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Universal Basic Income Canada Pros and Cons

Vincent Nyoike
Vincent Nyoike Finance

Canada is one of the countries that have tried basic income. The idea behind basic income in Canada goes way back to the 1930s during the Great Depression. The Covid-19 pandemic has rendered many people jobless, thereby igniting the debate about the introduction of a basic income in Canada. Organizations like UBI Works have been pushing for guaranteed basic income in Canada.

Besides, The Liberal Party, through MP for Davenport, Julie Dzerowicz had tabled a bill on the introduction of basic income in Canada. Although the Bill flopped, there is need to rethink about the introduction of basic income. Other parties that support the idea behind basic income include New Democratic Party (NDP) and the Green Party of Canada.

In this article, we are going to review Universal Basic Income in Canada, its experiments and findings, and its merits and demerits.

What is Universal Basic Income?

Universal basic income is a program that gives citizens of a country a specific amount of money regardless of their income, employment status, or resources they own. The main aim of universal basic income is to reduce poverty and increase equality among citizens in a country.

Read also: Passive income vs active income.

Characteristics of Basic Income

The following are the characteristic of basic income:

  • Periodic. UBI is distributed to beneficiaries at a regular period.
  • Cash payments. UBI is given to individuals as funds and not vouchers or coupons.
  • Universal. It is given to all individuals regardless of their financial status.
  • Unconditional. There are no requirements to qualify for UBI.
  • Individual. It is given to every adult individual in a household.

Types of Basic Incomes

There are two types of basic incomes that can be used to fight poverty in Canada.

  • Universal basic income. This is a kind of basic income where everyone in the society, whether rich or poor gets some amount of money periodically.
  • Guaranteed basic income. This is a kind of basic income where monthly payments only go to families and individuals with low income.

How to Pay for Basic Income in Canada

Since a majority of Canadians are for the idea of the introduction of a basic income according to a survey, it is also good to figure out how the project will be funded. The following are some of the ways basic income in Canada can be funded.

1. Fewer tax subsidies for the wealthy. Tax subsidies for the rich should be reduced. For instance, the 50% capital gains exemption on corporate shares for the rich should be abolished. Also, some of the loopholes the rich use to avoid paying taxes should be closed.

2. Reduce tax breaks for large companies. Tax breaks for large companies deprive the government of lots of money. For instance, carbon tax preferences for carbon emitters can be eliminated and replaced with a carbon border tax. This would help raise over $3 billion. A passive income tax on large companies can also help raise revenue to pay for basic income.

3. Introduction of new taxes. The government can introduce new taxes to raise more revenue to fund basic income. For instance, a Financial Transactions Tax (FXT) of 0.25% can be introduced to wealth portfolios. Also, the Financial Activities Tax of 4% on financial institutions like banks and insurance companies can help raise about $7.3 billion.

Basic Income Experiments in Canada

Canada has conducted several experiments on basic income. The first basic income experiment was conducted in 1974 in Manitoba while the second one was conducted in Ontario in 2017.

1. Mincome Experiment in Manitoba, 1974

Minicome is the name given to the first basic income experiment in Canada. It was conducted in Dauphin, Manitoba between 1974 and 1979. Every Canadian family was receiving a guaranteed annual income of 16,000 Canadian dollars.

The original budget for the Mincome experiment was $17 million which proved inadequate for the 10,000 members of the community. The project ran into budgetary problems and the government of Manitoba didn’t feel the need to continue funding it.

Among the findings of Mincome project include a decrease in labor involvement among school-going children. Consequently, there was an increase in the number of school graduates. It was as a result of government assistance that meant many children could stay in school instead of joining the workforce to support their families.

2. Basic Income Pilot Project in Ontario, 2017

Canada conducted another basic income pilot project in 2017 in Ontario. The budget for the project was $150,000,000 and was directed to 4,000 participants. Participants were to get 16,989 CAD every year for single people and 24,027 CAD per year for a couple.

The project was expected to run for 3 years but was canceled after 17 months by the newly elected government of Ontario. Social Services Minister Lisa MacLeod gave a statement that the project was expensive and unsustainable.

The results of the project, though prematurely canceled showed that there was an improvement in mental health for most of the participants. Also, there was decreased use of alcohol and tobacco for over 50% of the participants.

Read also: Will the cost of living go down? 

Universal Basic Income Canada Pros and Cons 

Universal Basic Income has its merits and demerits.

Universal Basic Income Pros

1. Reduces poverty. Universal basic income in Canada can go a long way in eliminating poverty. By availing a guaranteed income, citizens can afford basic needs like food and shelter, thereby eliminating poverty.

2. Reduces income inequality. Guaranteed basic income avails money to low-income earners. One of the ways to fund basic income is by taxing the rich and channeling the money to the poor. Consequently, there will be minimal income inequalities between the rich and the poor, thereby eliminating crimes like theft. 

3. Reduces rates of school dropouts. One of the results of Canada’s basic income experiment in 1974 was lower rates of school dropouts. When citizens have a guaranteed income, children can stay in school instead of joining the workforce to raise money to support their families.

4. It empowers caregivers and parents. UBI empowers caregivers including childcare and eldercare to meet their roles. When caregivers have guaranteed income, they are able to offer better care for their unpaid roles. 

5. Improves mental health. Poverty affects the well-being of citizens. One of the findings of the basic income pilot project in Ontario is that there was improved mental health among the participants. Also, there was decreased use of alcohol and tobacco.

Universal Basic Income Cons

1. It is expensive. The two experiments on basic income in Canada proved too expensive. As such, the government has to find other ways to fund basic income program if it is adopted. Otherwise, governments would need to dig deeper into taxpayers’ coffers.

2. UBI takes money from the poor. One of the demerits of Universal basic income is that it takes money from the poor and gives it to everyone else including the rich. Ideally, the goal should be to give more money to the poor and not take it away from them.

3. It removes the incentive to work. Earned income motivates people to work hard. However, if people are guaranteed a basic income without doing anything, they will do nothing. This then has a negative effect on a country’s workforce.

Summary of Universal Basic Income Canada Pros and Cons

The introduction of universal basic income in Canada can help eliminate poverty and reduce income inequality. Besides, when people are assured of some income, their mental health tends to improve greatly. It also reduces the rates of school dropouts since teenagers can stay in school instead of going into the workforce to raise money to support their families. Although universal basic income has some disadvantages like a deterrent to working, while it is also expensive, the idea has more benefits to a country.

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