UBI Strikes Again!

The debate over Universal Basic Income (UBI) reignites in Canada as Senate and House Bills Emerg. Photo credit: Senate of Canada.


The seemingly endless debate about Universal Basic Income (UBI) has become current once again in Canada as the Senate’s Finance Committee has undertaken to study a Bill intended to create a national framework for a UBI. The Senate bill is not geared to implementing such a system, but lays out the groundwork for it. There is a similar bill currently in the House of Commons, Bill C-223, sponsored by NDP MP Leah Gazan, which refers to a Guaranteed Livable Basic Income Act. Both of these Bills are intended to apply to anyone over the age of 17, and would not require any participation in the workforce or in an educational training program to qualify. They also state that these programs would not lead to any reduction in services or financial benefits that were a result of an individual’s needs related to health or disability. In other words, money for nothing.  

Naturally calls for a UBI or similar always come from the left of the political spectrum, where it is believed that governments have endless money to spend on such schemes as long as the “rich” are taxed sufficiently and that the priority should always be the redistribution of wealth from those who work hard to earn it to those who do not. Proponents state that UBI is a policy meant to reduce poverty and provide an equal baseline of income for all citizens. 

In our current economic circumstances, a UBI would also be expected to increase inflation. A major cause of our current inflation in Canada is that the federal government has pumped so much borrowed money into the Canadian economy that prices were forced to rise. This was the case even before the pandemic, when government spending took off like a rocket after the 2015 election of the Trudeau Liberals. During the pandemic, Canada spent about twice per capita what other countries did to account for pandemic-related job and income losses. At present, Canadian deficits and debt are at record levels while the federal Liberals continue to spend excessively and add to debt even though the pandemic is over and the Canadian economy is not generating the kind of revenue that might justify this level of spending. Pumping even more money into the economy in the form of a UBI would further boost inflation, which always harms lower income people more than those in higher income brackets. 

Many analysts consider CERB, the Canadian Emergency Response Benefit used during the pandemic, to be a test case of how a UBI would work because CERB did provide a base income level. As we now know, CERB was a disastrous program that wasted billions of tax dollars for no commensurate overall benefit. Sloppy government accounting meant that CERB went to many people who didn’t need it and even to folks that were dead. Many teenagers had never had it so good, as they collected CERB while living in their parents’ homes with virtually no expenses. A UBI available to 17-year olds, such as the current Canadian proposals are structured, can be expected to create a similar phenomenon of teenage couch potatoes. And even the CRA has admitted that as much as $30 billion in CERB benefits should not have gone to the people that received them, yet they don’t believe it is worthwhile to bother to do the work to try to collect these overpayments. Strange that the CRA will go after taxpayers who owe a few hundred bucks with a vengeance yet won’t chase $30 billion. Go figure. 

It’s not a stretch to believe that a UBI will just be a bigger and more wasteful version of CERB. The history of UBI-type programs around the world has also been less than impressive. A number of countries have done trials of such a program, only to find that when people are paid to do nothing, they are actually quite happy to do nothing. Even when the plan is intended to provide a bridge between periods of employment or to permit the person to get additional training, it rarely seems to work out that way. 

Another key question is if a UBI is to be considered, what is the level of income that should be guaranteed? Most studies have shown that to offer a UBI amount that is sufficient to actually make a meaningful difference to poverty would be so high it would be unaffordable for the economy at large. For instance, a comprehensive study that was done in BC in 2021 by the NDP government concluded that to make a difference, a minimum UBI amount was $20,000 annually. Even despite this relatively low amount, the program would have cost the province $51 billion dollars, roughly equal to the entire annual budget of the province. And even though this study was done by an NDP government with left leaning analysts, they still concluded that the province would be better off bolstering some of the existing targeted social programs instead of implementing a prohibitively costly UBI which would not be as effective in helping those who needed it most. 

The likelihood of success of the UBI proposals currently in the House of Commons and the Senate is slim, as they are Bills tabled by individual politicians and not widely supported by any political party. But the resilience of this concept should worry Canadians as it never seems to go away despite its record of failure and potential enormous cost. As successful rock stars, the band Dire Straits might have found a way to achieve money for nothing, but that’s unlikely to work well for we mere mortals. 

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