Dionne Pohler, et al.: Few of the policies announced last Wednesday by the Canadian government directly deal with the obvious issue of lost wages that immediately affects unemployed workers
The COVID-19 pandemic has shown the world how interconnected we all are, and how much we depend on each other. In Canada, it has been heart-warming to see the responses of people who are working together to protect the elderly and other vulnerable members of our communities. The situation has also highlighted that Canadians still place a lot of faith in our government and institutions, and that we are willing to act quickly and collectively to ensure that our health-care system does not become overwhelmed.
However, as borders shut down, provinces declare states of emergency and businesses close, attention has rightly turned to the impact this will have on the economy. Focusing on the economy is important, as the broad social consensus previously outlined is at risk of fracturing if the government does not develop a comprehensive plan to address the real and growing concerns of Canadians who are worried about putting food on the table and paying their bills.
Policy options abound, such as low- or zero-interest business loans, tax payment deferrals, payroll tax holidays, expanded access to employment insurance (EI), boosting the Canada Child Benefit (CCB) and GST rebates, and plans to ensure bank liquidity, along with various stimulus spending proposals. Prime Minister Justin Trudeau and U.S. President Donald Trump recently announced plans to implement several of these options.
But while some of these policies may be necessary, they are unlikely to ensure continued social solidarity, compliance with public health measures or help arrest the looming cascade of debt defaults and the resulting stress on the financial system that will only make things worse.
With the exception of expansions to EI, none of the policies announced Wednesday by the Canadian government directly deals with the obvious issue of lost wages that immediately affects unemployed workers. And, because they by and large do not target the people who need the help most, they fail to act as a necessary economic stabilizer or build trust and legitimacy among the broader public. They will not work as a means of maintaining economic activity, and perhaps more crucially, they will not secure the ongoing co-operation necessary to achieve the government’s public health goals. Workers who are left behind are not likely to quietly suffer and comply.
On both an individual and collective level, Canadians are acting quickly to protect the most vulnerable during this pandemic. They would be similarly supportive of policy proposals focused on helping the most vulnerable. A targeted income maintenance approach that is conditional on income — what we refer to as a “targeted basic income” — meets the urgency of the current crisis. And, because seniors and children already have a guaranteed annual income through the Old Age Security, Guaranteed Income Supplement and CCB programs, the major remaining gap in social policy must address the needs of low-income working-age people — particularly those without children.
Working-age people who rely on employment and self-employment as their primary source of income will be most affected by widespread business closures. Working-age people who fall in the lower end of the income distribution will also be the most severely impacted, as they will qualify for lower EI benefits and are more likely to turn to social assistance in the near future due to having lower savings. With many low-income Canadians stretched by big debt loads, neither EI nor provincial social assistance benefits are likely to be enough. Moreover, asking people to apply for these benefits in the middle of a crisis — when many cannot work because of illness, quarantine or business shutdowns — is unnecessary.
For this reason, we propose that the federal government immediately implement the provision of a monthly income of $1,000 to all individual working-age Canadians (ages 18-64) who had employment or self-employment income in 2019 between $1 and $50,000. The proposed amount of $1,000 a month is slightly higher than the average monthly social assistance provided to single working-age people in each province across the country.
According to our calculations, the gross cost of this policy option is approximately $11.6 billion per month. We assume that provincial social assistance programs remain unchanged. If students are excluded, the cost decreases by about $1.4 billion. Including an additional cut-off based on total household income would more effectively target low-income families, and further reduce the cost. Given the current situation, no claw-back rate should be applied, either now, or next year at tax time. The Canada Revenue Agency could directly administer this targeted basic income, and no application would be needed.
A related policy option that addresses many of the same concerns as the targeted basic income is the universal basic income (UBI). Because people are desperately searching for creative and effective policy solutions, the idea of an emergency (short-term) UBI has attracted support from all sides of the ideological spectrum. In both Canada and the United States, the idea has received support from both progressives and conservatives, and President Trump recently announced a direct cash transfer to all Americans.
When everyone gets the same amount of money from the government, it is clearly equal. However, just as not every Canadian is equally vulnerable to the virus, not every Canadian is equally vulnerable to the impact of the economic slowdown. A UBI is therefore a less equitable policy, even in the best of times. It is also much less efficient at helping the most vulnerable than a targeted income maintenance approach that is conditional on income.
A targeted basic income is a feasible, efficient and equitable option for addressing income precarity during this ongoing pandemic. It would provide a direct economic stimulus by putting money into the hands of the people who are most likely to spend it and, more importantly, into the hands of those who are most likely to need it. SOURCE