Ontario embraces no-strings-attached basic income experiment

Province to follow trail blazed by Manitoba in the mid-1970s with plan to lift people out of poverty with unconditional monthly payments.

Thestar.com
April 18, 2017
By Laurie Monsebraaten

The Richardson family got a new kitchen table and 12-year-old Eric got his first trip to the dentist.

The Wallaces, who had no running water or indoor plumbing in their farmhouse in the 1970s, were able to buy a nearly-new flatbed truck.

Forty years ago, they were among almost 2,200 Manitoba households that participated in “Mincome,” a three-year federal-provincial experiment that sent unconditional monthly payments to low-income families as a way to combat poverty and streamline social programs.

There was little analysis of the project at the time due to a change in government and political priorities in the late 1970s. But a 2011 study of Mincome turned up some interesting findings about the rural community of Dauphin, Man., where the Richardsons and Wallaces lived and where all low-income households were eligible to participate.

Hospital use in the area dropped, including admissions for accidents and mental health problems, according to University of Manitoba researcher Evelyn Forget. Meanwhile, the rate of high school completion increased compared to similar towns at the time.

This month, Ontario is launching its own pilot project to see what happens when low-income families receive monthly payments with no strings attached.

Policymakers want to know if a so-called “basic income” would improve health, housing, and employment outcomes for Ontarians.

Housing Minister Chris Ballard, responsible for Ontario’s poverty reduction strategy, says basic income “has captured people’s imaginations.”

“It’s a rare opportunity to make some real change,” he told the Star. “There has been so much talk, so much written. A little bit of study here, a little bit of study there. A lot of theory. We’re going to have an opportunity to do a rock-solid pilot that is either going to prove or disprove it.”

Community and Social Services Minister Helena Jaczek, who is leading the initiative with Ballard, says she is excited about the possibilities, but “tempering expectations.”

“At this point it is hypothesis,” she says. “We really want to test it.”

“There was always enough food. But there were definitely no extras,” recalls Eric Richardson, who grew up in Dauphin, a town of 10,000 about 300 km northwest of Winnipeg.

“All of a sudden I remember coming home to find this new chrome set. You know, the kind with chairs on caster wheels?” says Richardson, 54, of the day in 1974 when the dinette set arrived during the Mincome trial.

Richardson was the youngest of six kids and none of his older siblings had ever been to the dentist, he says by phone from Winnipeg where he teaches carpentry at Red River College. “I was the first one. But I got 10 fillings on that first visit. Ouch,” he says. “I still have all my own teeth, so I guess it was a good thing.”

Betty Wallace, husband Jim, and their two children lived on a farm just outside town. But for them, Mincome, which provided about $300 a month, was more problematic.

“We must have looked like we needed it,” the 87-year-old grandmother says in an interview from the farm now run by her son and his wife. Jim died about a decade ago.

“We were on the land. We grew a big garden. When we needed meat, we killed a sheep,” she says. “We didn’t need it like others.”

Wallace says she agreed to participate because recruiters needed families like hers that weren’t on social assistance. About 400 Dauphin families eventually signed up, or about 40 per cent of eligible households.

“Because of Mincome, we got a better truck,” Wallace says.

She’s still not sure farmers and other self-employed people are a good fit for a basic income because they can go months without any income and then become flush with cash when they sell some livestock or other product.

But Wallace acknowledges the benefits for families like the Richardsons. Eric’s father, Gordon, couldn’t work due to failing health. So his mother, Amy, ran a hairdressing business from home.

“She needed the money to feed and look after the kids,” Wallace says. Amy Richardson died in 2015. But in interviews before her death, she said the program helped her afford more of the basics.

The bulk of Mincome participants were in Winnipeg where low-income families were randomly chosen along with a control group. Subsequent studies of that cohort showed most male breadwinners didn’t reduce their work hours due to the extra cash, a key question the pilot project aimed to answer. However, fewer women with young children remained in the workforce.

Mincome was one of five similar experiments in North America at the time and the only one in Canada. But political interest on both sides of the border waned in the 1980s and the idea fell out of favour.

Until now.

Proponents on both the political left and right are embracing a minimum or basic income as a way to reduce poverty, support workers faced by the challenges of automation and precarious employment and reform excessively punitive and bureaucratic welfare programs. Some say unconditional cash transfers to individuals could even help staunch the rise of alt-right populism blamed for last year’s Brexit vote in the U.K. and Donald Trump’s election as president in the U.S.

Opponents worry it will be used to dismantle the social safety net, subsidize bad employers and take the pressure off government to develop effective labour strategies. But that hasn’t stopped global interest.

Finland launched a two-year pilot project in January and more than half a dozen other communities around the world are actively pursuing experiments of their own.

In Canada, former conservative senator Hugh Segal and Liberal Senator Art Eggleton co-authored a report in 2009 recommending a national basic income. Segal is advising Ontario’s Liberal government on a model for its trial. And federal NDP leadership candidate Guy Caron has made basic income a key plank in his campaign.

“It could well be the beginning of a seminal change in how modern societies inclusively and economically reduce the negative and broad impact of poverty,” Segal told the Star.

Segal’s proposed model calls for a minimum payment equivalent to about 75 per cent of the province’s low-income measure, or $1,416 a month in 2016 for a single person. (The low-income measure - an income-based definition of poverty equal to half of the median household income in the province, adjusted by size - was about $22,653 for a single person last year.)

The no-strings-attached payments for adults between 18 and 65 would be non-taxable and participants would be allowed to keep a portion of any additional employment income.

In a paper released last fall, Segal recommended a three-year randomized control trial in a large urban centre as well as three “saturation sites” where everyone living in poverty would be eligible to take part. Communities in northern and southern Ontario, as well as a First Nations reserve should be tested, Segal suggested.

More than 35,000 Ontarians weighed in on the proposal during online and public consultations over the winter. It has also attracted foreign media attention.

“I have been approached by several international documentary filmmakers who are keen to track what we are doing here,” says Sheila Regher, head of the grassroots advocacy group Basic Income Canada Network. “It is a very exciting time for our movement globally as numerous pilot projects get off the ground around the world.”

Canada provides relatively generous benefits for seniors and children, but nothing substantial for working-age individuals except welfare, a system mired in rules that force single people to live on incomes about 55 per cent below the poverty line, Regher notes. “A basic income would be a huge game-changer for them.”

Although some anti-poverty advocates condemn Ontario’s basic income experiment as an excuse to ignore longstanding calls to raise welfare rates, Regher says the pilot is a chance to change the conversation.

“We have been trying to reform social assistance forever and nothing really happens,” she says. “A basic income pilot could change all that, by giving people an opportunity to talk about it.”

Details on Ontario’s pilot project, announced in the 2016 budget as a way to test a different approach to providing income support, will be released in the coming days. The government will announce where the experiment will take place, who is eligible and how much money they will receive. Participation will be voluntary and no one will be worse off for taking part, the government has said.

Jaczek says the project’s findings will play an important role in her ministry’s ongoing commitment to reform the province’s meagre and rule-bound welfare system.

“At some point, something has to converge,” she says of the basic income pilot and welfare reforms that are happening at the same time. “If we do show improvement in terms of attachment to the labour force and less stress-related illness (through basic income), that’s worth doing for everybody.”

* * *

Gregory Mason, an associate professor of economics at the University of Manitoba, directed the digitization of Mincome data in the early 1980s after funding for the project ran out. While most Mincome participants were part of a randomized controlled trial in Winnipeg, interest today centres on Dauphin because of Forget’s research, he says.

Dauphin also remains the only community where all low-income households were eligible to receive the unconditional cash. Researchers say results in Dauphin are the most accurate reflection of what could happen if a basic income became more broadly available as provincial or national policy.

But as Mason and others note, randomized controlled studies carry more weight in scientific circles, which is why Dauphin remains the only saturation site ever tested for a basic income.

In addition to being scientifically suspect, saturation sites are politically difficult to select and more expensive to run, Mason says. Since all low-income households are eligible, it is difficult to guarantee participant privacy and a catastrophic event, such as a flood or major employer leaving town, could skew the results, he adds.

Forget, Segal and others still believe there are clear benefits.

“People are affected by their neighbours, their peers. This is an aspect the randomized trial misses,” says David Calnitsky, a post-doctoral fellow at the University of Manitoba and one of the first researchers to examine surveys completed by Dauphin Mincome participants.

For Calnitsky, one of the most interesting findings is how Mincome reduced the stigma of welfare. As one Dauphin participant wrote: “It trusts the Canadian people and leaves a man or woman their pride,” he notes in a research paper.

“The routine humiliation of the poor that continues to exist in our current highly conditional social assistance system melts away under a basic income system,” he says in an interview.

If a basic income replaced welfare and more people benefited from the program, it would become more politically difficult for governments to take it away, Calnitsky says.

In an increasingly polarizing world, a basic income could play an important social role by bridging the divide between the working poor and the welfare poor, the so-called “deserving” and “undeserving poor,” he adds.

In a finding that may concern business interests, Calnitsky’s research also shows a “statistically important” drop in the percentage of individuals in the labour force during the Mincome years. This shows that a basic income would give people the choice to turn down a low-wage or otherwise undesirable job or choose other socially-important activities, he says.

In a yet-to-be published study, Calnitsky found Dauphin employers paid higher wages for new hires during Mincome, suggesting a basic income could boost wages for low-wage workers.

But there is a wide range of skepticism over how a basic income would impact work today.

“Any struggling low-wage worker would jump at the offer of a basic income to give them a bit more breathing room,” says Pam Frache, with the advocacy group Workers’ Action Centre.

“But if a basic income is going to be good for everyone, how do we make sure it is not subsidizing a cheap labour strategy?” adds Frache who is also Ontario co-ordinator for a campaign to raise the minimum wage to $15 an hour.

If it is to support people who are unable to work or who cannot work due to care-giving or other reasons, a basic income that brings them within 75 per cent of the poverty line still leaves them in poverty, she adds.

“Any basic income program must be accompanied by strong employment standards legislation, increased access to unionization and a minimum wage that brings people above the poverty line,” she adds. “And it must be in addition to existing social programs.”

Segal estimates it would cost $30 billion a year to lift every Canadian out of poverty. The figure for Ontario is pegged at $8 billion. It would cost about $5 billion to raise current welfare rates under Ontario Works and the Ontario Disability Support Program to the poverty line.

Anything that is universal and beneficial would be tremendously expensive, Frache adds.

“If we fund basic income, what is the risk of something else being squeezed out? What social programs will be lost? Housing subsidies? Daycare subsidies?” she asks. “There is no way we will have a basic income program that will be in addition to all the existing social programs.”

“That’s the skepticism and where the queasy stomachs come into play,” she says. “It all sounds good until you start seeing the numbers and then you start to see anything that’s meaningful is hugely expensive. And then you have to ask what suffers? What is going to give?”

Peter Clutterbuck of the Ontario Social Planning Network worries the enthusiasm over basic income neglects the importance of work. A basic income can’t replace the social inclusion that comes from work, he says. And it will never pay as much as a good job.

At Queen’s Park, Jaczek muses about Manitoba’s Mincome project and wonders how the residents of Dauphin are doing now.

“There were some positive indications ... and then it was stopped,” she says. “But was there any hold-over?”

Eric Richardson, whose family used the money to send him to the dentist, still has his own teeth. And he still has the chrome and Formica kitchen table his family purchased with Mincome.

Remarkably, Betty Wallace says the second-hand truck she and her late husband Jim bought for $3,100 through the program, still sits in the yard, 40 years later.

“It turned out to be a heck of a good truck,” she says. “We still use it.”

Back in the 1970s, Wallace says her family wasn’t earning enough to pay income taxes. But today her son pays more in taxes than many people earn in a whole year.

“So it’s pay-back time,” she chuckles. And that is the legacy of Mincome.

“If you can take a family down on their luck, or with medical problems or what have you, and get them over the hump and into a job that they like, pretty soon they will be paying income tax,” Wallace adds. “I think it’s one of the best things they have ever done.”