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Canada’s Parliamentary budget watchdog says it would cost $76 billion per year to fund a nationwide Guaranteed Basic Income (GBI) — which seems a wildly inflated price.
If it Costs $76 Billion, You’re Doing it All Wrong!
(a) For starters, even the Parliamentary Budget Officer (PBO) admits the federal government already spends $33 billion annually to support low-income Canadians — many of whom are senior citizens receiving the Old Age Supplement (OAS) — therefore, what the budget officer really means is the federal government would need an additional $44 billion to fund a universal GBI.
Suddenly, we’re talking $44 billion, not $76 billion
(b) Also, every province in Canada already has monthly social assistance payments to help those adults with no income, or whose Employment Insurance (EI) has run out and who can’t find work, or who live on a monthly disability benefit. There are other situations where people qualify for social assistance but those three groups represent the largest percentage of recipients.
From the federal perspective, a GBI is about the federal government ‘topping-up’ the monthly amount that provincial social assistance and OAS recipients already receive to a reasonable amount that a person could actually live on, sans luxuries.
See? It isn’t about paying the whole shot, it’s about replacing the many overlapping federal and provincial social assistance plans that are available to people trapped in the bottom economic quintile.
Now it’s $15 billion, not $44 billion
(c) Another reason the PBO numbers are so high is that he claims every adult on social assistance needs $17,000+ per year which is still well below the official ‘poverty line’ in most provinces. But it’s just too high. The PBO also says that couples who live together would receive $25,000 per year.
If a person lived in rural Canada he or she could get by on a lower amount than suggested by the PBO, but if they live in Toronto even his higher amounts won’t be enough.
So the question is:
- Do we want to pay people living on social assistance a large enough amount that allows them to live in Canada’s most expensive cities?
- Or do we want to pay people living on social assistance an amount that allows them to live in the other 99% of Canada’s landmass?
If we use the figure of $1088/month per individual (a number that is widely accepted by anti-poverty groups across North America) instead of the PBO’s inflated number, suddenly our 15 billion dollar problem turns into 2.2 billion dollar problem.
Now it’s $2.2 billion, not $15 billion
But it means that a person couldn’t afford to live in expensive cities like Toronto, Vancouver, or Ottawa as real estate prices there (and therefore, rent prices) are too high.
Q: Is it really that onerous to suggest to people on social assistance that they don’t live in Canada’s most expensive cities?
Q: From their point of view, isn’t it better for them to seek out lower-cost rents in Canada’s small towns and live there?
Q: Why would anyone want to spend almost all of their monthly social assistance payment to rent a room in a house in one of Canada’s largest cities when they could rent an apartment or even a small mobile home in small-town Canada?
As the Canadian government spends a lot of time and money to convince people to move to smaller centres (sometimes paying new Doctors and other professionals a higher rate to relocate to small towns so that residents there can receive medical care on a timely basis) wouldn’t GBI recipients moving to smaller towns and cities lessen the need to pay Doctors and other professionals more than the normal rate to practice in those regions?
Many Doctors would no longer need to be paid extra to base their practice in Canada’s small towns once large numbers of GBI recipients would move to small-town Canada. (Many of whom would be senior citizens who could finally afford to move, it must be said)
Let’s pretend that factor represents a future savings of 200 million/yr — which sounds like a lot but it isn’t — because in addition to the premium that Canada pays new Doctors to practice in marginal areas of the country, the federal government must also fund the monitoring and management of that system. It isn’t run by one person in a telephone booth earning minimum wage.
Also, many Doctors contest their small-town posting decision which must be adjudicated at significant cost to the government.
Now it’s $2 billion, not $2.2 billion
Streamlining the System
We know that duplication of services costs money.
That covers anything that is done twice (2x) but how much money is wasted when there is duplication across ten provinces? (That’s 10x by the way — which is called a ‘decuple’) Because that’s what is happening with social assistance across this country.
Each of the ten provinces of Canada has its own Income Assistance programme and the government of Canada has various Income Assistance programmes for each of the ten provinces and three territories to support those who can’t afford to live on their own.
Also, Canada ‘tops-up’ the monthly income of senior citizens across the country through the OAS to something approaching half of the official poverty line in some cases. (Let’s not forget it was seniors that built this great country, and they deserve better than that)
Centralization can save duplication of services 10x over
Imagine if all social assistance benefits were paid out from one centralized location (say, in Winnipeg) and most of those provincial Income Assistance offices could close down.
Each provincial ‘welfare office’ with 20 to 100 staff, must cost well over a million dollars (the cost of the real estate alone) and must cost over one million dollars per month to staff and maintain — perhaps more. (Some of these offices would remain open because they offer other provincial services besides managing social assistance recipients)
Not only would each province save multi-millions, so would the federal government!
Now we’re saving the provinces money!
And, the federal government could close many offices across the country on account of being centralized and a social assistance ‘supercentre’ could handle every social assistance need across the country — whether it’s topping-up a senior citizen’s monthly income to $1088/month, or ‘topping-up’ a part-time worker’s monthly income to $1088/month, or paying those on social assistance or disability $1088/month — and save money compared to the way it’s presently operated!
Now we’re saving each province multi-millions (the amount of savings depend on the total population of the province) and we’re saving the federal government about $2 billion compared to the way it’s run now.
Now we’re down to $0, not $2 billion
Hey, this is fun! Wanna save some more?
NOTE: The GBI itself is based on having no ‘means test’ so every Canadian adult resident who earns less than $1088/month would automatically be eligible to receive either the full amount (if they’re earning nothing at all) or a ‘top-up’ to $1088/month.
Vastly Lower Provincial Government Spending Will Allow 10 Instant Provincial Budget Surpluses
It also means that homeless people could afford to rent a home if they live in small-town Canada. (Read: No more homeless people in Canada)
It means that every person on social assistance can afford to eat properly if they live in one of Canada’s small towns. (Read: People who use part of their grocery money to pay the rent or keep the heat on during the winter… spend more time in the Hospital)
It means that poverty-stricken people won’t be tempted to commit crimes in order to pay their rent, eat, or to acquire steel-toed work boots for a temporary day labour position, or for bus fare to get to a job interview. (I’ve volunteered at a homeless shelter; I’ve seen it happen)
By simply paying a standardized monthly benefit to Canadian adults who earn less than $1088/month homelessness will cease to be an issue, property crime rates will plummet, hospital visits will decrease, provinces can free themselves of managing social assistance recipients, provincial office buildings can be sold, the federal government can streamline OAS and other federal anti-poverty programmes into one super-efficient monthly payment system — and the feds can cross-verify CRA tax returns with the GBI system to catch cheaters.
Let’s pretend that all of it together could save the federal government 10 billion dollars annually. (It would save more than that)
Now we’re SAVING the federal government 10 billion dollars per year!
On the provincial side, almost every government in Canada could stop running provincial deficits by getting out of the social assistance business, freeing themselves of overlapping social assistance programmes, selling off their Income Assistance office buildings, lower their healthcare spending, and lower their property crimes spending which requires a lot of police investigations, court time, and incarceration for offenders.
Why would every province suddenly show a budget surplus?
No more provincial deficits to worry about — because after offloading their social assistance programmes onto the federal government — Canada’s provinces would save significant sums of money.
Provincial social assistance programmes are paid for by provincial sales tax, provincial income tax, and federal transfer payments — and those tax rates are set by the provincial spending plan for the following twelve months. Therefore, once the federal government absorbs those provincial programmes, provincial taxation rates could remain the same (for a time) and every province would suddenly find themselves in a budget surplus.
After five years elapsed they would probably remove the portion of the provincial taxation that had funded their social assistance programmes, thereby saving provincial income tax payers money at tax time.
Of course, the people who work in Income Assistance offices might be wary of this change but they’re highly trained and valuable people that their respective provincial government could easily put to work on positive programmes like conservation, education, healthcare, etc. instead of having them spend their days trying to prop up financially marginal people 365 days per year.
I’d expect that each provincial government would treat their Income Assistance staff with the respect they deserve and guarantee them a minimum of five more years of employment to each and every Income Assistance employee that was no longer needed at their Income Assistance office due to their social assistance programmes being superceded by the federal GBI.
How to Pay for it Until the $10 Billion Annual Savings Kick-in
During the five year transition period, the federal government would be required to find a revenue stream for a GBI that rolls all provincial and all federal social assistance programmes into one programme that pays $1088 per month. (CPP and EI would remain completely unaffected, obviously)
As stated above, the federal government already pays 100% of the cost of existing federal level social assistance programmes across Canada, so to absorb the provincial systems and afford the slightly more expensive GBI, it would need to add an across-the-board .29% increase to the federal income tax rate and concomitantly lower transfer payments to the provinces.
Alternatively, the federal government could tax robots like it taxes people. (Yes! It’s a thing! Even Bill Gates wants to tax robots)
If each robot was taxed at 30% of the value of its annual output, it would pay for the difference between what the feds already pay for federal social assistance spending, and the cost of funding a universal GBI that would replace existing provincial social assistance programmes. (Read here about the U.S. presidential candidate for 2020 running on taxing robots)
EITHER WAY, the federal government would save a minimum of $10 billion per year, creating new revenue streams to afford the GBI until those savings kick-in is completely doable, and the feds would never need to run a budget deficit again. And many social problems (like homelessness) would disappear forever.
That’s what a Guaranteed Basic Income could do for Canada!
PART I – Guaranteed Basic Income
The Guaranteed Basic Income (GBI) or Unconditional Basic Income (UBI) plans that have been proposed in recent years that are designed to mitigate poverty — poverty that is mostly caused by higher unemployment due to economic downturn or from humans being replaced by robotics, or a combination of both — have been contrived as if they were made to fail the smell test for voters asked to vote on such initiatives.
For instance, the recent Swiss referendum asked Swiss citizens to vote on a Unconditional Basic Income equivalent to $30,300/yr for every citizen, working or not. How ludicrous! (Even I, a UBI supporter would’ve voted against that!)
Of course, all that extra income would be taxable and it would boost an individual’s income into a much higher tax bracket, and consequently, all Swiss taxpayers would pay more tax. However, in addition to automatically being bumped into a higher taxation bracket, the Swiss were looking at major percentage increases to their tax rate in order to afford that exorbitant UBI programme.
However, if such guaranteed income schemes are kept within a reasonable context it suddenly becomes much easier to afford.
Working people who earn any amount over the official poverty line in Canada (approx. $19,000/yr, depending if you live in a rural area or a city) might not require a Guaranteed Basic Income.
But for those senior citizens and disabled people who live under the poverty line, and for hundreds of thousands of Canadians whose jobs were shipped off to Asia (and we know those jobs are never coming back) whose unemployment insurance benefits have run out and are subsisting on various welfare programmes, all of these people now find themselves living far below the poverty line at $7320. per year in certain provinces.
And we wonder why we have homelessness, substance abuse, high property crime rates and higher policing, court, and incarceration costs.
Using the $19,000/yr poverty line threshold as it relates to guaranteed income schemes, we can see how GBI measures up with the real world. (Note: $19,000/year divided by 12 months = $1533/month)
It’s actually cheaper to pay a person $1533/month, than it is to incarcerate them at $6600/month. (The incarceration costs only average $80,000/yr in Canada — with federal prison inmates costing $113,880/yr. per inmate, and provincial prison inmates costing from $48,000/yr to $58,000/yr per inmate)
It’s also cheaper to pay a person $1533/month, than the common $1,000,000 per person (for example) property damage, policing costs, court costs, and incarceration costs, once all the disparate costs of one repeat offender are totalled up. (Some criminal investigations cost hundreds of thousands of dollars per month and may involve many officers and several government agencies)
It’s cheaper to pay a person $1533/month, than it is to hospitalize them in various Emergency Rooms each time they overdose on street drugs, or get hypothermia from sleeping outdoors.
ER costs are astronomical and range from $260. to $8120. per visit (and costs rise significantly if additional testing is required such as MRI, X-Rays, or if there are complications) and a substance abuser who lives on the street in a violent area might have many Hospital visits per month.
And particularly with vulnerable people like seniors or battered women with young children in tow, who subsist far below the poverty line, it is cheaper to pay a person $1533/month, than picking up the pieces afterward.
By rolling existing social programme spending from many different government departments into a GBI, much of the $1533/month GBI is already funded.
And by dramatically lowering property damage, policing costs, court costs, incarceration costs, and Emergency Room and other healthcare costs, a reasonable GBI can facilitate huge net savings for any jurisdiction.
Do dramatically lower homelessness rates, crime rates, lower substance abuse rates, lower policing costs, court costs, incarceration costs, safer cities, lower healthcare spending and shorter ER wait times, appeal to you?
Then, de facto, you’re a GBI supporter! Surprised?
That said; There is nothing that a national (and effective) job-sharing scheme can’t fix in regards to high unemployment levels, regardless of how high the unemployment rate soars.
I’m a firm proponent of GBI or UBI and I will strongly support it, in the absence of an effective job-sharing programme — which should be our highest priority.
In Sweden, they have mandatory job-sharing. Which means that by law, every worker must work for a minimum of 6 months per year.
That’s right, everyone who is not a student, not retired, not on maternity/paternity leave, or not disabled, is classed as a worker and must work a minimum of 6 months per year.
Sometimes, two people share the same job their entire career. Don’t forget that in Sweden, people are mostly employed. It’s the rare person who doesn’t work full time, at least 11 months of the year.
Which means that the unemployment rate among workers would sit at virtually zero percent, EXCEPT for those people who’ve just graduated and are looking for work, or homemakers who’ve just re-entered the job market, or those who’ve relocated with a spouse to a different city in Sweden. (The historical unemployment rate in Sweden is 2.5% which neatly matches-up with my above statement)
In Sweden, there are two unemployment insurance (UI) schemes:
- One is the government scheme which pays unemployed workers 66% of their normal salary (most countries have this basic UI setup)
The other is a public/private insurer that workers can voluntarily pay into that allows them to purchase additional unemployment insurance coverage.
Both the government unemployment insurance scheme and the public/private unemployment insurance scheme are money-makers! (And why not?)
For the equivalent of only one or two pennies per dollar earned, workers can purchase the additional unemployment insurance from the public/private insurer — so that during their layoff they receive the normal 66% of their salary from the government unemployment insurance scheme — but also receive up to 33% of their normal salary from the public/private unemployment insurance scheme.
When Swedes get a layoff notice, it’s not a traumatic event in their lives.
From the first day of layoff, they’re on a fully-funded unemployment insurance program that pays them up to 99% of their normal wages, and with no application process nor waiting period. It’s automatic.
It depends upon how much additional coverage they’ve purchased, most people only purchase an additional 24% coverage, giving them 66% + 24% = 90% of their normal salary.
Why don’t they buy 33% coverage?
Because they no longer have commuting expenses, work clothing expenses, and other work-related expenses. It’s actually a net benefit to purchase only 24% coverage. But it’s completely their call to purchase any amount of public/private insurance that they want.
In Sweden, workers don’t need GBI or UBI — as they’re either working, or receiving government unemployment insurance plus the public/private unemployment insurance they’ve purchased themselves.
Companies in Sweden like this arrangement as they always have a large pool of fully-trained workers from which to choose.
Also, in the case of an ill or injured worker, Swedish companies simply call-in one of their unemployeds to fill-in for the injured worker — at full pay.
Workers gladly accept this, as not only do they continue to receive their unemployment insurance benefits (both the government UI which is paid monthly and the public/private UI which is paid weekly) but they also get the daily wage from the employer for as many days as they’re required to fill-in for the injured worker.
Yes. As you might expect, there’s a waiting list! The most senior people are at the top of the ‘Do Call’ List, whenever another employee has time away from work for illness.
It’s a great thing for companies, for workers, and for those trying to raise young families in uncertain economic times.
In Sweden, if you’re a worker, you’re covered! No matter what.
Either you’re at work getting 100% of your normal salary — or you’re at home getting (typically) 90% of your salary. There is no ‘other’ category for workers in Sweden.
And throughout your entire career, you will be in one of those two categories.
If you think that workers and their families like that system, you should interview the companies. They like it even more.
In Sweden, Nobody Sleeps in Dumpsters. Now you know why!
Which approach do you favour?
Do you think that people should be saved from poverty via (1) a GBI system or (2) do you think that an efficient job-sharing programme with both government and public/private unemployment insurance is the answer?
Let us know in the comments!
- About Basic Income (Basic Income Earth Network)
- Ontario’s Basic Income Experiment Coming This Fall (Huffington Post)
- Could Finland’s Universal Basic Income Ever Work In The U.S.? (FastCompany)
- Switzerland’s voters reject basic income plan (BBC)
- Basic income in real life: politics and policy (Basic Income Canada Network)
by John Brian Shannon | June 17, 2016
An economy that constantly grows and improves because it has enough virtuous circles (and cycles) is by design, a ‘good economy’.
It’s what every economy wants to be when it grows-up.
However, there are no generally accepted metrics to measure what constitutes a ‘good economy’ — but a definition by Edmund S. Phelps in his recent Project Syndicate essay is a definition that one can appreciate.
It is worth noting that the UN Happiness Index could be a way to grade the successful march towards a ‘good’ or ‘virtuous’ economy, as nations that rank highly on the UN Index also tend to have high productivity, high per capita income, low unemployment, a high degree of personal rights and freedoms, low crime rates (and related to that stat) generally high levels of education, and in other ways their citizens live fulfilling lives in a stable environment.
It’s easy to ‘work it back’ from the end-user point-of-view.
Another way to grade the march toward a ‘virtuous’ economy would be the Social Progress Imperative’s SPI Index.
If nations are ranking highly on SPI heuristics, it’s obvious that everything needed to support those high grades are *already in place* and working. Ergo, a high-scoring SPI nation is one with a ‘good’ or ‘virtuous’ economy.
Perhaps nations (and economists!) should put more emphasis on UN Happiness Index and SPI heuristics and less emphasis on GDP growth.
After all, You Can’t Feed a Family with GDP
The 1%’ers will always rate their country highly on the UN Happiness Index and on the SPI Index, as their incomes and security are guaranteed and their income growth meets or exceeds GDP growth. What matters in this case, is what 99% of the population thinks.
In developed countries, GDP growth has largely plateaued, and even in the United States of America the largest economy on the planet and the country with the strongest military, GDP growth is anemic at 2% annually.
There just isn’t room to grow the U.S. (and other) developed economies more than 2% per year under the existing paradigm.
“If you keep on doing what you’ve been doing, you’re going to keep on getting what you’ve been getting.” — Jackie B. Cooper
Einstein said something similar — “The definition of insanity is doing the same thing over and over again, but expecting different results.”
Therefore, to try to get more growth out of the U.S. economy by ‘doubling-down’ on everything that we’re already doing, does nothing except prove the truth of such quotes.
But what the U.S. hasn’t tried (enough) is to use heuristical analyses to plot a policy path towards high UN Happiness Index and high SPI scores. By doing so, I posit that the U.S. could unlock another 2% of GDP growth annually.
If that’s true for the U.S. economy, it works double for China’s economy.
Did anyone else notice the productivity increases in China during, and for a short time after, the Beijing Olympics?
Yes, a mini economic boom occurred as a result of hosting the Olympics — just as it does in any country that hosts the Olympics. But productivity isn’t known to spike upwards when a country hosts the Olympics.
I guess after not seeing the sky for decades due to a permanent and thick blanket of industrial smog, Beijing residents finally got to see the sky — due to some very foresighted Chinese air pollution abatement policies that were implemented for the duration of the Olympics.
“Look everyone, The Sky!”
An improved quality of life picture for Beijing residents worked to improve overall productivity, improving the bottom line for Chinese companies.
Certain other perks were added — including never-before-seen-in-China freedoms to travel and to miss time from work in order to travel to the Olympics.
That’s what I call a virtuous circle!
Imagine if that could be made permanent. It’s an example of how improved lives for workers can positively affect productivity and the bottom line.
By employing end-user heuristical data, developing nations could double their GDP growth annually.
For the rest of us; Now that the standard economic tools to increase growth have largely ‘topped-out’ in developed nations, it’s now time to look at improving the lives of citizens by using heuristical analyses — to increase the happiness of citizens, which will increase productivity, improving the bottom line, leading to higher GDP growth.
The proof that this works well is easily found by investigating the Norwegian, Danish, Swiss, Swedish, Liechtenstein, and UAE economies.
Ultimately, the question is a regional one; How can we improve the lives of workers and their families so that productivity can be enhanced, and thereby improve annual GDP growth?
Some nations have asked, and the results have been astonishing.
Soon, people will be saying things like; “The synergy of the ‘Good Economy’ is that the pursuit of happiness by individuals is directly related to the pursuit of worker productivity by corporations, which is directly related to the bottom line and GDP growth.”
And when those words are commonly spoken by both the masses and the elites, for the first time in history, our civilization will be firing on all cylinders — courtesy of the ‘Good Economy’.