THESE days no one should need convincing that our economic well-being can be affected by unexpected shocks. Sometimes these shocks are due to big events, such as the coronavirus pandemic or the great recession in 2008. Sometimes they are due to changes in personal circumstances, such as illness, job loss or the death of a provider.
Individuals can try to plan, but many Canadians are financially strapped at the best of times and do not have the financial margin necessary to support strategies for weathering economic shocks. After all, as of 2017, the latest year for which data are available, 5,869,110 Canadians lived in poverty (census family low-income measure, after tax).
Statistics Canada also reported that in the third quarter of 2019, on average, there was $1.76 in credit-market debt for every dollar of household disposable income. Similarly, a September 2019 Ipsos poll found that 48 per cent of Canadians are $200 or less away from financial insolvency.
When shocks such as the coronavirus pandemic cause economic activity to slow down and large numbers of Canadians are affected by job losses, layoffs, fewer available shifts and loss of customers for the self-employed, there is a broad consensus that governments must act to shore up household incomes.
The Trudeau government has acted. Income-security policies in Canada do not form a comprehensive and co-ordinated system, but a patchwork with some gaps between the patches; Ottawa added two new patches and increased the size of three existing patches. One of the new patches was the Emergency Care Benefit, which provides $900 bi-weekly to workers and the self-employed who are ineligible for Employment Insurance and who are quarantined or sick or caring for children or ill family members.
The other was the Emergency Support Benefit, for workers not covered by EI who are facing unemployment. The patches being extended are Employment Insurance (eliminating the one-week waiting period for sickness benefits and extending the Work Sharing Program to 76 weeks), Canada Child Benefit (increasing the maximum payment by $300 per child for 2019-20 benefit year) and the Goods and Services Tax Credit (one-time special payment in May 2020).
This week, the government combined, simplified and enhanced the Emergency Care Benefit and the Emergency Support Benefit into the Canada Emergency Response Benefit, providing a standard taxable payment of $2,000 per month for up to four months. All workers whose income decreases to zero due to the pandemic (for at least 14 days out of the four-week period) are eligible as long as long as they had at least $5,000 in employment income or maternity or parental leave benefits in 2019 or the 12 months preceding the application.
There are still problems with these measures, beyond the question of whether they provide adequate income. First, it is unclear if anyone is left out — there may be unintended gaps between the patches. Second, many of the measures are not being implemented until April, and one not until May. This is too slow for Canadians who are financially exposed in the manner described above.
Third, some of the measures require costly application and eligibility processes. This is not the time to over-burden government administrative systems or spend money on administration that could be used to fight the virus, provide health care or increase the benefits to Canadian families.
In combining two programs to create the Canada Emergency Response Benefit, the government seems to have recognized the challenges applicants may face.
We might consider how much better our response might be if Canada had implemented a universal basic income. This is a benefit that would be provided as a right to every member of the Canadian political community. It could be delivered through the personal income-tax system as a negative income tax, decreasing as market income increases. It would be target-efficient in moving resources to those who need them most.
A basic income would have low administrative costs, especially if provided through the personal income-tax system. It would also not require expensive monitoring of work behaviour or job-seeking, as this would not be a condition of receiving a benefit. However, evidence from the basic-income experiments of the 1960s and ’70s shows that decreases in work are moderate, and largely confined to secondary earners, such as parents caring for young children and high school students focusing on their education.
To complete our thought experiment, if Canada had a basic income in place when the coronavirus hit, we would have avoided all the problems described above. We could be assured that everyone who needs help is getting it because a basic income is universal. The help and economic stimulus could be delivered quickly and would be automatic as households reported decreases in market income.
No new application procedures or parliamentary approval would be required. Administrative costs would be low, and the introduction of new income-support programs would not be required.
This is one more good reason Canada needs a universal basic income.
Article published by the Winnipeg Free Press on 27 March 2020.