Basic Income, it is argued, provides an effective and efficient means of conquering poverty. What, exactly, is the problem that we are trying to solve? Mention poverty to someone and they are likely to immediately think of the Third World. Bringing the focus back to poverty in developed countries is fraught with preconceptions. People have predispositions to think about issues in certain ways. They share these predispositions with all other members of society regardless of specific opinions on social questions. Various models are utilized rather than others based upon how we frame the issue.[1] And so we feel that we have an intuitive grasp of the subject.
Courts will accept eyewitness testimony that someone was drunk. If a person were to get in an accident while driving and damage another’s car, then during the time of car accident settlements, the defense lawyer can bring in an eyewitness who can testify to the fact that the driver was intoxicated. The witness is not an expert. No Breathalyzer test was done; no blood sample was taken. They can just tell from a person’s demeanor and the nature of the accident whether or not it could have been a DUI case. It is considered common knowledge. The same can be argued for poverty. Broad definitions of poverty exist, such as: “the condition of a human being who is deprived of the resources, means, choices and power necessary to acquire and maintain economic self-sufficiency or to facilitate integration and participation in society.”[2] “In 1958, John Kenneth Galbraith argued, ‘People are poverty-stricken when their income, even if adequate for survival, falls markedly behind that of their community.'”[3]
The problem is translating this qualitative information into numbers so that policies can be implemented and progress tracked.
Some people accept that poverty is undefinable because it is a personal experience. This complexity is highlighted in the expression ‘poverty and social exclusion.’ A concept that you can’t define is difficult to measure. We may be evaluating actions taken to reduce poverty by a method which measures something completely different. Just counting the poor turns out to be a daunting task.
Many approaches are taken to arrive at a threshold value that defines poverty. I will present examples from Canada, Europe in general, the United States and the United Kingdom. Debates surrounding the various metrics are discussed as they come up. Some work incomes and welfare benefit numbers provide context.
In Canada, no official definition of poverty exists. Statistics Canada has been making this point for almost 45 years[4]. What is measured is low-income. Some countries like the United States have an official definition of poverty even if ‘there is still no internationally accepted definition of poverty-unlike measures such as employment, unemployment, gross domestic product, consumer prices, international trade and so on.’[5]
Statistics Canada tracks three low income statistics.
The Low Income Measure (LIM) is 50% of the adjusted mean income of Canadians[6]
The Low Income Cut-Off (LICO) starts with the spending of the average Canadian family on shelter, food and clothing (43% of after tax income).[7] The threshold is set at 20% more.[8] Any family earning less is below this Low Income Line.[9]
The Market Basket Measure (MBM) ‘is a measure of low income based on the cost of a specific basket of goods and services representing a modest, basic standard of living.’[10] It takes into account the ability to reasonably participate in community activities as well as physical health. It varies by geographical location.
This last metric developed in the late 1990s by Human Resource and Skill Development Canada is different from the other two, introduced by Statistics Canada. The first two statistics are unambiguously relative. Strictly speaking they measure income inequality. While the Conference Board of Canada does not hesitate to refer to the MBM as absolute[11], the specialist I spoke to at Statistics Canada was not so sure.[12] However, he felt that the basic-needs poverty line (BNPL) proposed by Professor Chris Sarlo of the Fraser Institute might qualify as absolute. Sarlo himself nuances this view:
This basic-needs approach to poverty is often referred to as an ‘absolute’ measure. This label is misleading insofar as it suggests that the list can never change and is therefore completely out of place in our rapidly changing society. While the basic needs line does propose a broad list of necessities that remains in place over time, the nature, standard of quality, and the quantity of each of the components will vary across societies and will vary over time in a given society. In other words, the basic-needs approach is partly absolute (the list is limited to items required for long-term physical well-being) and partly relative, reflecting the standards that apply in the individual’s own society at the present time.[13]
Stepping back a bit, you can often use absolute poverty as a synonym for extreme poverty, a term applicable to deprivation in very poor countries. Even so, relative elements remain: you can’t compare the situation of someone with no heating in the Arctic to that of someone with no heating in the Tropics. Moreover, Sarlo’s BNPL is approximately 30% lower than the MBM using a similar approach. Clearly, relative and absolute measures overlap and both involve a degree of judgment and arbitrariness.
There are many other variations on these themes. I will cover just a few.
In Europe, they use a measure called the at-risk-of-poverty threshold to define poverty. It represents a ‘percentage of the median or mean value of the Equivalised disposable Income after social transfers.’[14] ‘A threshold of 60% is the most commonly used.’[15] EU countries simply referred to the 60% level as ‘generally accepted.’ [16] Tables sometimes show statistics calculated at 40%, 50%, 60% and 70%, without comment.
The official United States poverty threshold has a fascinating history.[17] Based on the work the Social Security Administration economist Mollie Orshansky, it is often referred to as absolute. However its creator labelled it ‘arbitrary but not unreasonable.’[18] As early as 1959, Orshansky was aware of the pitfalls and limitations of the standard budget (usually called market basket today) approach to defining poverty. At the time, and even today, only with food, because of its nutritional value, can we reach some consensus about what minimal requirements are. Orshansky used the two lowest budgets devised by the Department of Agriculture: the low-cost food plan and the even less expensive economy plan. For the non-food portion, she used Engel’s Law (named for the statistician Ernst Engel not Marx’s collaborator Friedrich Engels), a normative principle establishing that a family spends one third of its total income on food. Using a multiplier of three for food costs under both plans, with adjustments for childless couples and single people, 124 thresholds were developed for farm and non-farm families of various compositions. With a few minor modifications and yearly inflation updates, this measure, based on the economy plan, is still in use today to count the poor in the United States.
A novel variant of the market basket approach, the Minimum Income Standard for the United Kingdom (MIS) is maintained by the Centre for Research in Social Policy at Loughborough University in Leicestershire, UK. [19]
MIS is based on detailed research with groups of members of the public specifying what items need to be included in a minimum household budget. The groups are informed by expert knowledge where needed, for example on nutritional standards. The results show how much households need in a weekly budget and how much they need to earn in order to achieve this disposable income.’ [20]
MIS is not an absolute measure like the US poverty line nor is it entirely relative.[21] ‘MIS also seeks to ensure that minimum income is looked at in the context of contemporary society, but does so in an evidenced way.’[22] Rather than make assumptions about societal standards, public input is used. Also, the UK’s Joseph Rowntree Foundation, which created the MIS, does not consider it to be a measure of poverty[23] and uses the 60% of mean measure in reports it publishes such as Monitoring poverty and social exclusion 2016.
To understand how different the figures are and to visualize the impact they have on the number of poor that are counted, I have converted all the metrics discussed into dollar amounts, in the table below. I make no claim that these numbers are comparable, only that they are reasonably accurate and up-to-date. The last three numbers are actual welfare payments rather than poverty statistics. They are strikingly lower than the rest and this fact does not speak for itself. It does, however, tell a story, if I may digress. The usual reaction when seeing these numbers is: how can someone live on such little income? I would ask: how does one get out of poverty under such straitened conditions?5 In Quebec, a welfare recipient is allowed to earn $200 per month without penalty. Over that amount, for every extra dollar made their benefits are cut by a dollar (a 100% marginal tax rate). In France, every Euro earned is deducted. This is what is known as the poverty trap. The system is structured so as to remove any incentive to get out of poverty.[24] When governments set payment schedules so far below poverty lines and also discourage the poor from improving their situation, what message does that send?[25] And in case you were thinking that the answer is ‘Get back to work’, item 11 shows what those who cannot work receive about 50% more, still nowhere near any threshold, except Sarlo’s BNPL (item 4), which has been ‘criticized as being too stringent and even “mean-spirited”.’13 More on that later.
Items 8 and 9 are incomes for a 40-hour workweek. These numbers indicate that poverty is not an issue confined to the unemployed. For example, in 2014, ‘Walmart’s low-wage workers cost US taxpayers an estimated $6.2 billion in public assistance including food stamps, Medicaid and subsidized housing.’[26]
As mentioned previously, the most striking pattern in the table is how the last three entries are low, compared to the rest. The others cluster together with the notable exception of item 4 (Sarlo’s Basic-Needs Poverty Line) and Item 10 (the US poverty threshold). Both of these statistics tend towards absolute measures, which are meant to focus on deprivation rather than income inequality. Which measure is appropriate in a developed country? If all you have achieved is to avoid destitution, are you no longer living in poverty? Not if integration and participation in society is beyond your reach. This is why relative measures of poverty are deemed more appropriate choices, especially in developed countries: they account for social inclusion.
I have tried to frame the question of poverty in such a way as to provide a better understanding of the numbers that inevitably come to define it at some point. Many judgments and choices are involved in calculating these numbers. Agreeing on a number requires social consensus. Unfortunately, focusing on the numbers is not conducive to building such a consensus and is even counterproductive, in that it immediately evokes highly emotional questions of cost and fairness. The whole debate sidesteps issues of social exclusion and lack of opportunities, to which people can better identify in their own lives.
Getting back to the original question, we need a definition of poverty to implement Basic Income. However, labeling it with a threshold number is both necessary and self-defeating. It is not possible to implement Basic Income without pinning down the benefit and cost numbers, yet focusing on these numbers distracts from the positive principles that would muster support for them. Framing the question of what poverty is in such a way that principles are explored before we formulate a numerical definition is more important than the number itself. This reframing is thus a prerequisite to Basic Income.
Author biography: Pierre Madden is a zealous dilettante based in Montreal. He has been a linguist, a chemist, a purchasing coordinator, a production planner and a lawyer. His interest in Basic Income, he says, is personal. He sure could use it now!
[8] “Twenty percentage points are used based on the rationale that a family spending 20 percentage points more than the average would be in ‘straitened circumstances.'” Ibid.
[9] LICO for a single person in a metropolitan area in 2012 = $19597
[18] Orshansky, “Counting the Poor: Another Look at the Poverty Profile,” Social Security Bulletin, Vol. 28, No. 1, January 1965, p.4. Quoted in Fisher (see previous note)
[21] “…We would not expect the content of a MIS basket to stand still. But we also don’t think that changes in the average AUTOMATICALLY trigger proportionate changes in the minimum, and in this sense it is not a relative measure.” Donald Hirsch, Director of Centre for Research in Social Policy, personal communication, Nov 1 2016
[22] Donald Hirsch, Director of Centre for Research in Social Policy, personal communication, Nov 1 2016
[23] Joseph Rowntree Fondation Press Office, personal communication, January 11, 2017
[25] There is no question that low welfare payments are a political choice. In 1969, when Quebec introduced its first welfare legislation, benefits for people under 30 were set at 70% of the amount provided to everyone else. Accounting for inflation, this still represents more than what someone unfit for work receives today.
Councilors of the small Ontario town of Smiths Falls voted on December 19 last year to reject participation in its province’s basic income pilot, to the objection of residents and the town’s mayor. A petition requesting a re-vote is currently circulating online. The story begins, however, in 2008.
That year The Hershey Company shuttered its Canada operations, at the time based in Smiths Falls, largely for cheaper Mexico-based labor. This exit of the area’s biggest customer precipitated the same by other businesses, and although the ensuing purge of jobs merely reflected a manufacturing decline already underway in the province, the disappearance of five hundred positions at Hershey’s alone, accounting for nearly 6% of the town’s population, catalyzed especially forward-looking pain. That year the town operated at a surplus of C$11.2m, and by the town’s most recent reported fiscal year, its once budget excess had trudged through increasingly tight leverage to a deficit of C$1.3m (albeit improved since 2013). Today the town struggles with unemployment above the national rate, and a third of children live below the poverty line.
Given also an aging population and petering labor force – per census data the town’s median age increased by 2.1 years in the five years leading up to 2011, and the overall population declined by 2% – it could be in the interest of Smiths Falls’ residents to entertain a basic income system. Indeed the petition created by resident Carol Anne Knapp has so far gathered 113 supporters, with a goal of one thousand. This is despite the council’s three-two vote, with two councilors absent, against mayor Shawn Pankow advocating to Ontario’s finance minister for participation in the program. Pankow has meanwhile expressed interest in holding a public meeting on the topic this month, health officials in tow.
A prominent councilor, Dawn Quinn, cast one of three “nay” votes. According to Jordan Pearson, writing for Motherboard, her vote was at least partly informed by her credo of frugality, stating that “folks sit around in Tim Hortons all day instead of looking for jobs, and they should consider buying a tin of Tim Hortons coffee to make at home instead of buying a cup.” On that point Pearson continues, “[Quinn added] they could consider shoveling snow to earn some extra money.” Similarly conveying Quinn’s underlying sentiment, Kate Porter quotes her in CBC News: “They need to be able to learn how to take that money and stretch it […] we need more of that kind of thinking.” So it appears the belief that basic income causes squander was, at least for one decision maker, a reason for the council’s vote outcome.
There is, however, some evidence from a bordering province that suggests this perspective is dogmatic, as reflected in Knapp’s petition letter requesting that a “new vote be based on science and evidence.”
Nearly forty years ago, Dauphin, a similarly small town in the Canadian province of Manitoba, underwent a five-year minimum income (dubbed “mincome”) experiment. Mincome was also similarly basic income-lite. Rather than a true guarantee, which is regardless of preexisting income status, mincome subsidized only those poor enough and was reduced for those who earned above a threshold. Likewise, Ontario’s pilot makes whole those earning below a set threshold. Even so, the experiment provides refutation to Quinn’s apprehension of lethargic congregations at Tim Hortons.
Evelyn Forget (credit to: Ecocide Alert)
According to Evelyn Forget, an economist at the University of Manitoba and academic director of the Manitoba Research Data Centre, primary earners in Dauphin worked only marginally less within the five-year study, and much of the other reductions in labor force participation was comprised of women who extended maternity leaves and male high school students who simply stayed in school rather than work. Additionally, hospitalizations, in particular for mental health problems, dropped significantly (nearly 9% across the board) and would alleviate the burden on healthcare programs today.
Quinn acknowledges, though remains unpersuaded by, the Manitoba findings and is further dissuaded by cost – a concern currently aggravated by budget shortfalls. She protests that Smiths Falls became financially saddled after a 1970s investment in low-to-moderate income (LMI) housing, giving rise to her concern about opting into another government-borne program. A ten-year housing plan published in 2014 by Lanark County and Smiths Falls, however, notes that 74% of the county’s dwellings requiring major repairs were constructed prior to 1971. Coupling two observations then – 60% of LMI housing was developed under the program to which Quinn is referring; and renting in lieu of owning has been on the rise since Hershey’s departure – the 1970s investment appears to have provided an arguably necessary safety net.
Expenses, furthermore, reflect precarity when business output, curbed by economic disempowerment of consumers, constrains municipal revenues. In pursuing a conservative bottom line, rejecting basic income has a potentially truncating effect on the top, and budget woes thereby persist. On this, councilor Lorraine Allen, one of two “yea” votes, says the proposal would enable residents to “shop more, buy more groceries, perhaps be more involved in things that they couldn’t before.” Hence her vote for the program.
Still, the short-lived nature of the pilot is consistent with another of Quinn’s concerns: that a pilot implemented, then taken away, could prove negligibly meaningful. In the town’s 2015 operations approximately C$2.4m was spent on social and family services. Tucked inside these costs were, in addition to unspecified uses, assistance to the elderly, childcare and the social housing expenses which Quinn resents of the 1970s. If the Ontario program follows the recommendation by former senator Hugh Segal (a monthly allowance of C$1,320), the combined cost to eligible individuals could perhaps exceed the town’s existing social and family services expenditures. This mainly reinforces the need for cooperation between municipality and province-level governments to realize success from basic income. Eating the full burden, what Ontario offers is more generous than that. But in order for such a program to live past a test phase, the council of Smiths Falls would first have to heed the needs of its residents – and try.
Thanks to Genevieve Shanahan for reviewing this article.
Rudy Karsan, co-founder and former CEO of the former human resource software company Kenexa (sold to IBM in 2012) recently held a TEDx talk in Calgary where he advocated a universal basic income as a means of stimulating innovation.
“We are in the golden age of our species,” Karsan begins his talk. He argues that we already have multiple solutions for the lack of food, water, and energy, and even for global warming; thus, our number one risk is none of these. Instead, he argues, “Meaningful work is about our choice of who we are,” and the lack of it is going to be the number one risk.
Karsan continues by explaining that this problem will not be solved by jobs:
“Jobs are getting decimated in an accelerating pace and they are not coming back.” […]
“We have to break the mental construct that jobs equal work.”
“No!” Karsan continues firmly. Jobs do not equal work. “Meaningful work has been with us forever and will be with us forever. It is not jobs. Jobs are simply a subset of work.” Jobs have created money for us since they came into our lives at the beginning of the Industrial Revolution, 250 years ago. “But work can exist without jobs.”
The second mental construct we have to break, according to Karsan, is about entitlement:
“We need to discard all forms of social programs and replace it with one: Universal Basic Income, which is the individual right for every citizen to unconditionally get an income from the state on a regular basis.”
“UBI is not about creating dependence; it is about the Maslow’s hierarchy of needs at the lowest level. […] The notion that this entitlement to a UBI makes us smaller and weaker is absolutely untrue”, Karsan states. It is also not a new idea, and the data that came out of Manitoba in the seventies already showed that minimal income had many positive effects.
Karsan even takes it further and states that a UBI is not only something we can afford, but it will also make us greater. “Innovation did not start with homeless people.”
Karsan encourages his public to demand a UBI from their leaders, because he is convinced that our species in the golden age can move a lot further and he hopes and dreams that “we may find a way, not only to find meaning in our lives, but meaning in the universe itself.”
In a unanimous decision on Tuesday, December 7, the Legislative Assembly of Prince Edward Island (PEI), Canada, agreed to “pursue a partnership with the federal government for the establishment of a universal basic income pilot project” on PEI.
Peter Bevan-Baker CC BY-SA 3.0
The motion was originally proposed by Green Party Leader Peter Bevan-Baker, and received the support of all four political parties in the province, which have been united for well over a year in their support for investigating a basic income guarantee (BIG).
Bevan-Baker drew inspiration from past experiments in Manitoba (the Mincome trial of the late 1970s) as well as the pilot scheduled to begin next year in Ontario. He believes that PEI’s small size — the island has only about 150,000 residents — would make it an ideal setting for an additional pilot study. Hugh Segal, adviser for the Ontario pilot, has also encouraged other provinces, such as PEI, to run their own trials of basic income.
According to Bevan-Baker, a pilot project is necessary “so we can evaluate whether the benefits outweigh the costs” — as quoted in a CBC News report about the successful motion — where the costs, in his view, might include a work disincentive effect as well as financial costs to the government. The main benefit specified in the motion is the reduction or elimination of poverty. However, the motion also mentions many other possible positive effects, including “local economic growth, supporting entrepreneurship, reducing administrative complexity and costs, improving working conditions, reducing crime, improving health, and helping to build vibrant rural communities.” CBC News quotes Bevan-Baker as saying, “A universal basic income could enable the greatest unleashing of human potential ever seen.”
The full text of the motion is as follows:
WHEREAS implementing a universal basic income in Prince Edward Island would significantly reduce or potentially eliminate poverty in the province;
AND WHEREAS a universal basic income would likely have many other positive effects,
including local economic growth, supporting entrepreneurship, reducing administrative
complexity and costs, improving working conditions, reducing crime, improving health, and helping to build vibrant rural communities;
AND WHEREAS all four Prince Edward Island political parties have indicated their support for exploring a universal basic income;
AND WHEREAS the federal government has indicated an interest in exploring a universal basic income;
THEREFORE BE IT RESOLVED that the Legislative Assembly urge government to pursue a partnership with the federal government for the establishment of a universal basic income pilot project in Prince Edward Island;
THEREFORE BE IT FURTHER RESOLVED that Government shall provide an update on the progress of this initiative in every session of this assembly.
The motion is still only an early step toward a basic income pilot in PEI. If the province is to actually implement a pilot, it will require cooperation and support from the federal government. The PEI Department of Family and Human Services has previously issued the following statement:
The Province supports the concept of the Basic Income Guarantee. We have been consistent in our response that any pilot project in this area would require active and committed federal participation. We are always open to partnerships with the federal government to improve the financial well being of the residents in our province.
No specific model for the basic income has been proposed for the (possible) pilot. The Working Group for a Liveable Income — an advocacy group that has been instrumental in promoting BIG in PEI for over a decade — explicitly supports a negative income tax (NIT), in which “if the person receiving BIG gets other personal income, the maximum level benefit will be affected by a reduction rate”. Segal has also recommended an NIT for the Ontario pilot. While ‘universal basic income’ is often used to refer to a universal cash grant with no reduction based on other earnings, in contrast to a NIT (cf. “What is the Basic Income Guarantee?”), it is not certain whether the PEI motion intends the phrase in this sense (which would entail that PEI is pursuing a form of BIG less commonly discussed in Canada).
References
Motion No. 83, Legislative Assembly of Prince Edward Island.
The Icelandic Pirate Party — which has proposed to launch an investigation into ways to implement an unconditional basic income in Iceland — has been granted the authority to form the country’s next government.
Iceland’s Pirate Party (Píratar) gained 10 seats in Iceland’s parliament (Alþingi) in the October 2016 general election (which was held a year early, after the Prime Minister resigned in the wake of the Panama Papers leaks). This put the party in third place in parliamentary representation, behind the center-right Independence Party and the Left-Green Movement.
Birgitta Jónsdóttir CC BY-SA 2.0 Pirátská strana
In Iceland’s political system, the president invites the leader of the winning political party to negotiate with the other parties to select new members of the government. If the party does not succeed, the president passes the mandate to the second most dominant party, and so on. In this case, neither the Independence Party nor the Left-Green Movement succeeded in negotiations; thus, on December 2, President Guðni Jóhannesson handed the mandate to form the government to Pirate Party leader MP Birgitta Jónsdóttir.
This marks the first time — in any country — that the authority to form a government has been handed to a party officially committed to investigate the possibility of basic income.
Píratar does not officially endorse any specific form, amount, or funding mechanism for a basic income guarantee, and the party believes that more research is necessary before moving forward with any such policy. Moreover, neither implementing nor researching a basic income appears on the party’s manifesto for the October 2016 parliamentary elections.
However, Píratar has actively promoted research into a basic income guarantee for Iceland, and plans to continue to do so with the new government. MP Halldóra Mogensen drafted a proposal calling on the Ministry of Welfare and Ministry of Finance to form a working group tasked with “looking for ways to ensure every citizen unconditional basic income” (“skilyrðislausa grunnframfærslu”), which she submitted to parliament in November 2015 along with the other two Pirate MPs, Ásta Guðrún Helgadóttir and Birgitta Jónsdóttir. In setting out the case that Iceland should investigate the possibility of a BIG, the proposal reviews the results of past basic income trials, especially in Manitoba (the Mincome experiment) and Namibia, and the Alaska Permanent Fund Dividend. It also outlines philosophical arguments for basic income, discusses the potential for a basic income to simplify the welfare system, and presents new concerns surrounding automation and the future of work.
Halldóra Mogensen
Mogensen tells Basic Income News that she will “definitely” put forth the basic income proposal again during the new parliamentary session and “look[s] forward to continuing the conversation in parliament and warming the new MP’s up to the subject.”
Overall, she says, “the conversation [about basic income] is ongoing but no concrete plans have been made regarding implementation or testing.”
Meanwhile, the immediate objective of the Píratar, after forming the government, is to ratify its new constitution.
BIEN Iceland — which is non-partisan but founded by another Pirate, Albert Svan Sigurdsson (Statistics Iceland) — will launch officially on Saturday, December 10 (Human Rights Day).
