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BRIEFING NOTE FOR THE MINISTER OF FAMILIES, CHILDREN AND SOCIAL DEVELOPMENT
Implementation of a Guaranteed Annual Income Program to Canadians by the Canadian Government
Discussion on the Annual Guaranteed Income for Canadians has been a great debate, despite the government’s lack of commitment to endorse this program. At the early stage it was discussed by the Social Credit movement. In this program, Canadians would be guaranteed an income of CAD 16,989 for singles and CAD 24,027 for couple annually (Charles & Hugh, 2015). People with disability will receive an additional CAD 500 per month. The program has had varied names, including Guaranteed Annual Income, Social Dividend and basic income. It is approximated that, if implemented, the program would cost the Canadian government CAD 76 billion per year. However, there is a belief that implementation of this program would eliminate the current expenditure of CAD 33 billion by the government, on low income individuals (Greg, 2016. The net expenditure will therefore, be CAD 43 billion.
WHY IS THIS AN ISSUE?
Canada has been praised in the past, for its good concern concerning the portion of its population, with low income. The main idea behind Canada having a fixed pay for the low income earners, is to ensure that it caters for the social and economic needs of its population. This is what has prompted the debate of the guaranteed In North America, before the great depression, the development of Social assistance program was a piecemeal affair. Since the beginning of, welfare in Canada and the United States, always concern itself, with the work of incentive issue (Charles & Hugh, 2015). The unemployable found relief through a set of uncoordinated private charities and local programs. This was contrary to the employable, who would only rely on their incomes, whether or not it is adequate for their families.
Occasionally, the government of Canada would be considerate to the employable whose incomes were low, but this has been and remains unreliable.
The debate on having Canadians being guaranteed an annual income, is rotating around ensuring that there is equality to both the employable and the unemployable. According to (Melissa, 2011), the Annual Guaranteed Income, will ensure that the Canadians can universally afford the necessities of life, hence increasing the general human development in Canada. The proponents of this policy argue that, the current CAD 33 billion which is currently spent on incentives for the poor, should be put into this program, and improve it to universal program.
The idea basic income in Canada was first recommended in the year 197. Based on this proposal, the government of Canada, in partnership with the province of Manitoba, conducted a negative income tax (NIT), an experiment known as mincome, between 1974 and 1979. At this time, it was widely believed that this, would serve as the pilot for a universal program that would lead to a revolution on the ways that Canadians pay their taxes, receive benefits and earn income. The oil shocks and persistent stagflation in the 1970s, brought a different government to power, at both the federal and provincial levels, hence bringing to an end the mincome, without the implementation of the anticipated universal basic income proposal (Melissa, 2011). In the year 1986, however, the debate was revived by the Royal Commission on the Economic Union and Development Prospects for Canada. Once again, the excitement generated by such a radical proposal did not translate into a universal income scheme.
Since then, the subsequent governments have been a flirt to this program. It is argued that, new social support programs in Canada, such as National Child Benefit, are built on the lines on a negative income tax. While this seems a good idea, many have already asked its effectiveness, hence leading the government showing little or no commitment to it. There is an argument that, this program would save the government up to CAD 28 billion, currently spent on health (Greg, 2016). It also argues that, the cost would be lower, as the local governments will also be part of this program.
RISKS AND CONSIDERATIONS
Hypothetically, the Guaranteed Annual Income (GAI), would benefit the Canadians according to the proponents of this concept. However, a deeper analysis of this program reveals numerous risks. One of the risks, of this is that the tax paid by the citizens would go high, as the government will need more funds to sustain this program. In addition many would opt to stay unemployed, since they are guaranteed income, whether or not they work. This would therefore create a lot of pressure on the working class, who will be required to pay more taxes. Also with reduction in the labor force, the government would find this program unsustainable, as the number of tax payers would drop. The amount to be distributed, as a guaranteed annual income, will obviously go to consumption, and not development. This would starve the development expenditure and rate of Canada. Which in turn may increase unemployment rate, and finally increase poverty rates. This program would also cause a demand pull inflation, as government expenditure would increase. Finally, this move, can be perceived as political tactic to woo voters, hence reflecting negatively the provincial government.
Based on the above factors, it will be prudent for the government of Canada to implement a negative income tax program. This will enable the country to;
- alleviate poverty and improve the general social welfare, with minimal unintended employment effects
- Raise wages for low wage workers, owing to the fact that labor would be a scarce commodity,
- Increase the incentives relative to other welfare programs.
The cost of this will be that those who fall within the benefit bracket, would have low chances of being employed.
ANNEX: OTHER OPTIONS CONSIDERED
- Earned Income Tax Credit
In this case, workers would be given a subsidy, based on their income, up to a certain minimum level, for example CAD 1,200. The benefit of this is that it will induce s strong incentive for people to work. Its cost however, is that it may be ambiguous on employment levels, during the phase portion in the wages subsidy
Greg Mason (2016).Basic Annual Income: Prospects and Problems. Department of Economics University of Manitoba Presentation to Len Remis Lunch Shaarey Zedek Synagogue. Retrieved from: http://gregorymason.ca/wp-content/uploads/2016/07/Basic-Annual-Income.pdf. Viewed on 20th March 2019.
Melissa Martin (2011).International Perspectives on Guaranteed Annual Income Programs Queen’s University Osgoode Hall Law School/Schulich School of Business. Retrieved from: https://www.queensu.ca/sps/qpr/sites/webpublish.queensu.ca.qprwww/files/files/22%20international%20perspectives%20guranteed%20annual%20income.pdf. Viewed on 20th March 2019.
Sharagge, E. (1994). Why we can support guaranteed annual income. Canadian Charles Lammam & Hugh MacIntyre (2015).The Practical Challenges of Creating a Guaranteed Annual Income in Canada. Retrieved from https://www.fraserinstitute.org/sites/default/files/practical-challenges-of-creating-a-guaranteed-annual-income-in-canada.pdf. Viewed on 20th March 2019