Basic income sticker shock

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Hugh Segal is getting ready to release some details from his forthcoming report on Ontario’s planned basic income pilot project. The full report won’t be publicly available until mid-September, but at this point he is ready to reveal that giving everyone thousands of dollars is going to be extremely expensive.

This might come as a surprise to some, because many basic income advocates have repeatedly given assurances that a basic income program would at worst be only mildly more expensive than existing anti-poverty measures. But these assurances tend to depend on a mix of handwaving and equivocation. For example, vague references to savings from “administrative costs” or gains from breaking down the welfare wall are used to conjure up a few dozen billion dollars here and there; or, as in the Rainer and Ernst piece linked above, the costing for a guaranteed income floor at the LICO poverty line with a 100% phase-out rate might be used to demonstrate the feasibility of a universal payment with no clawback at all. This kind of slippery rhetoric has helped bring basic income to prominence in recent years, leading to plans for a pilot project in Ontario and Segal’s report. Now that implementing a basic income is actually on the agenda, details like benefit levels, the relationship between the basic income payments and other government transfers, and the phase-out rate have to be clearly defined. And when those parameters are clearly defined, it’s a lot harder to get away with handwaving and equivocation. Without those rhetorical tools, the true magnitude of the cost of a full-scale basic income program becomes apparent, and sticker shock sets in.

That’s not a bad thing. Insofar as pitches for a low-cost basic income had any connection with reality, they required the gutting of social insurance programs like EI and public health insurance which perform valuable functions that a basic income program is incapable of replicating. Support for a low-cost basic income that preserved the rest of the welfare state, on the other hand, was based on a mirage; it got the movement this far, to the point where governments are setting up trials and taking a serious look at how a basic income would actually work, but it couldn’t have got it any further. So sticker shock hurts overall levels of support for a basic income program, but it focuses the basic income movement on making the case for the kind of basic income that’s actually worth all the bother.

At the same time, left-wing critics of basic income should think twice about taking aim at the cost of the program (as Mary Boyd does here). Any kind of basic income that’s worthwhile is going to be really expensive, but any means of eradicating poverty is going to be really expensive. Eradicating poverty necessarily involves transferring huge sums of money from people who have more of it to people who have less of it. That’s true whether the transfer is carried out by government directly, as in a basic income program, or if the transfer is engineered through intervention in the labour market in the form of training programs, job creation policies and measures that increase wages. Left-wing advocates and critics of basic income agree that poverty ought to be eradicated and that this is a legitimate goal of government, or even an obligation. If the government ought to pursue the eradication of poverty and any means of eradicating poverty requires more or less equally large transfers from one part of the population to another, then real objections to basic income must have to do with the means by which it effects this transfer rather than the size of the transfer. This is where the conversation should be focused.

Now that the practical details about those means have to be nailed down in order for pilot projects to go ahead, advocates of basic income will face challenges that are more difficult to answer than complaints about sticker price, and they’ll face them in front of a less sympathetic public. I hope this doesn’t make advocates too discouraged, because a decade ago I think they’d say they were really lucky to have a chance for problems like this, and they’d be right.

Supplementary links

Costing basic income at various benefit levels and phase-out rates, by Kevin Milligan

Webinar on basic income by Kevin Milligan

Stephen Gordon on Basic Income: Go big or go home

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