Bill S-233, An Act to Develop a National Framework for a Guaranteed Livable Basic Income (Second Reading)
Honourable senators, I would like to offer a modest intervention on Bill S-233. I support sending Bill S-233 to committee as soon as possible so we can have an informed discussion about the complex issues around basic income. Whether you support a basic income or not, I think it is fair to say that there is growing interest in the idea. Earlier this month, the Union of British Columbia Municipalities voted in favour of a resolution calling on the federal government to implement a guaranteed livable basic income.
However, the problem with the public debate — and here I am setting aside the conspiratorial end of basic income critics — is that advocates and opponents are often debating different versions of basic income and hence talking past each other. If a Senate committee can clarify the issues and shed light on the varieties of basic income proposals, that will be a positive contribution on an important public policy issue regardless of whether this bill is adopted. To this extent, my speech is about what I think the most important issues are and what I would suggest are some of the questions that a committee should be asking.
The fundamental question is this: What is a basic income for? Most advocates of basic income, including many senators, argue that it is to eliminate poverty. Poverty is an income-based measure and as such can be solved, in theory, by augmenting the incomes of those who fall below a defined cut-off level. That is why so many anti-poverty activists support basic income. The question is how to identify people whose incomes are below the poverty line and to ensure that the income supplemented to those individuals is provided on a timely basis.
There are basically two approaches. The first is to provide a basic income to everyone and then claw back a percentage when reported incomes exceed the cut-off. The second is to target income supplements to vulnerable groups with varying conditions attached. The former is what might be called a classical approach to basic income, since it is provided to everyone, whereas the latter might be called targeted basic income, or social assistance, and it’s roughly the way the system currently works.
If our goal is poverty alleviation, which approach works better? Well, for any given level of poverty reduction, the answer is the latter — the targeted approach — for the obvious reason that it is directed at only the people who are below the poverty line and not “wasted,” if you will, on those who are not poor. This is not to say that targeted social assistance, which is the status quo, has eliminated poverty; it hasn’t. But if we are to pour substantial new resources into poverty alleviation and have a choice between the two approaches, based on the criteria of efficiency, the targeted social assistance approach wins, hands down. That is the conclusion reached by the expert panel commissioned by the B.C. government in 2018, which released its study in 2020. They rejected basic income in favour of expanding targeted income supplements and social programs.
Basic income advocates will counter that the solution to the wastefulness of a basic income is to claw back any income earned above the cut-off. This is technically known as the benefit reduction rate. The higher the benefit reduction rate, the more efficient the basic income in targeting people under the poverty line. A very high benefit reduction rate, however, runs counter to one of the key principles behind the basic income, which is to not disincentivize people from earning additional income. There is a trade-off between the efficiency of a basic income program and the disincentive effects of clawbacks.
To underscore the point of how inefficient a basic income program would be as a remedy for poverty per se, the B.C. panel authors created an online interactive table where you can choose your preferred basic income amount and your preferred benefit reduction rate to generate a scenario showing the cost of the program and its impact on poverty reduction. Colleagues, if you like spreadsheets, you can have hours of fun on this one. What you will find is that the lower the benefit reduction rate, the more expensive the program and the less efficient it will be in reducing poverty. For example, a basic income of $20,000 for an individual in B.C. with zero benefit reduction would cost $51 billion and would reduce poverty incidence by about 7,000 people per billion dollars. Compare that with the cost of $11 billion for a reduction of 32,000 people in poverty per billion dollars at the benefit reduction rate of 75%.
Opponents of a basic income, the B.C. panel included, argue that a maximalist approach to basic income, one with little or no benefit reduction, is too costly, especially if a province were to attempt basic income on its own. This objection, however, is addressed in a new study from the School of Public Policy at the University of Calgary, which concludes that a federally funded basic income could be both effective and affordable, which is a finding that was already foreshadowed by the Parliamentary Budget Officer in a report a couple of years ago. According to the Calgary authors, a federal program could create more fiscal capacity for the provinces to provide other cash and in-kind social supports, allowing for greater provincial benefit targeting.
I support the principle that proposed solutions to policy problems should be cost-effective. That is different from saying that they should not be costly. Solving poverty could well be a very costly public investment, but if our goal is the eradication of poverty, and it is costly to do so, so be it. But we should make every effort to find the most cost-efficient solution for the problem at hand.
This is why I think the case for basic income cannot be based solely on poverty alleviation. If near-term poverty eradication is the only objective, I agree with the B.C. number crunchers that targeted programs focused, for example, on youth aging out of care, the disabled, or single parents with or without children are likely a better approach. But if the policy objective is broader, and it includes social and economic indicators such as health care, human capital, the criminal justice system, volunteering, creative activities and entrepreneurship, the calculus of a basic income program could be much more favourable.
The B.C. panel ruled out these second-order benefits because they focused their study narrowly on poverty alleviation. They did not give any serious consideration to the broader benefits of basic income and whether these benefits might offset the considerable cost of a basic income program with a low benefit reduction rate.
The B.C. panel also offers a philosophical argument against basic income, which our colleague Senator Bellemare has also advanced. It is premised on the primal importance — even duty — of paid work and on a strict view of reciprocity in social relations. This normative framework is associated with the writings of John Rawls and Elizabeth Anderson on the meaning of a just society. It is a view of the world which values what might be called “participation income” over “basic income,” and it assumes the economy offers dignified participation opportunities along the lines of what politicians like to call “decent, middle-class jobs.”
The reality is that there are a lot of non-decent jobs in our market economy that challenge the assumption of a just society. The idea of participation income also values formal paid jobs over non-formal, unpaid forms of work that may, in fact, offer greater personal reward and social good, which contribute to a more just society.
The blinkers used in the B.C. report effectively turned a study that was supposed to be about the feasibility of a basic income in B.C. into one that was about designing a better income transfer scheme without using basic income.
Insofar as the framework chosen for their study is concerned, the report is correct in its conclusion that an untargeted poverty reduction program, such as basic income, would be less efficient than a targeted program. That is why I fear that any campaign for basic income that is focused solely on poverty alleviation will be ruled out on efficiency grounds and will not make much headway intellectually or politically.
When I last spoke about basic income in this chamber, it was on a motion introduced by former senator Art Eggleton, in which he proposed basic income pilot projects led by the federal government working with the provinces. I argued at the time that the foundational case for basic income is personal autonomy and the expansion of collective freedoms.
I believe that freedom is not so much about the right to do as one chooses, but more about having the capability to do so. Freedom is an end in itself and therefore an important social value, but it is also a means for individuals to work toward other ends, such as a fulfilling career, acquiring goods and services or artistic pursuits.
A guaranteed basic income can be an important plank in advancing an individual’s freedom in both a constitutive as well as an instrumental sense. Providing the means for individuals to address their basic needs is a way of giving them the freedom to develop and expand their capabilities for even greater freedom.
At heart, basic income represents an evolution of the social safety net that values the rights of individuals to exercise their freedoms without stigma. This may sound a bit like a libertarian creed, but the idea is also rooted in egalitarianism and in the belief that there is a collective responsibility for empowering individuals to exercise their freedoms.
One obvious way in which to test basic income is to conduct pilot projects and to measure not just the impact on poverty alleviation, but also on other social indicators such as health care, educational attainment, crime and volunteering. A pilot project could provide answers to these very worldly questions as well as to broader philosophical objections that have led some to rule out basic income.
For example, the hypothesis that society would reject unconditional transfers because they violate the work obligations and social reciprocity necessary for a just society is just that — it’s a hypothesis. The B.C. panel ruled out the need for a pilot project in part because they took the hypothesis as a given. My own preference is to look to the empirics rather than relying on political theory. That is why I support more research on basic income and especially pilot projects along the lines of what has been proposed for Prince Edward Island. In fact, I would support a flowering of pilot projects across the country, including in my home province of British Columbia, that could be used to compare with each other.
Colleagues, there are still many unanswered questions about basic income and its efficacy as a new form of social safety net for Canadians, but I think we would do well to study the issue further and this bill allows us an opportunity to do so. Let’s send it to committee. Thank you.
Some Hon. Senators: Hear, hear.
Hon. Diane Bellemare: I have a question for you.
You support a pilot project like the one proposed by Senator Eggleton, which I voted for at the time. It was very focused.
I would like your thoughts on this. Bill S-233 is about developing a framework to implement basic income for all Canadians 18 and over. Don’t you think that has financial implications? Does this kind of bill not necessarily push us to really study the issue? The indirect financial implications alone may disallow this bill because, in law, you can’t do indirectly what you can’t do directly, and this bill is about developing a framework.
The Hon. the Speaker: Senator Woo, you will run out of time in 10 seconds. Will you be asking for more time to answer the question?
Senator Woo: If you allow me a minute, I can answer the question.
The Hon. the Speaker: Is leave granted, honourable senators?
Hon. Senators: Agreed.
Senator Woo: I support sending the bill to committee precisely to ask some of those questions in light of the growing interest publicly in the concept and in the hope that it will clarify a pathway for experiments in basic income that might, in fact, be fiscally feasible.
I don’t know that I support the bill as law. In any case, my understanding of the bill is not that it seeks to implement basic income, but to simply develop a national framework for basic income. It’s not clear to me that violates the prohibitions on the Senate proposing certain bills, but that is a question that we will all be faced with, I hope, at the end of a study that examines all of the questions that we should consider in deciding if it should go forward.