Canada is betting on a universal basic income to help cities gutted by manufacturing job loss

Canada’s Prime Minister Justin Trudeau signs a robotic unit during a tour of the Amazon Fulfillment Centre in Brampton, Ontario Canada, October 20, 2016.
Canada’s Prime Minister Justin Trudeau signs a robotic unit during a tour of the Amazon Fulfillment Centre in Brampton, Ontario Canada, October 20, 2016.
Image: Reuters/Fred Thornhill
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Of all the ideas to pull people out of poverty, one of the more contentious is also the simplest: governments should just hand out monthly checks to the poor, no strings attached.

That’s exactly what the Canadian province of Ontario plans to do, and it’s already causing a ruckus. The Liberal Party currently in control of the provincial government aims to roll out a pilot for a “universal basic income” program in what could be three cities in the spring of 2017. While it has yet to identify the guinea pigs, hints of what the system will look like can be found in a discussion paper authored last August by Hugh Segal, a former member of the Canadian Senate and now head of the University of Toronto’s Massey College.

Segal recommended piloting in at least three cities, one urban, one rural and one in close collaboration with a First Nations community, and setting the handout at a minimum of three-quarters of Canada’s official poverty line. At that level, a single adult would receive an annual basic income of $16,989, almost double the $8,472 max payment under the province’s current welfare program.

Over 1.7 million people in Ontario live on incomes below the poverty line—$20,676 for a single person, or $41,351 for a household of four, according to 2011 data compiled by Statistics Canada. Many of the province’s poor were laid off between 2000 and 2007 as jobs evaporated in the auto industry and other manufacturing sectors.

One of the hardest-hit cities is Oshawa, which has battled to overcome a series of cutbacks at what was once one of General Motors’ biggest plants in North America. Ben Earle, a social planner with Durham Workforce Authority, a local think tank, estimates that the city, located about an hour’s drive east of Toronto, has lost 4,000 jobs over the past 15 years. He expects many of those jobs will never return. Thousands of former auto workers are now in precarious jobs “that are lower pay, contract-based, [and have] lower benefits—if they have benefits at all, ” Earle says.

Ontario as a whole makes up about 40% of Canada’s total economic output. A centerpiece of the Liberals’ economic policy is to replace traditional manufacturing with new “knowledge-based” jobs in areas such as medical research and financial technology.

Many economists think a universal basic income could help drive that shift. “It’s time [we] start considering some kind of basic income because of the changing nature of work due to automation,” says Chris Ballard, the minister responsible for the basic income initiative.

“If it is done right and universally accessible, it could provide opportunities for people to either explore entrepreneurship because they wouldn’t have to worry about their basic needs being covered, at least for a short period of time while they develop a business concept,” says Earle. “Similarly, it could be used to back up [people] who want to go back to school. Someone could make the choice to take time out of work to return to education in order to advance their skill set.”

In addition to Segal’s 101-page discussion paper, Ontario sought feedback from 40 experts, and conducted 14 public consultations on the feasibility of a universal basic income. Not everyone was enthusiastic.

Critics say testing basic income puts off meaningful action to address poverty. Karl Widerquist, associate professor in political philosophy and an economist at Georgetown University in Washington, DC, says the danger is in giving the Ontario government an excuse to put off more expensive policy changes, like addressing the inadequacy of social welfare rates or raising the minimum wage. Similarly, David Macdonald, senior economist at the Canadian Centre for Policy Alternatives, is concerned that if it truly becomes universal, the resulting price tag would force the government to cut other social programs to compensate. (The Ontario government has committed to the pilot in their budget but exact costs and where the money will come from have yet to be sorted out. )

Others don’t trust the government to succeed in implementing a basic income, given its track record: two earlier poverty-reduction strategies, which both proposed far-reaching structural reforms, have changed nothing, says Mike Balkwill who represents anti-poverty groups in Ontario, including a campaign called Put Food in the Budget. “This government really hasn’t done anything for people in deep poverty,” says Balkwill. The moves towards a basic income are just another “consultation merry-go-round.”

Instead of waiting around another three years to see the results of a pilot, he and other anti-poverty advocates are calling for an immediate raise to existing social assistance rates in the province to provide some relief for poor people.

The government received over 34,000 responses to their recent web surveys, the most ever for an online consultation in the province. Although staff are still reviewing the data collected, the government said in an email that feedback received has generally been supportive of a basic income pilot. A report on what they heard will be available later this winter.

Widerquist says the Ontario pilot will be good for the basic income discussion generally if it’s designed and measured well—we need more test cases and better data to decide whether it has the potential to work in a broader application.

Success, he adds, should not be measured simply by whether the poor are encouraged to go out and find work, since recipients may stay unemployed for longer compared to people receiving current welfare benefits because in theory they’d be more inclined to further their education or to take more time to find the right job. In addition, basic income, Widerquist argues, could improve an individual’s overall well-being, thereby offsetting healthcare costs, and act as an incentive for employers to provide better wages and job security. Once people have options, he says, companies are more inclined to offer more competitive job packages.

Various other jurisdictions have experimented with a universal basic income system. A basic income pilot—called Mincome—was tried in Manitoba, Canada in the 1970s. Due to lack of funding the project was cut short and not fully analyzed. Similar trials have been done in the US, showing mixed results.

India is right now seriously considering implementing a basic income nationwide after three pilots showed positive impacts on health and labor, benefiting mostly girls, women, and the disabled. Half a world away, Finland started a pilot program on Jan. 9 in which, for the next two years, about 2,000 randomly chosen unemployed Finns will receive €560 per month instead of welfare. They are not required to look for a job, but if they do work they will continue to receive the benefit.

Guy Standing, a professor at the University of London in England who has studied the basic income idea for 30 years, predicts that recent and ongoing experiments will go a long way to legitimize it as a serious policy option. In North America, a US technology company, Y Combinator, is funding a pilot. “The design is still yet to be finalized,” says Standing, who is helping plan the pilot. “I can say it is going to be [for] two communities.” And Canada’s smallest province, Prince Edward Island, announced plans last December to test basic income for its 149,000 residents.

Correction: This article has been updated to clarify that the government of Ontario has not confirmed the number of cities in which it will be testing basic income program.