By Kelly Ernst
Open a newspaper and you are likely to read that the Canadian economy is ramping up. Oil is up, the dollar is up, and employment is up. Yet on the streets we hear that things have not changed substantially for many people and for a very long time.
Statistics Canada data confirm that the highest-income people are earning more, while lower-income Canadians are not faring better. So where is the debate on new policy initiatives that could reverse such disparity across the income spectrum?
It is easy to find reports of economic well-being but the fact remains that economic disparity is growing at a worrisome rate.
The Organisation for Economic Co-operation and Development (OECD) has pointed toward Canada as an example where “the rich have been getting richer leaving both middle and poorer income classes behind … Canada spends less on cash benefits such as unemployment benefits and family benefits … as a result, taxes and transfers do not reduce inequality by as much as in many other countries.”
Consequently, up to 14 percent of Canadians now live in poverty. Even in wealthy Calgary the working poor now number as many as 140,000 people.
The reports about how well our society is doing economically ignore the reality of the many people who are falling farther and farther away from those with wealth.
What’s wrong with income disparity?
To say that economic disparity is bad for all of us, not just the poor, is not particularly revolutionary. Richard Wilkinson and Kate Pickett, in their book The Spirit Level, bring together a wide variety of evidence showing that countries with greater disparity have lower life expectancy, higher teenage pregnancies, higher infant mortality rates, higher rates of crime and homicides, greater imprisonment rates, and lower social mobility. The conclusion seems unavoidable: we ought to be tackling growing disparity to eliminate the harm it causes to all of us.
Back to basics
One policy worth considering is a guaranteed basic income level for all citizens. Although there are many approaches, a guaranteed annual income (GAI), has been described as a promising method.
A GAI provides enough income to ensure families can pay for their basic needs, such as housing, food, clothing, and transportation, without needing expensive government supports to monitor it. Senator Hugh Segal has argued that a negative income tax program could be used to deliver the GAI. For those who file taxes and earn below a particular threshold a grant would be delivered to them. This would phase out as they begin earning self-sustaining incomes. If unconditionally applied to all citizens, it might eliminate much of the poverty in Canada as well as the discrimination in adjudicating the “deserving” and the “undeserving” poor.
Segal suggests that GAI would reduce many costly provincial and municipal support programs (such as welfare, employment insurance, food banks, homeless shelters, and many health services) that are currently used to address poverty. Because it would be universally applied through tax returns, the GAI eliminates the need for monitoring elaborate qualifying rules. It attacks core poverty without needing swarms of additional bureaucrats and may well result in a diminished bureaucracy.
Recent studies by Evelyn Forget based on evidence accumulated from a basic income trial in Manitoba in the 1980s suggest that a minimum income program leads to greater levels of post-secondary education plus fewer health and other costs associated with poverty. Rather than acting as a disincentive for people to find work – a criticism often leveled against a guaranteed income – the Manitoba trial showed that the program provided opportunity for people to upgrade their education and opened new employment opportunities to them.
Canada currently offers a minimum Guaranteed Income Supplement (GIS) to seniors with low incomes. The GIS is often cited as a policy success because it keeps many seniors out of poverty who would otherwise experience extreme hardship. Similar programs have been suggested for people with disabilities, students, or single women with children pursuing educational upgrades.
Contrary to critics of a basic income policy who suggest it would be prohibitively expensive, its implementation may be quite affordable – especially in comparison to funds expended on recent economic stimulus. For example, Canada spent $47 billion in 2009-10 on stimulus infrastructure spending. This is five times more than the $8.3 billion spent in 2010 on GIS for 1.6 million seniors. We spent substantially less on direct supports for people entering the work force: $1.3 billion for approximately half a million people accessing student loans and grants.
The billions spent on infrastructure rather than expanding Canada’s existing GIS was a conscious policy decision in response to the economic downturn. The main impediment to helping the poorest Canadians climb out of poverty is not that a basic income policy would be unaffordable but that we lack the political will to consider such a solution.
Policymakers should consider basic income benefits
Consider a GAI applied to students in postsecondary education. If we supported low-income students through school, they could complete their education debt-free similar to how many higher-income Canadians now complete their education. A GAI would allow access to education for diverse groups of people who are least able to afford it, simultaneously help to reduce economic disparity by improving their employment prospects, and reduce governmental costs associated with student granting programs.
A GAI could give the opportunity to students to invest savings immediately upon entering the workforce and foster compounded wealth accumulation both individually and on a macro scale. Such early investment by young people could significantly reduce the need to pay seniors’ pensions later in life.
This is only one example of how a basic income policy might help encourage people to sustain themselves, reduce the cost of poverty to taxpayers, and simultaneously reverse the societal impacts of deepening disparity.
Without serious discussion of economic disparity, its consequences, and possible solutions, we will never determine how to mitigate poverty’s deleterious effects to all of us. If we think economic disparity ought to be addressed, then we have an ethical obligation to ask our policymakers how they plan to do it.
Kelly Ernst is Senior Program Director at the Calgary-based Sheldon Chumir Foundation for Ethics in Leadership.