Basic income will reduce poverty, but require more taxes, spending cuts: Study – Halifax
A guaranteed basic income in Canada would help reduce poverty, but could also jeopardize the financial stability and labor supply of some provinces, a new study published Thursday said.
Providing people with monthly checks will ensure that everyone has enough money to cover their essential needs, including food, housing and clothing, reports the Atlantic Province Economic Council, a Halifax-based economic think tank.
The study found that income support would reduce inequality, establish a sense of financial security and encourage savings.
Yet a basic income program – whether need-based or universal, paying high income earners through taxes would be more complicated than it seems, the report said.
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Funding the program would require an increase in taxes or a cut in government spending, it said.
“One of the biggest risks is how this program will be funded over the long term,” said APEC senior economist Lana Asaf. “It’s quite expensive.”
A report by the Parliamentary Budget Officer has estimated the cost of national guaranteed basic income in 2022-2023 to be around $88 billion.
Asaf said that if social programs are cut to help pay for basic income, there is a risk that the condition of some groups of society could worsen.
Given a Basic Income in Canada
He said the risk could be even worse for some regions, such as Atlantic Canada.
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Meanwhile, a guaranteed income can also create a disincentive to work, potentially worsening the current labor shortage.
“There is a concern that it may discourage people from working,” Asaf said. “This can be a challenge especially in low-wage industries, where we are seeing a huge labor shortage.”
No program being tested
The idea of a guaranteed basic income program gained renewed interest during the pandemic.
The roll out of the Canadian Economic Recovery Benefit, or CERB, and other pandemic benefits prompted discussions on the adequacy of our nation’s social safety net.
The APEC report said that in December 2021, Senator Kim Pate and MP Leah Gajan introduced bills aimed at creating a national framework to “guarantee a livable basic income”.
“A basic income is a concept that has been around for some time… but it is becoming a more mainstream topic,” Assaf said. “The program has potential advantages and disadvantages but some are more theoretical in nature.”
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There are no basic income programs currently being tested in Canada.
In 2018, the B.C. government convened an expert panel to study basic income, including the feasibility of a program and its potential to reduce poverty.
It found that shifting to basic income would be a complex undertaking and not necessarily the most cost-effective way to reach poverty goals.
Ontario began a three-year basic income pilot project in 2017, but it was canceled before it could be completed following a change in provincial government.
The APEC panel said income support targeted at certain groups may be a better option, the report said.
This report by The Canadian Press was first published on June 16, 2022.
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