Guaranteed annual income could save Canada money, but ultimately impractical: report

Leave it to the Fraser Institute, a Vancouver-based think tank with an appetite for stirring the policy pot, to kick off a new year by resurrecting a familiar, old topic.

The Practical Challenges of Creating a Guaranteed Annual Income in Canada, a research paper released this week by authors Charles Lammam and Hugh MacIntyre, serves as the latest volley in a nearly 50-year-long discussion on how Canadians can best tackle poverty and better support financial stability for those in need.

Broadly speaking, a guaranteed annual income (GAI) program, sometimes called a basic income guarantee, would see the direct transfer of money from government to individuals or families to provide a basic annual income.

Versions of the concept already exist in Canada in the form of guaranteed income supplements for seniors and federal child-tax benefits.

Internationally, Switzerland is set to hold a referendum on the creation of a universal cash transfer to its citizens. In Greece, a six-month pilot program will launch this year providing basic income support to the country’s poorest residents.

How it would work

The Fraser Institute sees merit in what they are calling a “big bang” program.

They envision a comprehensive program whereby the many governmental bodies that manage the current social system are dismantled. That list includes everything from subsidized housing and disability funds to GST/HST credits.

Benefits would be, instead, rolled into a single GAI transfer making it possible to do away with costly administrative duplication.

Eliminating the various eligibility conditions for receiving government transfers would also make a GAI relatively cheaper to operate, since fewer resources would be needed for monitoring and ensuring that recipients comply with the program.

The authors calculate that the existing income support system — after accounting for federal, provincial and local government spending and tax measures — at $185.1 billion in 2013, or roughly 10 per cent of Canada’s economy.

“We could use the money to provide support to individuals,” said Lammam in an interview with Yahoo Canada Finance.

But, here’s the thing. Implementing such a change would take a monumental effort on the part of political leaders, not to mention absolute consensus among all three levels of government, including a willingness to relinquish control over current program administration to a single authority, likely federal.

The authors’ conclusion?

“It doesn’t seem likely to happen in practice,” says Lammam.

Andrew Jackson, senior policy analyst with the Ottawa-based Broadbent Institute, said the Fraser Institute raises valid concerns around a universal GAI program that requires such a fundamental shift in policy.

But, overall, he called the report “disappointing.”

“They really put forward a ‘big bang’ thing. The way they outline the (GAI) program really goes far beyond what the great majority of the advocates are proposing,” he said.

Jackson says a gradual move towards income-system reform is a better starting point for the conversation in Canada — a more modest proposal that allows for the continued discussion by both the political left and right on how we might abolish poverty.

The GAI concept has drawn plenty of interest over the years from people representing all points of the political spectrum in Canada. Proponents of a universal program champion its potential to reduce overall healthcare spending, the frequency of workplace accidents and domestic violence — all measured outcomes of early GAI experiments in Canada and United States in the 1970s.

Kaylie Tiessen, an economist with the Canadian Centre for Policy Alternatives, says previous research also indicates people who receive better financial support achieve higher education levels and are better able to secure more suitable and stable work.

Critics, however, say universal GAI programs actually discourage able-bodies citizens from working.