Basic Income Could Cost Less Than Money Spent On CERB: Watchdog
July 10, 2020
OTTAWA — The federal budget watchdog estimates a six-month guaranteed basic income for all eligible Canadians could cost the government less than what has already been spent on Canada Emergency Response Benefit (CERB) payments over a four-month period.
Parliamentary Budget Officer Yves Giroux released a new report Tuesday in the wake of emergency money that’s been rolled out to soften the “brutal” economic impacts of the COVID-19 pandemic.
“The introduction of CERB has brought discussions of universal basic income to the forefront once again,” the PBO wrote in its report.
Watch: Why Canada’s COVID-19 crisis may result in 1 more lost generation. Story continues below video.
A basic income for the last six months of the 2020-21 fiscal year would cost at least $47.5 billion and upwards of $98 billion, the report read. In this scenario, the funding would provide a guaranteed annual income of $18,329 and $25,921 to individuals and couples, respectively.
Approximately 9.6 million Canadians between the age of 18 and 64 would be eligible for payments at the lowest income threshold the PBO examined. The money is intended to help cover the basic necessities of life such as food, clothing and shelter.
Advocates have long argued that implementing a guaranteed basic income could replace an existing patchwork of social assistance programs and tax measures for low-income or disabled individuals, while saving administration costs.
The PBO found approximately $15 billion could be saved this way. The savings could theoretically be used to offset the cost of implementing a guaranteed basic income.
Comparatively, the federal government has so far paid $53.5 billion in direct CERB payments since mid-March to Canadians whose employment has been impacted by the coronavirus pandemic.
Breaking down the math
Giroux’s office used the parameters of Ontario’s scrapped basic income project to guide its calculations. The PBO included a supplemental $1.7 billion for guaranteed income for disabled Canadians into all of its projected scenarios.
The PBO looked at how much a federal program could cost at a 50 per cent, 25 per cent, and 15 per cent reduction rate.
A reduction rate is the percentage of the benefit that is reduced in relation to earned income. So, for every dollar in wages, a recipient’s benefit is reduced by between 50 and 15 cents, depending on the model. The reduction is built into many basic income proposals as a way to incentivize people to work and earn higher incomes.
The lower the reduction rate, the more people who would be eligible for larger benefits — which in turn increases overall program costs.
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At the low end of its range, the PBO estimates the cost of a guaranteed basic income could be $47.5 billion at a 50 per cent reduction rate. This means a person would have to earn $36,660 to no longer be eligible for basic income payments.
Lowering the reduction rate further widens the net for eligible Canadians.
In the highest cost model, more than 20 million Canadians would be eligible for basic income at a 15 per cent reduction rate, increasing program costs to $98 billion per year.
A person would have to earn more than $122,000 before benefits are eliminated at this rate.
The government’s economic responses to the coronavirus pandemic has fuelled discussion and debate around the CERB and the idea of a guaranteed basic income.
They’re two different programs with different intentions that have been conflated because of the attention on the sticker price.
A senior government official, who was not authorized to speak on the record, told HuffPost that the CERB was designed to be temporary, intended to fade away when there is no longer an emergency.
Prime Minister Justin Trudeau has repeatedly said his government’s focus has been getting financial aid quickly to Canadians who need immediate help.
Approximately 5.5 million Canadians have either lost their jobs or had their hours cut since widespread physical distancing measures upended the economy in March.
Despite criticism of the CERB eligibility criteria letting some Canadians fall through the cracks, Trudeau has maintained that making the emergency payment universal during a pandemic is easier said than done.
The popular program has been extended to the end of August due to low uptake of the government’s Canada Emergency Wage Subsidy program to help employers rehire workers. The cost of the CERB program is expected to grow to more than $71.3 billion by the end of the extension.
“The impending expiry of current COVID support programs is an opportunity to test basic income while helping Canadians weather the uncertainty of a post-COVID world,” read a statement from Sen. Yuen Pau Woo, who requested the PBO study.
Disability advocate calls federal aid ‘absolutely dismal’
Guaranteed basic income has been touted by advocates as a long-term policy solution to shrink the administrative costs of maintaining 55 federal and provincial programs designed to help low-income earners and other vulnerable groups.
The argument is the money can be saved by cutting red tape, and reallocating funds as direct basic income payments to lift people from poverty.
Chelsea Mayne, who is currently on the Ontario Disability Support Program (ODSP), wishes the government opted for a federal basic income.
She told HuffPost Canada’s politics podcast “Follow-Up” that though the government’s intentions were good with CERB, the response to people on disability has been “absolutely dismal.”
Listen to Mayne on “Follow-Up” starting at the 24:44 mark:
Follow-Up With Althia Raj · #53 ‘Never Let A Good Crisis Go To Waste’
People on ODSP receive less than $1,200 monthly, which is less than the $2,000 benchmark the government set as its minimum CERB payment.
Mayne said the double standard has been a slap in the face for those on disability who’ve found themselves ineligible for the CERB, dealing with increased COVID-19-related costs.
“There is systemic ableism in this country and it is considered OK to just ignore disabled lives,” she said.
NDP House Leader Peter Julian told reporters in Ottawa that his party has been pushing for a more universal approach to financial support for Canadians since the onset of the pandemic in March.
“It makes more sense to make sure that everybody who needs the benefit can actually get it,” he said Tuesday.
With the cost of coronavirus-related government packages climbing, the prime minister promised Canadians last month to give a summary of how the economy is doing and how the country’s response fares to that of other countries.
In lieu of its postponed budget, Finance Minister Bill Morneau is expected to deliver the government’s “economic and fiscal snapshot” Wednesday.
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