Beware of Basic Income

By Michal Rozworski

Wouldn’t it be great to get a cheque every month just for being you? This is the sweet, fuzzy vision the Ontario and federal Liberals, are counting on to sell their latest idea, a basic income. Just this year, the Ontario government laid the groundwork for a pilot project to test the idea. Any actual large-scale program is far off into the future, however, and that’s a good thing. We need to take a hard look at the idea, especially in Liberal clothing.

Pie-in-the-sky or slap-in-the-face?

A basic income is exactly what it sounds like: a monthly cheque provided to every person by the government with no strings attached. A recent Ontario poll suggests the idea has broad support: 41% of Ontarians support it compared with 33% who oppose. Yet when people are asked whether they think a basic income is a good idea, they are never asked what they would be prepared to lose to get it. The point isn’t that basic income is pie-in-the-sky. It’s just that it could be implemented as a slap-in-the-face.

Basic income is an obvious draw at first. A basic level of guaranteed subsistence for everyone sounds egalitarian and just. It could reduce poverty. It could even give workers something we lack today: bargaining power. Getting a monthly cheque could mean not having to take the first crappy job that appears if you get fired or the economy tanks.

Does basic income = bargaining power?

The question we should ask first is whether we have the bargaining power to get a worker-friendly version of basic income. Be aware: conservatives of all stripes also like the basic income. In fact, one of the idea’s biggest proponents in Canada is former Conservative senator Hugh Segal. Milton Friedman loved the idea too. It plays to the right’s utopian libertarian fantasies of “coupon capitalism.” The idea is that the government’s role is reduced to simply giving everyone a cheque or coupon to purchase goods and services plus securing property rights.

Corporations already profit off everything from toothpaste to cargo planes, why not the healthcare and education we receive as basic rights today? Those crappy jobs might be easier to resist for a while but they might also get a bit crappier if employers know the state is effectively giving them a subsidy that keeps workers out of the most desperate poverty.

Neoliberal Trojan Horse

What kind of basic income program would the Liberals create? Would it be one that adds to the standard of living we already enjoy, strengthening worker confidence? Would the party of Bay St. demand that the rich pay more so that everyone can live well? Or would they be happy to lop off some more public programs to their friends in the private sector while introducing ever more means-testing? The labour movement and the left could expend a lot of energy on a neoliberal Trojan Horse, one that entrenches the idea that social policy is there to support individuals navigating markets rather than building collective goods.

Looking at the numbers should give anyone seduced by the Liberals overtures pause. This fiscal year, Ontario will spend $15.8 billion on social programs in total and roughly $8.4 billion on income transfers for those on low incomes (welfare and similar programs). Giving every Ontarian even $15,000 annually would cost $207 billion, just over 25% of provincial GDP. Even limiting basic income to everyone over 15 years old would still come out to $172.5 billion. Increase the basic income amount and the cost rises in tandem. Even a $10,000 per person annual basic income would cost a bit more than what Ontario currently spends on everything else put together.

To implement a $15,000 basic income, while getting rid of welfare, but keeping things like education, healthcare and higher education, would still mean raising an additional $200 billion in revenues. That’s more than double the $91 billion Ontario is able to raise in taxes today (Ontario has total revenues of $130 billion).

Even an optimistic scenario would need a very strong social movement to demand higher taxes. Assume, as basic income advocates rightly point out, that a basic income would improve health and lower crime. Say we could reduce expenses on those by a third or roughly $20 billion. Assume also that the federal government gives Ontario the roughly $40 billion it would save on transfers like child benefits and low-income pensions. This still leaves an extra $140 billion, 18% of GDP, unaccounted for.

Basic income, austerity, and privatization

There is nothing wrong with increasing taxes if they pay for the things we need. In fact, we need more taxes if we don’t want to continue down the path of austerity started in Ontario by Mike Harris and continued by Dalton McGuinty and Kathleen Wynne. This path has seen tax cuts followed inevitably by hospitals closing, work inspectors being fired and urban transit crumbling. But first we need the social force that could extract this kind of progressive tax increase—one that ensures the rich pay their fair share.

The very real risk is that instead of a progressive basic income Bay St. as well as the multinational charter school and healthcare corporations would finally get their privatized schools and day surgeries in Canada. We deserve a basic income, but we also deserve quality education, healthcare, childcare for anyone who needs it. We deserve programs that can provide more support to those who need it more, not an abstract equality. A Liberal basic income implemented today will present us with the false choice of getting rid of these universal rights for some more cash—we may well end up spending more and getting less. An extra $5,000 to pay for your child’s education or your broken leg doesn’t matter much when you’re wealthy, but it does when you’re working class.

Power from the bottom up, or gifts from the top down?

The math and the political landscape should be enough to at least get a bucket of cold water ready in case we need it. Basic income in the abstract is not up for debate today; if it was, we would be feasting. Instead, we need to be taking a hard look at what something concrete enacted by today’s Liberal Party would look like. And it looks like table scraps. The NDP, who recently passed a resolution at their convention seeking to explore a federal Guaranteed Annual Income, with next to no debate, would be wise to be very cautious about the illusory promises of basic income.

Fighting for $15 an hour may not sound as glamorous as fighting for $15,000 a year, but it is only by building our power form the ground up rather than appealing to the nice feelings of elites that we’ll truly win. The fight for a world that is less insecure, where we work less and have a greater say over what we do doesn’t start with illusory quick fixes like basic income handed down by the representatives of the elite. It starts with the hard work of organizing. Every time workers have demanded something and won, they’ve had to make credible threats. This starts with collective power built from the bottom-up and it will get us much further than a basic income handed from the top down.

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6 thoughts on “Beware of Basic Income

  1. Good article with many valid points. I have two items to add.
    (1) We would get rid of a LOT of costs for a wide range of social services currently provided by all 3 levels of government. What are the savings? (unfortunately, many job losses as well, but that is nothing new in the new economy – look at manufacturing)
    (2) How much of the cost of guaranteed income would be clawed back from those who continue to work? (tax structure would change to provide these clawbacks)

  2. Personally I’d rather pay more in taxes to have a strong (constitutionally protected) social safety net. One that guarantees access to dental care, and quality post secondary education, solid rent controls (30% of income maximum.) Than be bought off by a measley sum of money.

  3. I’m no expert on basic minimum income, but the article by Michal Rozworski seems quite misleading….sounds like someone from a right wing think tank. Obviously, the amount received would be based on income tax returns and a majority of people wouldn’t receive much if any of the basic income. Statements are made about social programs without defining what they are….Welfare and other social assistance programs may or may not be included under social programs. There will never be decent jobs for everyone, but there can be decent incomes for everyone.

  4. Pingback: Beware of basic income | Michal Rozworski

  5. Both basic income and minimum wage laws have unintended consequences that are worse than the disease they mean to cure. This can be seen by thinking through the logic of the proposal with various tests. For example, why should the minimum wage be $15/hour as is popular right now and not $30/hour? Why not $45? The fact is that many jobs, and the entry level employees who fill them, are not worth $15/hour and as the minimum wage goes up those jobs will disappear. And in this age of increasing automation, distorting the labor market with artificial minimums will only increase the incentive companies have to install machines and reduce headcount. Plus the money has to come from somewhere. Pay the staff at the burger shop $15/hour and the price of the hamburger goes from $5 to $8, so everyone pays for this increase until the burger shop gets rid of most of their staff and replaces them with self serve kiosks as is currently happening. The only staff left will be the ones servicing the machines and these will not be entry level jobs a high school student can do.

    Basic income suffers from the exact same problem. Why $15,000 per year as proposed in this article? Why not $150,000 per year? Whatever level it is set at distorts the market. If the basic income is going to be $15,000 per year, no one will choose to work unless the salary paid is considerably higher. $15,000 per year works out to roughly a full time equivalent of $7.50 an hour, but since the new minimum wage of $15 dollars an hour works out to roughly $30,000 per year, at which point there are taxes involved, many people will simply choose not to work especially if there are child care, transportation, and other costs involved in working.

    If there were a way to give everyone a free lunch and not task anyone with making it we’d have thought of it by now. The fact is the economy cannot function unless everyone is prepared to make their own lunch.

    The real reason the government wants to raise the minimum wage to $15/hour is that those people will then pay taxes (something like the first $17,500 is basically tax free, I can’t remember the exact number). They don’t care that they are forcing more people into unemployment, they just want to see taxes up. Any time a politician says he is doing something for your own good, you have to remember that he isn’t. He’s doing it for his own good and if you happen to benefit that is coincidental.

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