Reducing poverty rate by guaranteeing incomes

U of M economist crunches numbers


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Guaranteeing poor Manitobans a no-strings-attached annual income -- perhaps $8,000 a year -- could cut the province's sky-high poverty rate by a third, a University of Manitoba economist says.

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Hey there, time traveller!
This article was published 06/02/2015 (2851 days ago), so information in it may no longer be current.

Guaranteeing poor Manitobans a no-strings-attached annual income — perhaps $8,000 a year — could cut the province’s sky-high poverty rate by a third, a University of Manitoba economist says.

But, adds Harvey Stevens, a former provincial-policy expert, it would cost about $350 million extra a year. That price tag includes the elimination of the province’s costly and elaborate welfare system but it doesn’t factor in reduced health care, crime and child welfare costs, which typically shrink as the poverty rate does.

Stevens crunched complicated economic data for a gathering Thursday of policy wonks, poverty activists and academics exploring an old idea that’s gained new currency — a guaranteed annual income, perhaps as high as $20,000, as a way to shrink poverty, income inequality and even save governments money.

There’s been renewed national interest in Manitoba’s seminal experiment in the mid-1970s in Dauphin, in which all families were given a basic income for a few years and saw improvements in education rates, mental illness and health. The experiment’s allure faded until recently, but national attention from academics, documentary filmmakers and social activists has revived the idea.

Sid Frankel, a veteran poverty activist and U of M social work professor, said there’s little interest in poverty programs federally, so it makes sense to look to provincial governments.

He laid out a plan to phase in a guaranteed income using existing programs, such as the 55 Plus benefit that already pays about $160 every three months to poor seniors, or the Manitoba child benefit that pays working-poor parents $420 a year. As a first step, those benefits could be made more generous and expanded to other key groups such as the disabled.

That would avoid full-frontal opposition and allow the province to begin seeing some of the spinoff savings, such as lower health-care costs, before making the benefit universal.

“By then we would have demonstrated not everyone quits work, terrible things don’t happen,” said Frankel, one of the conference’s organizers.

Manitoba has a serious poverty problem that hasn’t improved much even though Canada’s rate has dropped. By most measures, Manitoba’s poverty rate went up between 2007 and 2011.

Under Harvey Stevens’ model, cash would be given directly to about 163,000 households, about five times as many as are now on welfare. A single person would get $8,000 a year, just a bit more than welfare currently provides, but families would get more.

That would shrink the poverty incidence rate from 12.7 per cent to 8.5 per cent, said Stevens.

Stevens also looked at the effect of making some tax credits refundable. The cost was less, but the effect on the poverty rate was also smaller.

But, warned Stevens, there might be better ways to spend $350 million on poverty programs, such as early childhood education. And designing an effective guaranteed income — when clawbacks kick in, how to avoid discouraging people from finding work — is tricky.

“The devil and God are in the details,” said Stevens.

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