for sufferers – have accreted onto the system, Ontario has ended up with 812 rules for working out what kind of social assistance a person is entitled to. Simply giving a basic income could free up a huge amount of cash and time.

Nevertheless, the idea is far from uncontroversial. Within the government itself there is opposition on the grounds that actually people do need be incentivised to work, as well as from finance officials whose ability to allocate spending would be reduced.

One always hopes for really positive outcomes

Also, the apparent simplicity of basic income is something of a mirage. For example, should the money be paid by topping up incomes to a certain level, paying out a negative income tax after people file their returns (Nixon’s model) or just giving people a wad of cash each month? Should the people chosen for the study be people with long-term health problems who are unlikely ever to find work or under-employed young people doing gig-type jobs or indeed young mothers?

Over the three years of the trial, the crucial question will be: how will people’s behaviour change? Will they watch TV all day and subsist on their handout or will they use it as a base on which to build a bigger life? Only the trial will tell.

Said Jaczek, ‘At my age, you always temper enthusiasm with what you’ve observed over the years. Public servants have already been making great efforts to help the poor and I don’t want to just throw out all their good work and say we need something completely different. But one always hopes for really positive outcomes, that the security of knowing that you have enough to live on changes lives for the better.’

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