Ontario pilot project puts universal basic income to the test

Conservative strategist leading first project of its kind in North America for decades says he wants ‘a floor beneath which people are not allowed to fall’

Child poverty has been a long term problem in Ontario despite attempts to tackle it for decades as this 2005 photograph of children watching television in a bedroom that sleeps 7 in Kashechewan suggests.
Children watching television in a bedroom that sleeps seven. Child poverty has been a problem in Ontario despite attempts to tackle it for decades. Photograph: Charla Jones/Toronto Star/Getty Images

 

The Canadian province of Ontario is pushing forward with plans for a trial run of universal basic income, making it the first government in North America in decades to test out a policy touted as a panacea to poverty, bloated bureaucracy and the rise of precarious work.

In the coming weeks, the provincial government is expected to announce consultations to hammer out the details of a C$25m pilot project, with the aim of formally launching it in spring 2017.

The government’s foray into basic income began earlier this year when it tasked Hugh Segal, a Conservative political strategist and longtime advocate of the idea, with exploring potential directions for a pilot project.

“This is not something which is in any way, in my view, the precinct of the left,” Segal said in an interview. “It is in fact the precinct of rational people when looking to encourage work and community engagement and give people a floor beneath which they’re not allowed to fall.”

An elderly woman finds something to eat and drink in a garbage can on York Quay, Toronto.
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An elderly woman finds something to eat and drink in a garbage can on York Quay, Toronto. Photograph: Patti Gower/Toronto Star/Getty Images

Segal’s interest in the idea was sparked in the mid-1970s. A series of news stories documenting high rates of seniors living in poverty in the province – including one report of some resorting to eating pet food to get protein in their diets – had ramped up pressure on lawmakers to address the issue. The response was a basic income policy for seniors in the province.

The policy sent poverty rates among seniors in Ontario downwards, from the low 30s to 5%, and sparked a slew of ripple effects. “Food security went up, longevity went up, independence of the healthcare system in terms of needing long-term care, all those indicators went up,” said Segal. The program soon spread across the country.

“So the question that occurred to me was very clear,” said Segal. “We can do this for seniors without having to add any more bureaucrats or civil servants, we respect their freedom to choose, we give them the money, they decide what’s important. Why would we treat other poor people differently?”

As he rose up the ranks from an aide to Conservative politicians to a seat in Canada’s senate, Segal pushed the idea. He scored a victory of sorts in February when Ontario included a promise in its budget to roll out a project to test the merits of basic income.

“What Ontario is doing is saying let’s have a pilot project, let’s calculate the costs, let’s calculate the positive and the nudge effects behaviourally,” said Segal. Any pilot would need to be in place for at least three years to obtain reliable results, he said, and would hopefully involve testing the policy in a small community to measure the effects on the population as a whole, as well as among a group in a larger community. “Then having made that assessment, let’s decide how to proceed.”

The experiment in Ontario comes as basic income, once championed by Martin Luther King Jr and Milton Friedman, is undergoing a popular renaissance. As leaders around the world struggle to strike a balance between fighting poverty, the push for austerity and the steady erosion of stable jobs with pension and benefits, basic income projects are in the pipeline in Finland, the Netherlands and Kenya. Earlier this year, American incubator Y Combinator announced it would launch its own experiment in basic income.

In Canada, where nearly one in five children live in poverty – a rate that is among the highest in the OECD and more than three times that of Nordic countries – leaders in Quebec and Alberta have backed the idea, as has the federal Liberal party. A recent poll of some 1,500 Canadians found two-thirds of those polled were open to the idea of basic income as a replacement for other forms of government assistance.

Canadians’ embrace of the idea can perhaps be traced to Dauphin, a small farming town of 10,000 people in Manitoba that was once home to one of North America’s largest and most ambitious experiments in basic income.

In 1974, about 1,000 residents began receiving monthly payments with no strings attached. The pilot, a joint effort by the federal and provincial government, set the stipend at around 60% of Statistics Canada’s poverty threshold, translating to roughly C$16,000 a year in today’s dollars for a single person. For every dollar earned from other income sources, 50 cents were scaled back from the monthly payment.

The payments flowed for four years, turning Dauphin into a potent test site for the policy. But the project’s budget of $17m – the equivalent of about $85m today – ran short halfway through the project, hindering data collection. A growing federal push for austerity along with a change in Manitoba’s government in 1977 sounded the final death knell for the project.

Grain silos and trains, in Dauphin, Manitoba, Canada
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Grain silos and trains, in Dauphin, Manitoba, Canada Photograph: Barrett & MacKay/Getty Images

Decades later, Evelyn Forget, a professor at the University of Manitoba, dug up the data in hopes of getting a sense of the project’s outcomes. What she found was promising. Hospitalisations, accidents, injuries and mental health issues had all declined when the stipend were flowing into the community. “That’s just a huge finding for a country like Canada that spends so much on hospitals every year,” said Forget.

At the outset of the project, policymakers had wondered whether the income would make people less inclined to work. Data from Dauphin showed little change in residents’ work habits, save for new mothers who took longer maternity leaves and teenage boys who were more likely to stay in high school. For many residents, basic income was seen as a source of stability, buffering them from financial ruin in the case of sudden illness, disability or unpredictable economic events.

Dauphin wasn’t considered an ideal representative of the labour market; many people were working seasonally, wages were low and nobody belonged to a union. Four decades on, the town seems prescient, said Forget. “Now if you look at the Canadian economy, the whole economy is starting to look like a small town labour market.”

Until recently a job with pension and benefits was enough to allow for a dignified existence, said Richard Pereira, an economist and one of the founders of the Canadian chapter of the Basic Income Earth Network. “Now we need something else, unless we are willing to undo globalisation,” he said. “Which you are seeing some move towards, whether it’s Brexit or both the left and right in the US – Bernie Sanders and Trump – talking against free trade.”

A guaranteed income could allow workers to regain the upper hand, enabling them to reject low paying or insecure jobs or choose to devote their time to traditionally unpaid work such as care and community support. The cost savings for governments in the long run could be substantial, said Pereira, pointing to the example of a family member caring for an elderly relative. “If that person were to say I have to go find a Walmart or Tim Horton’s job because I can’t keep this up, it would cost the public system so much more money if that person is in an institution.”

Hugh Segal Canadian senator.
Canadian senator Hugh Segal.

Still, the proposal faces obstacles. In June, voters in Switzerland overwhelmingly rejected a plan to institute a guaranteed basic income. In Canada, the same poll that suggested broad support for the policy also found that most would not be willing to pay more taxes to support such a program, raising the possibility that basic income programs may not garner enough government investment to be significantly different from the system currently in place.

These points are simply part of the discussion inherent in the process of launching a transformative idea, said Pereira, who likened basic income to women getting the vote. “These things are so common sense they just have to happen,” he said. “It’s just amazing that they didn’t happen so much earlier.”

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