Written by: Pashmina Rupani
Universal Basic Income (UBI) is a no-strings-attached payment program, where the government gives residents a fixed amount of money at regular intervals. Unlike programs such as welfare or income assistance, UBI operates on an unconditional basis, eliminating the need to fall under a certain threshold to fulfill eligibility. Basically, everyone would be entitled to UBI, regardless of their employment income.
Canada’s current welfare system is used as a last-resort solution for those in extreme poverty, a literal application of providing a ‘safety net’ (8). UBI suggests a broader and more generous application of social services. The main idea is that, without the stress of securing basic needs, people will be able to make better decisions for their lives, leading to better outcomes (1).
Do we need UBI?
The most glaring reason for implementing UBI is automation: 42% of Canadian jobs are at high risk of automation in the next 20 years (2). Automation also further polarizes the labour market through erosion of the middle class (2). Proponents believe that UBI can help ensure or supplement a portion of lost income to those left behind by this transformation to avoid poverty. Ideally, UBI would diminish, or at the very least, slow down the growth of this disparity.
The quality of jobs is also steadily declining (2). The current jobs available are low-pay and low-quality, leaving Canadians underpaid and overworked. Combined with an increasingly precarious labour market, income security is becoming less attainable for most individuals.
How will UBI help?
The number one stressor for people, as of 2020, is financial worries (4). By alleviating the stress of day-to-day expenses, residents would ideally experience improved mental and physical health, as well as allowing some people to exit the cyclical nature of poverty through the way that UBI would expand their opportunities and give them the freedom to pursue said opportunities (3, 4). Without the never-ending need to make ends meet, one has the time and flexibility to explore other options, like entrepreneurship, pursuing or completing higher education, improving skills, learning a trade…. the list goes on and on (3).
UBI also guarantees income for people in traditionally unpaid roles, like caregivers or stay-at-home parents. These roles are typically held by women, meaning that UBI could have a ripple sociological effect by empowering people in these roles.
Next, UBI would also ideally help to reduce costs associated with poverty, which is estimated at roughly $80 billion per year in Canada (9). Costs of poverty can be reflected in many different social structures, such as increased costs to healthcare, criminal justice, and social services systems, as well as the intergenerational costs of poverty, and losses in productivity (9).
Covid-19 and everything that came with it also renewed calls for basic financial support. The pandemic highlighted how residents were left largely unsupported in the face of mass economic uncertainties, which affected most Canadians in some way (5). Regular, guaranteed payments can aid people in these types of unprecedented situations, offering them support and security in times of duress.
How can UBI backfire?
Like most idealistic theories, there are about a million ways that UBI can go wrong in practice. A major concern is that guaranteed income will de-incentivize people to work, leading to economic slowdowns and a labour and skills shortage. As put bluntly by Charles Wyplosz, PhD, Professor of International Economics at the Graduate Institute in Geneva, “if we pay people, unconditionally, to do nothing… they will do nothing” (3).
Implementing UBI is also incredibly expensive. On top of the existing welfare fund, financial support for UBI would be drawn primarily from increased taxes or, at the very least, restructuring the tax system (2).
Lastly, many critics point to how millions of dollars in welfare would be given to families that would not need it (3). Redistributing income upward, instead of directly targeting people and families in poverty seems counterproductive, wasteful, and excessive. However, measures have been put into place in UBI trials to counteract this: for example, reducing $0.50 in UBI for every $1.00 in employment income that a recipient earns (9).
Does UBI work?
The idea of UBI is not new – it’s been around since the 16th century and has been tried, on a small scale, in roughly 130 countries around the world (5).
The results have varied. Two major UBI trials in Kenya and India have shown improved sanitation for residents, increased school attendance, and economic stimulation (5). Trials in Finland and Spain had less definitive benefits in terms of economic stimulation, however, residents reported lowered levels of stress and increased life satisfaction (5). Experiments in Seattle and Denver led to a reduction in hours worked by recipients (5).
Clearly, there isn’t one universal yes/no response to if UBI works. It has benefitted residents of some communities, while de-incentivizing recipients in others.
Can it work in Canada?
It’s difficult to assess how effective UBI would be on a national scale, since it’s never been nationally implemented anywhere. However, we can look to the two UBI trials in Canada that have been previously conducted.
Mincome (Manitoba Basic Annual Income Experiment): A four-year program in Dauphin, Manitoba carried out in the 1970s, where an average family was guaranteed an annual income of $16,000 (6). Employment rates stayed the same, doctor visits and hospitalization rates decreased, and high school graduation rates improved (5, 6).
Ontario: This program was meant to last three years, starting in 2017, however it was prematurely cancelled after the conservative government deemed it “expensive, unsustainable, and clearly not the answer for Ontario families” (7). However, limited results showed improved physical and mental health and more people returning to school (7).
The Cost of UBI
In 2022, the Parliamentary Budget Officer (PBO) estimated a gross cost of $81 billion for this type of project to be implemented on a national scale. Based on an estimated $30 billion of federal and provincial tax credits that could be deducted, that brings the net cost of UBI in Canada to an annual $51 billion (2).
Contextualizing this amount, $51 billion is just 5% of what all levels of government spent in 2020 (9). However, restructuring the tax system to the detriment of the wealthiest would not be without significant opposition, and could introduce a complex web of political and economic issues for the country.
UBI is not a catch-all solution to poverty, increasing rates of mental illness, or unequal social benefits. It’s expensive, can be counterproductive, and complicated. However, it’s an avenue that welfare states can implement in different communities, on a smaller-scale, based on factors like employment rates, financial strain, wealth disparity, etc.
Ultimately, support for programs like UBI will have varied over time and for good reason: the results are not overwhelmingly clear. However, policymakers can examine the specific needs of their communities (high costs of poverty, growing wealth inequality, etc.) and decide accordingly whether UBI is the best fit for them.
(1) Bernstien, J. (2021, September 19). What is basic income and which of Canada’s main parties support it? CBC. Retrieved from https://www.cbc.ca/news/canada-how-basic-income-works-1.6179760
(2) (2021, November 26). Why we need basic income now. UBIworks. Retrieved from https://www.ubiworks.ca/whynow
(3) (2021, February 25). Universal Basic Income (UBI). Britannica Encyclopedia. Retrieved from https://www.procon.org/headlines/universal-basic-income-top-3-pros-and-cons/
(4) (2021, January 27). Mental well-being inherently connected to financial wellness. Purdue University. Retrieved from https://www.purdue.edu/newsroom/purduetoday/releases/2021/Q1/mental-well-being-inherently-connected-to-financial-wellness.html#:~:text=Worries%20about%20finances%20came%20in,%25)%20and%20family%20(46%25).
(5) Samuel, S. (2020, October 20). Everywhere basic income has been tried, in one map. VoxMedia. Retrieved from https://www.vox.com/future-perfect/2020/2/19/21112570/universal-basic-income-ubi-map
(6) Cox, D. (2020, June 24). Canada’s forgotten universal basic income experiment. BBC. Retrieved from https://www.bbc.com/worklife/article/20200624-canadas-forgotten-universal-basic-income-experiment
(7) Haridy, R. (2020, March 12). Canada’s cancelled basic income trial produces positive results. NewAtlas. Retrieved from https://newatlas.com/good-thinking/canada-basic-income-experiment-ontario-report-results/
(8) Mahboubi, P. & Ragab, M. (2020, June). Lifting Lives: The Problems with Ontario’s Social Assistance Programs and How to Reform Them. C.D. Howe Institute. Retrieved from https://www.cdhowe.org/sites/default/files/attachments/research_papers/mixed/Commentary%20572_0.pdf
(9) (2022, May 11). Basic Income: Who Pays? Probably Not You. UBIworks. Retrieved from https://www.ubiworks.ca/howtopay
(10) Feffer, J.(2022, July 15). Is universal basic income part of a just transition? Institute of Policy Studies. Retrieved from Is Universal Basic Income Part of a Just Transition? – FPIF