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What Could a Guaranteed Basic Income do for Canada?

by John Brian Shannon

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?


Means Testing

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!

How Western Economies Could Double GDP Growth in Two Steps

by John Brian Shannon

Empowering the bottom-two economic quintiles via a Guaranteed Basic Income and a 21st century minimum wage will allow low-income people to become ‘part of the solution’ instead of ‘part of the problem’ in Western economies.

We Have a Problem in the West

The top-three economic quintiles are doing just fine thank you very much, and any one of those top-three quintiles contribute more to society… than the bottom-two quintiles combined!

That includes the CO2 emission contributions of any one of the top-three quintiles by the way. And it includes the high level of government spending required for the enhanced infrastructure and security considered de rigueur for those who live near the top of the economic pyramid.

If you don’t believe that the top-three economic quintiles cost the government more, just take a drive around some of the ‘tony’ neighbourhoods in your city. Look at the streets (nice, broad thoroughfares and sidestreets that are always well paved, etc.) look at the decorative streetlights, the curbing, the sidewalks. Also don’t miss the world-class schools and recreational facilities. And of course, visit an international airport to see how many of the travelers boarding planes to sunny locales hail from the top-three economic quintiles. That would be most of the travellers in the airport.

While the top-three economic quintiles are driving their Land Rovers and taking exotic vacations and sending their kids to university (and yes, they do work hard for their money — nobody is saying any different) the bottom-two quintiles can’t.

While the top quintiles cost society much, they also contribute much. And why shouldn’t they contribute much? They’re the prime beneficiaries of that society.

At the end of it all we may conclude that (apart from their astonishing CO2 footprint and the astronomical security costs to ensure almost total security in their neighbourhoods) the top-three quintiles aren’t the problem when we’re talking about the economy.

Through no fault of their own the problem lies with the bottom-two economic quintiles and we can thank (some) economists and (some) politicians for this miserable state of affairs.


Shall We Toss the Bottom-Two Economic Quintiles into the Ocean?

Or should we allow them to become ‘part of the solution’ on the path to dramatically increasing national GDP growth?

If we did toss them in the ocean, just for argument’s sake; Who will pour your latte at your favorite coffee joint? For that matter, who will pick up your trash, man the gas station counter, feed the ducks in the city park, or cut your lawns and clean your swimming pool?

Wouldn’t you rather be earning your $100 per hour or whatever you earn, instead of spending your free time sweeping the sidewalks and changing burned-out streetlamps? Wouldn’t you rather be racing your personal watercraft with friends at your lakefront cottage? You work hard, you play hard. Great!

Now let the other people contribute too.


Maybe Those Bottom-Two Economic Quintile Types Aren’t So Bad!

As it stands now however, the bottom-two quintiles are a drag on the economy. There’s no hiding that fact.

Some are homeless and may engage in property crimes or other offenses. Others may find themselves often unemployed or in a permanent state of underemployment as 34% of all manufacturing jobs have left Western nations for Asia since 1975. (Not the fault of the bottom-two economic quintiles by the way)

And still others just can’t find their niche, nor do they have the education, nor the financial clout to engage in the type of business where they could succeed in personal terms, but also contribute to the overall economy.

They want to contribute(!!!) to their country but can’t find a way forward. And they’re not up for moving to Asia to reclaim their former manufacturing job. Nor should we expect them to.


Changing a Negative Into a Positive!

Many people have experienced the kind of drag induced by leaving your car’s emergency brake in the ‘on’ position as you travel down the highway. As soon as you realized your mistake and moved the e-brake to the ‘off’ position the car appeared to have 100 more horsepower.

But of course it didn’t. The motor had the same horsepower it always had, it’s just that by accidentally leaving the e-brake ‘on’ it took extra power to move the car.

So it is with the economy and the bottom-two quintiles.

Prior to all those manufacturing jobs leaving for Asia, the bottom-two economic quintiles contributed much to the economy. We used to call them ‘the middle class’ or ‘blue collar workers’ or ‘the rank and file’ and other descriptors.

But there just aren’t the jobs to employ them now. So many people (millions) have exhausted their unemployment insurance benefits and have given up looking for a job, any job, that they’re no longer listed as officially ‘unemployed’. The corporate world, and governments too, appreciate that those are rarely reported stats. It makes them look bad and feel bad, but they don’t know why, or how, this has happened. In any case, it’s better for them that it’s rarely reported.

Yet, there is no need to leave two-fifths of the population in a permanent state of poverty and thereby not able to move ahead with their lives — let alone contribute to GDP.

A two-track plan could accomplish a number of good things for the overall economy.


Allowing the Bottom-Two Economic Quintiles to Become Part of the Solution, Instead of Part of the Problem

Working people always contribute more to the economy than non-working people. But what’s the use of getting a job if you can’t afford the monthly bus fare to get back and forth to work? It’s a very common thing nowadays.

Make your choice now; Eat for the month, or use your grocery money for subway fare. Pay the electricity bill, or buy a monthly bus pass to get back and forth to work. Buy some decent clothes for a job interview, got the job! now you can’t afford the bus fare to get you back and forth. Ugh!

These are the very real concerns of the McJobs era. It’s even multi-generational. Older workers may work as low-paid greeters at WalMart, while younger, low-paid workers at fast-food restaurants experience similar life choices.

Two-fifths of the working age population are a drag on the economy — but only because of poorly thought-out policies and on account of the race for corporate profits which were (and are still) improved by outsourcing jobs to developing nations. Bad!

Therefore, because the situation is so tragic ANY solution is better than allowing the status quo to continue!

Two Ways to Solve Gross Inequality and Increase GDP:

  1. Legislate a standardized $15/hr wage right across the country. In this way, people who would rather work will be able to afford to eat for the month AND pay their electricity bill AND have enough money for bus fare to travel back and forth to a job. Perhaps Mom and Pop can front them the money to buy some decent ‘job interview appropriate’ clothing and help in other ways such as babysitting young children, etc. However, we can’t expect Mom and Pop to pay for all of those things, as their time and resources are limited too.
  2. A guaranteed basic income (GBI) of $1088/month per adult (a generally recognized amount, accepted by researchers and governments)
    In some cases, this would effectively ‘top-up’ the monthly income of welfare recipients and Old Age Security recipients to $1088/month from all sources. It would likewise replace all other low-income schemes, grants, etc. So much duplication of services exist that entire government departments could be down-sized (by attrition) thereby saving some government departments up to 5% in their annual budgets. Especially police and court budgets. And the multi-billion dollar SNAP programme and Food Banks could be eventually discontinued, for example.

With 21st century policies in place, the bottom-two quintiles could then afford(!) to look for a job, afford(!) to move to a different jurisdiction to accept a job offer, afford(!) to return to vocational school or attend night school to brush-up on job-skills, or afford(!) to move to a safer neighbourhood where they aren’t afraid to take the bus to a night shift job they’ve been offered.

As soon as they report on their annual tax return that they’re earning any amount over the poverty line, then their GBI payments would be discontinued. Success!


“Paying good wages is not charity at all — it is the best kind of business.” — Henry Ford

And, in case you’re wondering what kind of chips Henry has in this game? Henry single-handedly created the middle class in America. Yes, it’s true!

Henry Ford created the Middle Class and the modern economy by simply paying workers $5 an hour, twice as much as the national average at the time. People flocked to get a job at his factory. Other companies followed suit realizing that great, qualified employees were lining up at Ford’s doors. This unprecedented gamble by Ford paid off and America was on its way to becoming an economic giant. Henry Ford was behind the success of the American Middle class, and he did not do it by lowering wages.

In fact, he is quoted as saying:

“Low wages are the most costly any employer can pay. It is like using low-grade material — the waste makes it very expensive in the end. There is no economy in cheap labor or cheap material. The hardest thing I ever had to do was to reduce wages.” — Henry Ford

Excerpt from Raising the Minimum Wage: The Birth of the American Middle Class by The Daily Kos


If policymakers want the present situation to continue to deteriorate; Just keep on doing what you’ve been doing, and you’ll keep on getting what you’ve been getting

But if we want the bottom-two quintiles to contribute to the economy like they did in past decades, policymakers must set payscales at rates that are relevant to 21st century cost of living standards (they’re not now!) and they must institute a GBI that replaces all low-income schemes and empowers people to either; move to a job, retrain for a job, afford transportation to and from a new job, and in the meantime, maintain their home / electricity connection / phone connection / internet connection / job interview and other employment-related clothing needs / childcare / normal caloric intake / buy medicine, and afford other necessities in our modern world until they get back to work.

How can you get a job nowadays if you can’t afford an internet connection? Do you know? (I don’t know. Can that still be done in the year 2017? Probably not)

The time for navel-gazing is over. It’s time to get brave and release the brakes from the economy and allow the bottom-two quintiles to again contribute to the economy by passing legislation that’s designed to make people part of the solution, instead of part of the problem!



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The Synergy of the Virtuous Economy

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.

Social Progress Index 2015

Social Progress Index 2015

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!”

Smog in China. Image by scmp

Constant smog is a normal state of affairs for residents of China’s major cities — except during the 2008 Olympics when special air quality policies went into effect (in Beijing only)

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’.