Basic Income: FAQs
What is Basic Income?
Basic Income is a government income support program that replaces many complicated and confusing benefits with a single, unconditional payment for people with low incomes, eliminating unnecessary bureaucracy. It provides recipients with an adequate income to purchase necessities like housing, food, and clothes. People in special circumstances (such as living with disabilities) continue to receive extra support.
As far back as 1968, one thousand economists signed a letter endorsing a form of basic income. Earlier this year, a group of more than 100 Canadian CEOs, representing businesses with more than $2.2B in combined annual revenues, publicly supported Basic Income.
How is Basic Income more efficient?
Instead of being based on age, employment status, or other conditions, basic income payments are based strictly on a person’s income being insufficient for their basic needs. Removing the maze of rules and application forms, and rolling other income support programs into a single program, makes basic income much more efficient for the government to operate.
But what incentive is there for recipients to work?
Plenty! Manitoba’s test of Basic Income showed that recipients reduced their work hours by only 5% on average. And in fact, most of this reduction came from two specific groups: single mothers who invested more time in caring for their children, and students who spent more time on their education.
Existing support programs each have their own claw-back percentages that withdraw benefits as the recipient starts to increase their income. This creates a “welfare wall”, where an extra dollar of earnings can cause a claw-back of as much as $0.90, a demoralizing disincentive.
By merging these programs, Basic Income prevents the claw-backs from “stacking” to such a high percentage. With a reasonable and consistent claw-back, recipients know that every additional dollar earned will reliably improve their financial situation. This gives recipients the incentive and support to get back on their feet with stable employment. In fact, some recipients go a step further and start a business, ultimately providing employment not only for themselves, but others in their community too.
How would it impact local economies?
It’s a well-established fact that people with lower incomes spend a bigger percentage of their income on basic needs—and they spend it locally. That’s why economists of all stripes have agreed that one of the best ways to stimulate local economies is to give money directly to people with lower incomes, because those people are guaranteed to spend it in their community. In addition, because recipients choose where the money is spent, every local business has the opportunity to compete on an equal footing for those dollars.
Can we afford it?
Yes, we definitely can. First, keep in mind that Basic Income replaces existing, inefficient programs, reducing the cost of administration. That’s a savings right off the top.
Some people are still worried because Basic Income seems to have a big “price tag”. Keep in mind that the price tag is only half the story—you have to compare the price to the value you get. We accept the price tags for our police, public schools, and public health care, because we know our society does better with these services in place. One glance at the US health care system shows that trying to avoid a “big price tag” can end up producing worse results and costing society much more in the long run.
Basic Income not only cuts government waste, but has also been shown to reduce crime, improve public health, and inject money directly into local economies, all while preventing poverty. These are big benefits!
For a concrete example, in 2008 the Ontario Association of Food Banks issued the report The Cost of Poverty—An Analysis of the Economic Cost of Poverty in Ontario. This report determined the total cost of poverty in Ontario to be $32B-$38B dollars every year. Our existing income support programs have failed to eliminate poverty, but Basic Income has been shown to drastically reduce poverty, which means we could eliminate $30B+ of hidden costs from poverty.
As another concrete example, Basic Income has been shown to promote education and literacy. It removes the need for single parents and children of poor families to work multiple jobs, allowing them to devote time to their children’s education, and enables children to focus better in school because they are better-nourished and cared for. It’s been demonstrated that a country that improves its literacy by 1% can expect its GDP to increase by 1.5%.
These are only two examples of the indirect benefits that make up the full value of Basic Income. At the very least, we’ll save administration costs by merging inefficient programs—but all evidence suggests we will gain much more than that, because Basic Income is more effective as well as more efficient. We need to think in terms of investment and returns, and make a smart investment in our province’s future.
How does Basic Income support small business?
In several ways. First, Basic Income is proven to increase the number of new small businesses. It provides a guaranteed backup income that makes it safer for entrepreneurs to take the risk of starting a business, knowing they and their families will be okay if it fails (as half of new businesses do). Secondly, Basic Income creates jobs and income stability in local communities, which means your customers are able to continue supporting your business. Finally, Basic Income cuts government waste, which improves the government’s bottom line, making it possible to lower taxes or fees for small businesses.
Are there any other benefits?
Yes! Aside from providing people with income stability and empowering them to become financially independent, Basic Income has also been proven to reduce crime and improve health. For recipients, not having to run through a maze of applications and forms reduces stress and 3 FAQ for Small Business cont’d uncertainty and restores their dignity. Basic Income also acts as compensation for important forms of unpaid work, such as caring for the aged and infirm, community service, and attentive parenting. These benefits are harder to measure in dollars (though estimates have been made and are in the tens of billions), but common sense tells us they result in stronger families, healthier communities, and a better outlook for the next generation.
What needs to be done to implement Basic Income?
The Ontario government has the power to implement Basic Income today. We don’t need to wait for the Federal government or get their permission. There are no contracts to source, and there are no purchases of land, equipment, or other assets needed. Passing a bill in our provincial Parliament is all that’s needed, and since the current government has a majority of seats, this is easily accomplished.
Wouldn’t it be disruptive?
No. Guidelines have already been drafted for a smooth transition. Basic Income can be phased in over several years, while existing income support programs are phased out at the same time. This would keep the cost to the public stable during the transition period. Furthermore, anybody receiving support today would know for certain their support would not be cut off , and would be able to plan their financial futures based on a known timeline for the transition.
What can I do to help?
Please sign our public letter calling on the Ontario government to implement Basic Income. Your signature shows the government and the public that the small business community is on board, and ensures that Basic Income will be an issue during this government’s term and during the next election.
Please also share the letter and FAQ with other small business owners you know, and in your personal network. The more small businesses we can reach, the more we can increase awareness and support of Basic Income among the small business community.
Finally, please consider displaying the provided stand-up card at your point of sale and/or the logo and link on your website. Your customers will appreciate knowing that you care about the well-being of your community.
For more information about Basic Income, or to get involved in local campaigns and events, please visit us on the web at www.OBIN.ca.