Saturday, December 3, 2011

Information Round Up on Basic Income

A basic income is an income unconditionally granted to all citizens, without means testing or work requirements. Basic income programs have several advantages over alternative social security programs, such as providing greater security, requiring less administration, and presenting fewer perverse incentives. Advocates for basic income have included Martin Luther King, Bertrand Russell, Milton Friedman, George McGovern and John Kenneth Galbraith. In Canada, basic incomes have the support of the Green Party of Canada, Conservative Senator Hugh Segal, and was recommended by the Trudeau appointed MacDonald Commission.

Basic income guarantees often take the form of either a citizen's dividend or a negative income tax, which we now describe.

A citizen's dividend is system of regular payments (or dividends) to all citizens made from revenue raised by the state through leasing or selling natural resources for private use. Such a system is currently used in Alaska to distribute their oil wealth. A citizen's dividend would be a much fairer way to distribute the oil wealth of Newfoundland and Labrador, as opposed to the current system of income tax cuts which provides far greater benefits to the wealthy than to the rest of us.

A negative income tax is an income tax system where people earning below a certain amount receive extra money from the government instead of paying taxes to the government. In 2008, a negative income tax called the EITC was launched as a pilot program in Israel. A report released in 2010 by the Bank of Israel recommended that the program be extended countrywide, because "EITC is a focused and effective tool that raises the level of income of the working low-paid population" and " EITC is not expected to have a negative impact on rates of employment".

Many experiments have been conducted to study the effect of basic income guarantees on work force participation (the concern being that if people are guaranteed an income, they won't bother to work). One study (unfortunately behind a paywall) of four different negative income tax experiments in the U.S. found that on average adults reduced labour force participation by only two or three weeks. A Canadian experiment in the 1970s provided the residents of Dauphin, Manitoba a "Mincome" over four years. Researchers found that the only two segments of the labour force who worked less were new mothers and teenagers. Furthermore, there were significant declines in hospital visits and in the high school dropout rate during the period of the experiment.

A basic income guarantee currently exists in Canada for people over 65 years of age, in the form of Old Age Security and the Guaranteed Income Supplement. These programs have been instrumental in one of Canada's great social justice success stories: the reduction of poverty among the elderly. Since the evidence suggests that guaranteed income has very little effect on labour force participation, doesn't it make sense to extend these programs to the rest of our population?

A fascinating discussion about the implications of introducing a basic income (and a wide range of other topics)

1 comment:

payday loans said...

Times have been changing indeed. Basic income nowadays are challenging to live by due to inflation. Most of the time, people resort to loans just to get by.