The pros and cons of guaranteed annual income

Debate surrounding Canada’s welfare system continues

Worth a look? Debate is being reignited on whether or not governments should replace the current welfare system with a guaranteed annual income for the working poor to those not eligible for welfare. Dylan Hewlett

While both conservatives and progressives agree the welfare system is broken, they cannot agree on how to fix it.

Conservative Senator Hugh Segal reignited the debate last year on moving forward on a guaranteed annual income (GAI), and progressives have followed suit, recently hosting a forum in Winnipeg to discuss the findings of the Dauphin Experiment to a public audience.

The Dauphin experiment was a four-year study between 1974 and 1978, wherein the federal and provincial governments tried implementing the GAI in the city and studied the results.

Topping up the income for every low-income in Dauphin, from the working poor to those not eligible for welfare, led to better health rates, increased high school graduation rates and didn’t cause people to stop working, according to Evelyn Forget, who led the forum on behalf of Winnipeg Harvest and Food Matters Manitoba.

The Frontier Centre for Public Policy’s (FCPP) Steven Lafluer agrees that GAI could be a good replacement for the current welfare system as long as it is structured to not inhibit entry into the labour market.

“The virtue of GAI is simplicity, there’s very little duplication. As with all welfare models there needs to be incentives to join the workforce, not just collect,” he said.

While agreeing that there is potential for the GAI to address issues of poverty, Shauna MacKinnon, director of the Canadian Centre for Policy Alternatives (CCPA), was adamant adequate wages must go hand in hand with GAI to create an effective welfare system.

She argues that a GAI is very hard to imagine considering the current context.

“Conservatives like this idea because it has the potential to eliminate bureaucracy and save money,” she said.

“Progressives in Manitoba are having a hard enough time getting a win on raising rental allowances. I can’t imagine how we’d fight for a national or provincial GAI right now.”

Kirsten Bernas, from Make Poverty History Manitoba, sees rental allowance being far below what is necessary to provide safe housing for citizens on social assistance.

According to Bernas, the assistance rate for individuals is $285 per month, a rate in place since 1992. For families requiring a three-bedroom apartment, the rate is $471 to $513 per month.

Unfortunately the average cost of a three-bedroom in Winnipeg is $1100.

When asked about rental allowances, Lafluer stated, “We need to adjust rates to what things actually cost in the current market.”

Lafluer also argued that eliminating rent control would be advantageous to bringing down rental prices and providing incentive to building new housing units.

“No one wants to develop if you can’t make enough money to maintain safe housing,” he said.

Current rental regulations on second-generation rent controls give developers a 20-year window before controls are imposed.

The developer still gets to establish what rent is after construction. Rent controls can be waived for renovations, units more than $1140 per month and non-profit subsidized housing.

However, according to Mackinnon, there’s no money in low-income housing.

“It is not a market,” she said. “Many are happy to let government take care of that responsibility.”

Welfare systems need to be built with labour markets in mind, Mackinnon stressed.

The CCPA released a report on living wages in 2009 that argued families of four (two adults, two children) require a wage of $13.44 per hour, with each parent working 35 hours per week to be able to provide the basics of a decent life and the ability to participate in social life as an engaged citizen.

“We think all employers have a social responsibility to provide an adequate wage to their employees.”

Lafluer, on the other hand, sees the minimum wage being raised as a recipe for increasing unemployment, while acknowledging that people’s ability to survive needs to come from somewhere he does not think it should be on the backs of employers. Instead, he would consider a negative income tax.

Published in Volume 67, Number 3 of The Uniter (September 19, 2012)

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