Basic income—a radical idea for eliminating poverty

March 16, 2016 by Atif Kukaswadia, Plos Blogs
Basic income—a radical idea for eliminating poverty
The Watson Arts Centre in Dauphin, Manitoba. Credit: Wikipedia

I imagine most of my readers have never heard of Dauphin, Manitoba. A small, farming community in Canada, Dauphin is a town that was part of an experiment back in the 1970s. The "mincome" project was launched in 1974, and offered everyone a minimum income. Unfortunately, the project was shut down in 1979 with a change in the government, and so the effects weren't long term enough. The purpose of the mincome project was to see what would happen if a "top up" was offered to everyone. Dr. Evelyn Forget has been studying records from those years, and following up on people to see how it impacted their life. Would people stop working? Would there be higher rates of employment? How would people respond?

But lets start from the top. What is a minimum income? Currently, there are two main models for a minimum income – the universal basic income (UBI), and the negative income tax (NIT). They're similar, but also slightly different in how they're implemented. A negative income tax basically gives you money to top you up to a certain among, after which point you start getting taxed. However, this has problems, such as how often would your income be evaluated? If it was only annually, then someone could be unemployed for a year or more before they receive their minimum income payments. More frequently would be better, but would also be more challenging to implement. The other alternative is a universal basic income, which gives every adult a monthly cheque regardless of income. At the end of the year, this would be included in . This is also problematic: primarily because of the high costs up front, plus the optics of giving everyone a cheque, including those who do not need it (Huffington Post).

One of the first questions people have when I mention a minimum income is what's to stop people from working. Well, the current model of welfare doesn't incentivize work – once you earn over a certain threshold, you are no longer eligible. So there's a hard cut off before which point there's no reason to work. Under a minimum income model, you are not penalized for working more, and instead the supplement is taxed at a certain rate (often suggested to be 50% for every dollar you earn), up until a certain amount. So there's always an incentive to work (as shown below).

Basic income—a radical idea for eliminating poverty

When the data from Dauphin was analyzed, Dr Forget's found that while there was a slight decrease in people working, it was among those in late high-school who stayed in school to graduate (rather than picking up part-time employment), and parents who stayed home to be with their children. In fact, the biggest benefit is to allow you to take risks that may not pay off immediately, such as furthering your education, obtaining more training or qualifications, or setting up your own business. Forget found that many young people stayed in school, and Grade 12 enrolment increased while the project was active (page 32 here). Oxfam recently implemented a mincome project in eight villages in India, and compared the results to 12 control villages. They found that the experiment had huge impacts on the community, with "improvements in child nutrition, child and adult health, schooling attendance and performance, sanitation, economic activity and earned incomes, and the socio-economic status of women, the elderly and the disabled." (Standing, 2014) In fact, they saw a shift from from casual wage labour to own-account farming and small-scale business, which helps people move out of poverty. Perhaps the most challenging aspect of the above is the stigma and mindset associated with giving everyone "free money." While we can acknowledge that people can be trapped in poverty, there's less of an onus on helping people out of poverty. A minimum income helps people plan for the future, helps absorb unforeseen circumstances and situations, and can allow for people to take risks.

Fascinatingly, there are people on both sides of the aisle who are interested. On the one hand, you have those who are socially liberal recognizing the benefits of giving everyone a guaranteed income for the reasons outlined above. On the other side of the political spectrum, you have fiscal conservatives recognizing that this could save money by eliminating social assistance programs and reducing bureaucracy. However, we need to pilot test it and collect better data to evaluate how sustainable or enforceable such a policy would be. Nationally, this would be very difficult to implement. However, the benefits, which could range from a better educated workforce to lower hospital visits, could result in massive savings overall.

With changing global economies, and a large proportion of the population in precarious employment, there's been a renewed interest in a minimum income guarantee. In Canada, estimates for the number in precarious employment (contract work, temporary short term work) ranges, but estimates suggest around 20% of in Toronto and Ontario are precariously employed. As we gain a deeper understanding on poverty and how it can be passed down between generations, our current approach is evidently not sustainable or successful. This isn't a silver bullet solution to poverty by any stretch. Income is one part of it, but there are also issues around discrimination and stigmatization, lack of contacts to obtain experience and jobs, and other factors that feed into it. However, this is a start, and evaluating whether it works with good data is the only way to know if this is the way of the future.

Explore further: Links between money and happiness uncovered

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