By Thomas Dong
Themes: Policy, Economy, Work, Solidarity
Since the turn of the century, neo-liberal economic ideas have paved the way for contemporary iterations of capitalistic ideologies and developmental models. With that, the world was met with a severe worldwide economic crisis in 2008. In 2020, the world faced yet another crisis in the form of a global pandemic caused by COVID-19. Many have argued the global spread was due to a reliance on globalization as one of many pillars in economic activity and development. This caused the shut down and closures of many businesses and the unemployment of many workers due to quarantine practices and distancing edicts in many parts of the world. Governments around the world have stepped up to support its citizens through additional unemployment insurance or wage subsidy programs. In Canada, the Canada Emergency Response Benefit (CERB) has been introduced to support Canadians affected by the pandemic. It was originally a 16 week program that got extended for another 16 weeks. I believe the extension of CERB is a testament to the impact it has had on the lives of Canadians and the economy.
Here I will first examine the history of Universal Basic Income (UBI) by exploring different UBI projects that have taken place. I will use examples to outline the possible outcomes of UBI and how it can be more beneficial than the current offerings of the capitalist system. Then, I will explore CERB as it relates to addressing the unstable economy and precarious situation of many workers during the socio-economic crisis caused by the COVID-19 pandemic. Implemented by the Canadian federal government to assist workers who stopped working due to COVID-19 or saw their employment insurance end, together with other wage subsidy and assistance relief pay introduced by federal and provincial governments, CERB is important as a type of basic income and thus provides clues to understanding the impact UBI can have as a mechanism to correct the wrongs of neo-liberalism on working people. I will conclude by outlining the possible outcomes of UBI and its impact on the lives of its beneficiaries by outlining how UBI can solve the issues of inequality and reliance of government services the current neo-liberal system has created.'
Implemented by the Canadian federal government to assist workers who stopped working due to COVID-19 or saw their employment insurance end, together with other wage subsidy and assistance relief pay introduced by federal and provincial governments, [the Canada Emergency Response Benefit] is important as a type of basic income and thus provides clues to understanding the impact UBI can have as a mechanism to correct the wrongs of neo-liberalism on working people.
A Brief History of Universal Basic Income
The core idea of UBI is to allocate an unconditional cash payment paid to everyone regardless of status of employment. UBI is considered as a potential solution to many socio-economic challenges confronted by the results of neo-liberal ideologies and its effects upon people, working or not. A UBI pilot was conducted in Finland and it was viewed as one of the main measures to reform the social system, reduce administrative bureaucracy and to simplify the overly complex tax system (Zheng, 2017). Finland launched its UBI pilot program in 2017 and became the first European country to pay its unemployed a minimum income as part of a two-year program to explore the effects of basic income on employment incentives (Zheng, 2017). Other countries, such as Canada and the Netherlands, include parties and individuals who consider it as a potential saviour of the existing social welfare system, which is deemed by some as dysfunctional and ineffective (Zheng, 2017). In the 1970s, Canada experimented with basic income in Manitoba, Alberta with a program called Mincome. This experiment has received a renewed interest recently. One aspect of this renewed interest is ongoing work to document actual consequences of the Mincome experiment that were not reported at the time (Forget, 2012). Mincome has remained one of Canada’s premiere social research studies. The technical manuals attest to the scientific rigour of the research and data, notwithstanding the challenges of assembling and interpreting experimental data (Simpson et al, 2017). Wayne Simpson (2017) asserts that “the fact that Ontario [tried to proceed] with a pilot to test a basic annual income in 2016 shows that Mincome remains pertinent to today’s policy context” (p.15). However, upon coming into power in Ontario, Doug Ford had made decision to end the pilot project in Ontario before any results could be taken from the program. For developing countries, UBI is seen by some as an approach to eradicate extreme poverty (Zheng, 2017).
In theory, if UBI was implemented, it would alleviate reliance on current government services such as unemployment insurance, financial welfare programs and healthcare. On the other hand, these individuals would be less restricted to rely on other government services such as daycare for example. If individuals received a guaranteed monthly income, they would have more freedom and choices in the market to choose the appropriate necessities and services they require. UBI provides more freedom in the sense of opportunity by substantially increasing the scope of real choices individuals have (Malleson, 2014).
Past projects offer insights on the effects of UBI. Yuan Zheng’s (2017) Universal Basic Income: A Working Paper looks at pilot UBI projects conducted in India from 2010-2011. The results of the project revealed that the beneficiaries were more equipped to identify their particular needs and priorities. For example, a proportion of the beneficiaries increased their labour and work productivity, while alcohol consumption remained mostly unchanged (Zheng, 2017). More recently, in 2017 the government of Ontario launched a three-year basic income pilot project and the results were positive before Doug Ford made the decision to end the project. In the study, 79.4% of individuals saw a positive change in their health status. Interestingly, only 5% of beneficiaries were less motivated to find a better paying job while 78.9% were motivated to find a better paying job (Ferdosi, 2020). In the findings, a basic income offered potential to reduce public health expenditures. In terms of doctor visits, respondents decreased about one third of their visits, with individuals using basic income to help address their health needs on their own terms. Visits to the emergency room are one of the most expensive aspects of Canada’s hospital system, and basic income led to a significant reduction in the frequency of such visits among beneficiaries (Ferdosi, 2020). Similar findings emerged from Canada’s earlier basic income project, Mincome, in Dauphin, Manitoba in the late 1970s (Cox, 2020; Forget, 201). During the project, the hospitalization rate began to fall in Dauphin showing a decline by 19.23 per 1000 residents (Forget, 2011). This was attributed to fewer alcohol-related accidents and hospitalisations due to mental health issues (Cox, 2020). In addition to health, the effects on education were met with positive effects. There was also an increase in the number of adolescents completing high school. Rural towns across Manitoba have a legacy of boys not completing high school and going straight to work jobs in factories or farms by the age of 16 (Cox, 2020). However, in 1976 100% of Dauphin students enrolled in their final year of high school (Cox, 2020). This shows that these students were motivated to develop their education and their skill set with a basic income. Examples of the impacts of UBI pilot projects outline positive impacts to health, employment and quality of life. All in all, the independence UBI provides individuals allows them to rely less on government services and gives them more autonomy to govern their own lives.
Canada Emergency Response Benefit
The global crisis has forced federal and provincial governments in Canada and other countries to see the limitations of our current income-security framework as businesses and incomes are deeply affected by global closures and social distancing practices (Forget and Segal, 2020). In Canada, CERB gives financial support to employed and self-employed Canadians who are directly affect by the COVID-19 Crisis. Eligible Canadians can receive CDN$500 per week over a 16-week period. There have been similar responses in other developed countries like Australia with their JobKeeper payment program, and in the United Kingdom with the Coronavirus Job Retention Scheme (CJRS).
These wage-subsidy and relief initiatives draw on a long social democratic tradition when great crises spawned related responses. For example, the Great Depression of the 1930s saw Canada introduce Unemployment Insurance (today called Employment Insurance, or EI), federal equalization payments and the Bank of Canada (Macleans, 2020). In recent years, under the current neo-liberal model, we will have experienced two recessions, the 2008 financial Crisis and another one anticipated after COVID-19. In 2008, a massive bail-out was set in place for huge corporations and banks to prevent the collapse of the world financial system, but this did not prevent the recession that followed. The quick response from Canada to provide financial support to all Canadians negatively affected by the COVID-19 crisis is a departure from what was experienced and done for the 2008 Financial Crisis. Given how the first quarter of this century is unfolding, with numerous virus outbreaks and recessions taking place in different parts of the world, it is time to take a systematic solution to systematic problems embedded in the current system. UBI is one such solution.
The Impact of CERB
Many have praised Canada for providing immediate income support to help contain the virus by reducing pressure for people to work, especially those who receive lower incomes. It provided immediate financial security to individuals affected by the COVID-19 crisis. Between April 6th and 23rd, the Canadian Government received 7.12 million unique CERB applications (Laurin et al, 2020). This secured individuals but also the Canadian economy from broader collapse; as businesses start to reopen, Canadians will have money to put back into the economy as it begins to start up. This consumer and business confidence due to CERB will cushion the economic fallout expected to come.
At the same time, CERB exposed the flaws in the current Employee Insurance (EI) program, revealing it to be bureaucratic, unresponsive to worker’s needs, incredibly slow and incredibly complicated (Macdonald, 2020). EI (formerly UI) was a program implemented after the Great Depression of 1930s, during a less complex economic moment compared to today. Being outdated, EI was not equipped to solve the issues that arose from COVID-19 to support all Canadians whom have recently lost their jobs or who had to stop working due to the pandemic.
According to Tom Malleson (2014), in general, people will be more likely to search for jobs that appeal to them or choose to live off the basic income and devote themselves to other activities such as art, volunteering, activism, caregiving, parenting and/or education. Having said this, evidence from UBI programs from around the world have not shown that UBI dissuades people from looking for gainful employment, as critics argue. It does open up time for other worthwhile activities, however, like furthering education and civic involvement. While further research is needed to draw conclusions, that the massive attendance to protests for the Black Lives Matter movement amidst the pandemic could have been a reflection of the extra time CERB has given its beneficiaries to participate in activism. With a basic income, beneficiaries can have more opportunities to be committed and involved in social change.
Possible Outcomes of Universal Basic Income
At first glance, UBI may seem unattractive because, and to repeat the arguments of critics, one may wonder what incentive individuals on UBI have to search for employment and contribute to the economy or society? The evidence, as just suggested, does not show this to be the case, however. It is true, as the Ontario UBI experiment showed, there will be a small percentage of individuals who may not wish to work. However, numbers of possible “abusers” seem to small and not far off from those who already take advantage of current unemployment and social security systems in place. All of the pilot programs mentioned above also asserted that more people would be inclined to find employment that best fits their skillset.
In addition, working essential, or service jobs that pay minimum wage would be more attractive and do-able because UBI acts as an additional income for these workers. This can lead to a decrease in turnover rate and strengthen the retention of employees. UBI can reduce the wage gap and increase equality with more individuals more actively participating in society and the economy. Moreover, many can participate in increasing or developing their education and/or job training by being able to reduce working hours and being more inclined to find a position that fits their skill set. This can lead beneficiaries to be less inclined to work a ‘survival job’ for an extended period of time just to meet essential needs. Indeed, needing to work in a survival job would be less likely since many individuals under UBI would have those needs met by their guaranteed monthly incomes.
UBI can also be a solution to inequalities in the current system. Unpaid labour typically done by women known as the ‘second job’ can finally be compensated through UBI. For example, women who often find themselves taking on more responsibilities at home or during childcare can finally be compensated through UBI, additionally giving these individuals more freedom to pursue other professional interests. For instance, instead of spending time to go grocery shopping, they can buy online groceries, or they can hire a babysitter with the additional income. This gives caregivers more time to develop themselves and contribute to society in different ways.
Additionally, with increased equality through UBI societies may be more likely to experience lower mental illness, an increase in educational performance, and social mobility (Malleson, 2014). In the long run, with an increased quality of life through UBI, governments would spend less of their resources on treatment for mental illness and other social welfare programs. Beneficiaries would be able to act more autonomously and positively participate in society with more autonomy.
In conclusion, CERB acts as a blueprint for UBI as a tool to reduce poverty and government reliance and improve health and improve quality of life. UBI can create the necessary step forward to equality by increasing incomes of individuals and providing more opportunities. CERB was created as a response to a crisis that neo-liberal capitalism could not take care of. CERB immediately supported Canadians who were affected by the crisis in hopes of softening the impact the COVID-19 crisis. While encouraging its beneficiaries to remain in quarantine, CERB was also preparing Canadians for the next anticipated recession following the pandemic.
CERB, as a type of UBI, highlights that a systematic solution is needed to solve a systematic problem. The problem is that our current neo-liberal ideologies and practices create high levels of inequality while not protecting everyone contributing to the system. CERB forcefully has allowed everyone to see the impact guaranteed income can provide, especially when safeguarding individuals in times of crisis.
As I write these lines, COVID-19 is still affecting the economy. Only time will tell how CERB will impact the lives of Canadians. If it does so positively and in a widespread way, it could open up further legitimate discussions on how Canada and other developed countries can restructure their economies so that it is more equitable and inclusive. CERB can act as a precursor to UBI and show areas of improvement for people and communities for whom CERB may have not been successful. At the very least, CERB and many other programs like it can act as examples and learning experiences for future universal and guaranteed basic income initiatives as national economies figure out alternatives to the current model. Resources
Ferdosi, M., McDowell, T., Lewchuck, W., & Ross, S. (2020). Southern Ontario’s Basic Income Experience. Retrieved from https://labourstudies.mcmaster.ca/documents/southern-ontarios-basic-income-experience.pdf
Forget, E. L. (2011). The Town with No Poverty: The Health Effects of a Canadian Guaranteed Annual Income Field Experiment. Canadian Public Policy, 37(3), 283-305. doi:10.3138/cpp.37.3.283
Forget, E. L. (2012). Canada: The Case for Basic Income. Basic Income Worldwide, 81-101. doi:10.1057/9781137265227_5
Forget, E., & Segal, H. (2020, April 19). Opinion: CERB is an unintended experiment in basic income. Retrieved June 16, 2020, from https://www.theglobeandmail.com/opinion/article-cerb-is-an-unintended-experiment-in-basic-income/
Hoynes, H., & Rothstein, J. (2019). Universal Basic Income in the US and Advanced Countries. National Bureau of Economic Research. doi:10.3386/w25538
Kearney, M., & Mogstad, M. (2019). Universal Basic Income (UBI) as a Policy Response to Current Challenges. Aspen Economic Strategy Group.
Laurin, A., Mahboubi, P., & Robson, W. (2020). To reopen the economy, put curbs on the CERB | Financial Post. Retrieved from https://business.financialpost.com/opinion/to-reopen-the-economy-put-curbs-on-the-cerb
Maclean. (2020, May 19). Will this pandemic's legacy be a universal basic income? Retrieved from https://www.macleans.ca/opinion/will-this-pandemics-legacy-be-a-universal-basic-income/
Malleson, Tom. (2014). Conclusion, Toward a Feasible Socialism for the 21st Century. In After Occupy: Economic Democracy for the 21st Century. Oxford: Oxford University Press (pp. 198-217).
Simpson, W., Mason, G., & Godwin, R. (2017). The Manitoba Basic Annual Income Experiment: Lessons Learned 40 Years Later. Canadian Public Policy, 43(1), 85-104. doi:10.3138/cpp.2016-082
Stanford, J., & Biddle, T. (2008). Economics for everyone: A short guide to the economics of capitalism. London: Pluto Press.