Tuesday, February 4, 2014

Guaranteed Annual Income: Simpler, More Effective Solution?

Recently I have been watching a lot of people debate the minimum wage. Ontario’s government announced that the minimum wage would be increasing to $11/hour. Advocates were urging the government to put the province on track for a $14/hour to raise minimum wage, full-time workers above the poverty line. As I wanted the debate unfold it became very clear that the minimum wage was not the answer to poverty.

An ideas that I keep hearing about among policy wonks is the basic income supplement or guaranteed annual income. Obviously the welfare system as implemented for decades is not working to lift people from poverty. If anything, welfare seems to lock people within a pernicious system. Both basic income supplement/guaranteed annual income purport to address the failings of modern welfare in a far simpler, direct manner. I will do my best to describe them as I understand it.

The guaranteed annual income would basically function as a negative income tax. As I understand it Canadians would file taxes and if their income slips below a certain number it would be topped off to a certain basic level.

I found this infographic to quite nicely compare guaranteed annual income to the current welfare system, I suggest checking it out. 

The cost alone of the bureaucratic state to administer the welfare system could be partially cut, and better invested in other social services, such as mental health, addiction treatment, or affordable housing. Issues like affordable housing become much simpler because the state can assume a basic income that each citizen can count on. Proponents argue that lower-income citizens can build capital and climb out of poverty.

For more information you can check out the Basic Income Pilot.

The advocates make a very compelling point. Instead of the humiliating and fraud-prone system we currently have it could be simplified into a simple question of a tax return.

There is a problem though, this would be a revolutionary change to the entire tax system and dramatically redistribute wealth. It could be costly, but even if we accept everything as it is now a simple bump to the GST could cover the cost. What should be added is the mitigation of poverty would have incredible ripple effects across society and reduce all sorts of social and financial costs. At this early stage I think I am on board. I have even heard it suggested that with this system a minimum wage is entirely unnecessary. I think it is worth study, and I hope to learn more.

No comments: