What is universal basic income and what does it mean for small businesses?

What is universal basic income

When the Ontario government wanted to implement a Basic Income Pilot project, they turned to political strategist Hugh Segal. Currently the Master at Massey College, Segal has spent some 40 years in politics, including stints as Brian Mulroney’s chief of staff and as a senior aide to Ontario Premier Bill Davis.

As a special advisor, Segal tabled a 108-page report with 90 recommendations on how to best test universal basic income in the province. Premier Kathleen Wynne and her government adopted 85 of those recommendations, and this spring rolled out a pilot in Thunder Bay, Hamilton, Brantford, and the county of Brant.

We asked Segal what universal basic income is, and what the implications might be for employers.

Workopolis: What is universal basic income?

Segal: A universal income is something that is now being pilot tested in the Netherlands and Finland. Usually, it refers to a “demogrant,” where everyone gets an automatic monthly transfer, and those who are better off pay more taxes back than others.

Finland’s universal basic income test program was launched in January of this year. How is the Ontario pilot different from the Finnish one?

In Finland, the pilot is for the unemployed; in Ontario, it’s for people living below the poverty line, regardless of employment status. The idea is to support low-income workers and find out if a basic income can improve their health and education outcomes, as well as their job prospects and ability to make choices. It’s a top-up that brings the annual income to a basic minimum with the intent of alleviating poverty.

How long will the Ontario pilot run, and how many people will be part of it?

The pilot will run for three years, with the results being delivered to Ontario’s next parliament. While private data must be safeguarded, aggregate data should be released as soon as possible.

Four thousand people are to be enrolled in the pilot in total. A remote First Nations community will also be chosen based on advice from the First Nation’s chiefs of Ontario.

Under the pilot, who qualifies?

Everyone who earns less – from all sources – than $1,320 a month, or $2,400 for a couple, would be topped up to that number. Before my proposal, average income for Ontario Works (the provincial financial assistance program) was $640 a month; I recommended that it be doubled. The $1,320 figure represents 75 per cent of the low-income measure, whereas $640 was only 45 per cent. And my proposal would see the disabled, who receive Ontario Disability Support Program (ODSP) payments of about $1,100 monthly, being topped up to $1,700. Also, the first $1,320 is tax free; further earnings – which are encouraged – would be taxed at the 50 per cent rate.

What does it mean for employers, especially small businesses, if potential employees can get money “for free”?

Contrary to what some of my conservative friends think, it’s not true that if people get money “for free” they won’t be looking for employment. In fact, 70 per cent of the 15 per cent of Ontarians who live beneath the poverty line have jobs. Some have more than one, but do not earn enough to get over the poverty line.

Those in the pilot will have some choices – choice and time being the two commodities denied low-income Canadians. And unlike welfare payments, the basic income would allow people receiving it to keep some of their earnings, so it is actually an incentive for people to remain in the workforce or to seek jobs if they are unemployed.

Currently, Ontario Works and ODSP discourages work by clawing back earnings of recipients more than $200 dollars a month.

The benefits for low-income people seem pretty clear. But what are the benefits for employers, and, more broadly, for the economy?

People like Elon Musk, George Soros, and Chris Hughes (the co-founder of Facebook) all think this is the best way forward – especially now with the effect automation will have on the workforce. They have realized that:

  • Existing welfare has not meaningfully deceased the number of people living in poverty. It is inefficient and unproductive while also discouraging work.
  • Poverty is a dependable predictor of early illness and hospitalization, substance abuse, difficulty with the law, and bad education outcomes. These all cost Ontarians billions, beyond the $9-12 billion spent annually on Ontario Works and ODSP.
  • Over 80 per cent of the inmates in our prisons come from communities living beneath the poverty line.

In the end, a well-paid workforce produces better long-term results, stability, and continuity. It also addresses the pathologies of poverty, which will make the economy more productive.

For more on universal annual income, check out Hugh Segal in conversation with Steve Paikin:

See also:
What Canada’s 2017 federal budget means for employers
What NASA can teach us about hiring

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