Imagine a world in which you were guaranteed $2,000 per month, regardless of your work status or other income. Where everyone from a working single mother of three to Drake and Justin Bieber receives this $2,000 monthly cheque. This is the premise of Universal Basic Income (UBI). Afixed wage or payment, given to each citizen regardless of work status, health, wealth, or other criteria, to provide a foundational income to cover fundamental needs. While this may seem like an impossibly grand idea, UBI has become a topic of hot debate in recent years.  In fact, late last year, two bills to establish UBI were brought before the Canadian Federal House of Representatives and the Senate. This was inspired by the Canadian Emergency Response Benefit, which was established in response to the COVID-19 pandemic and has demonstrated that UBI is achievable. So, what is the debate?

Proponents of UBI advocate for its ability to streamline social security services, address health problems associated with poverty and break the cycles of dependency on social assistance. This gives people who are experiencing financial downturns the time, confidence, and ability to climb the economic ladder. Theoretically, UBI would abolish poverty, reduce human suffering, and reduce the costs of poverty on society. On the other hand, opponents criticize that UBI is too costly, is an invitation to laziness, and withdraws resources from other settings such as infrastructure and health. Currently, no single state has adopted a continuous program of UBI. Multiple countries, including Canada, Kenya, Uganda, Germany, and Finland have conducted smaller scale trials. The most comprehensive study to date occurred in Finland and aimed to evaluate the effects of UBI on income and employment. The study reported a small, but not significant (p=0.08) increase in the willingness to accept work or to increase hours of work. The largest benefits from UBI were the reduction in use of other government funded services and benefits accessed by participants and that participants felt more confident in their own future, financial situation, and ability to influence social matters.  Recently a small pilot study occurred in Ontario which aimed to examine the impact of basic income on a range of socioeconomic health inequalities including food and housing security, mental health, health and healthcare usage, education, employment, and labour market participation. The study commenced in April 2018 under the Wynn government and was expected to continue for three years. 4,000 residents from Hamilton, Thunder Bay and Lindsay between the ages of 18 and 64 received $16,989 per year, with a 50 cent reduction for every dollar earned through paid work. The study was estimated to continue for 3 years but was cancelled early in 2019 when the Ford government was elected, citing an extraordinary cost for taxpayers, and in what is possibly the most extraordinary cost of all, no official data was collated or released. A small team of researchers surveyed 200 of the participants and found that 80% of participants reported increases in overall health and mental health, while 86% reported decreased anxiety. Furthermore, 46% of participants reported increases in housing accommodation and 57% reported an increase in ability to pay rent. Investigators identified several key trends including a movement from low paying jobs to jobs with better benefits and more career development options, and increased participation in education for career development. For some participants, UBI enabled them to leave employment to better care for children and other relatives requiring care. Those who remained unemployed found it generally improved their health and well-being, allowing them to better cover existing debts, improve nutrition and housing standards. The report concluded that there was no individual who did not benefit in some way from receiving the income.

Both studies demonstrate a clear improvement in health and well-being of recipients. Moreover, they debunk the idea that UBI disincentivizes work, a finding corroborated by a systematic review produced by an economics group from Harvard and MIT demonstrating that cash payments have no effect on incentive to work. Indeed, increased financial stability and decreased anxiety provide recipients with a sense of optimism that empowers them to seek to improve their own financial situation and general well-being.

The data on UBI’s social outcomes are clear. Understanding the cost, the economic impact, and the feasibility of UBI is a more challenging task which requires considering how the program will be funded and predicting long-term economic effects. Ambiguity in these factors inhibits effective cost-benefit analysis and is one of the largest barriers to effective discussion of UBI. Undeniably, the upfront cost for UBI is immense. In Canada a UBI of $24,000 per annum per adult would increase federal spending by $464.5 billion dollars annually, which initially would need to be funded either through federal debt or increased taxation rates. Opponents argue both these scenarios unfairly place the burden on higher income families or businesses and would lead to serious economic downturn through reduction of spending and investment. Longer term models show that UBI stimulates economic growth. A study by the Canadian Centre for Economic Analysis indicated that after the 5th year, providing a UBI of $24,000 per year would generate 450,000 new jobs and grow GDP by 2.4% in addition to lifting 3.2 million families above the poverty line. Similarly, US-focused modelling from the Roosevelt Institute predicted that financing UBI through government debt would boost the US economy, with their most radical modelling predicting that giving a $1,000 per month debt-financed payment to each adult leads to a GDP growth of 12.56% over 8 years. Ideally, such economic growth, combined with a streamlining of other social services, would lead to UBI being self-funded, however whether this is achievable is unclear. Ultimately, we ask the wealthy of our society to shoulder a tangible financial burden and be repaid with less tangible factors such as economic growth and a more equitable society. The benefits of UBI to those that need it most are clear. The benefits to those that don’t need it are less clearly defined. So, the question we must ask as a society is what emphasis should we place on improving the quality of life for the needy and marginalized of our society? 


References:

  1. Countries that have tried Universal Basic Income. https://worldpopulationreview.com/country-rankings/countries-with-universal-basic-income Date Accessed: 10 Feb 2022
  2. The Basic Income Experiment in Finland: Preliminary Results. https://julkaisut.valtioneuvosto.fi/bitstream/handle/10024/161361/Report_The%20Basic%20Income%20Experiment%2020172018%20in%20Finland.pdf?sequence=1&isAllowed=y. Date Accessed: 10 Feb 2022
  3. News Release: Ontario’s Government for the People Announces Compassionate Wind Down of Basic Income Research Project. https://news.ontario.ca/en/release/49980/ontarios-government-for-the-people-announces-compassionate-wind-down-of-basic-income-research-project. Date Accessed 10 Feb 2022
  4. Southern Ontario’s Basic Income Experience. https://labourstudies.mcmaster.ca/documents/southern-ontarios-basic-income-experience.pdf. Date Accessed 10 Feb 2022
  5. Debunking the Stereotype of the Lazy Welfare Recipient: Evidence from Cash Transfer programs. https://economics.mit.edu/files/12488. Date Accessed: 15 Feb 2022
  6. Frasier Institute Research Bulletin: How much could a Guaranteed Annual Income Cost? https://www.fraserinstitute.org/sites/default/files/how-much-could-a-guaranteed-annual-income-cost.pdf. Date Accessed 16 Feb 2022
  7. Potential Economic Impacts and Research of Basic Income Programs in Canada. https://www.cancea.ca/sites/economic-analysis.ca/files/ubi/Potential%20Impacts%20and%20Reach%20of%20Basic%20Income%20Programs%2020201203%20FINAL.pdf. Date Accessed: 16 Feb 2022
  8. Modelling the Macroeconomic Effects of a Universal Basic Income. https://rooseveltinstitute.org/wp-content/uploads/2020/07/RI-Macroeconomic-Effects-of-UBI-brief-201708.pdf. Date Accessed 12 Feb 2022
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