[Gunnair]

$1:

Andrew Coyne: The problem isn’t giving people money when they don’t work … it’s taking it away when they do

For much of the past two years, much of the media has been obsessed with a tiny number of very rich people — “the 1%.” Rather less coverage has been devoted to the far greater numbers of the very poor: the bottom 10%. This suggests a certain loss of perspective. Surely if there is a problem that merits our concern, it is not that we have too many rich people, but too many poor.

On the other hand, everything’s relative. Maybe there is less talk about poverty nowadays because, in Canada at least, there is less of it about. And indeed that’s true: though it has gone all but unreported, the proportion of the population on low income has fallen sharply over the last decade. By the most common measure, Statistics Canada’s Low-Income Cutoff, it has fallen from 15.2% in 1996 to 9.0% in 2010 — the lowest level in nearly four decades.

Using a more recent yardstick, the “market basket” measure — roughly $30,000, depending on the city, for a family of four — it has fallen from 12% to 10%. (The same progress has not been observed relative to yet a third benchmark, one-half of the median income — not surprisingly, perhaps, as median incomes rose steadily over much of that period.) Had the trend been in the other direction, you may be sure we would have been talking about nothing but.

Still, it ought to trouble us that so many remain so poor, in a country as rich as ours — not least because we devote so large a share of our resources to income security: more than $160-billion annually, combining the various federal and provincial programs. Emphasis on the “various.” Indeed, there are libraries full of research to show that the sheer multiplicity of these programs — overlapping, confusing, and riddled with perverse incentives — is a big part of the problem. The safety net is for too many people a spider’s web, in which they can remain trapped for years.

Every so often this enduring problem produces a spasm of reform efforts, usually inconclusive. With federal and provincial finances in their current disarray, and given the premium, as the ranks of the retired swell, on freeing every available person-hour for work, perhaps it is time to try again. Some impetus was provided by the recent report of the Commission for the Review of Social Assistance in Ontario, the first the province has undertaken in more than 20 years. More radically, there is renewed interest in that hardy perennial, the guaranteed annual income, as championed by the indefatigable Senator Hugh Segal.

The basic idea behind the GAI is sound: to consolidate a number of federal and provincial programs, some in cash and some in kind, into a single, universal, unconditional cash benefit, delivered through the tax system. The base amount would be modest: perhaps $10,000-$12,000 per person. Critically, it would be taxed back only gradually, say at 25 cents on the dollar, as earned income rises. Compare that to current practice, where benefits are often withdrawn dollar-for-dollar, or in the case of benefits in kind like free dental care or prescription drugs, are denied altogether to those who leave social assistance: an effective marginal tax rate of 100% or more.

You can see why the people who design and administer these systems do this. They’re trying to save money; they want to target assistance only to those who “need” it; they worry what people would do if given the cash to buy what they want, rather than the services government thinks they should have. But the result of all this careful selection and monitoring is not just condescending and intrusive: it effectively punishes people for taking a job, or working longer hours. This is the key insight of the GAI: dependence is created not so much by giving people money when they don’t work — certainly not at $10,000 a year — as by taking it away from them when they do.

So if all of this makes sense, why hasn’t it been done? One barrier is cost. The more gradually you reduce the transfer as income rises, the more paltry the base amount must be to stay within a given limit; conversely, set a more generous minimum, and you have to impose a steeper clawback. Of course, the arithmetic becomes less stark if you include the revenues saved from the programs the GAI would replace. But here you run into other obstacles.

Most of these programs are provincial, and the provinces are notoriously unwilling to give up turf. Moreover, it’s not clear just how many you’d even want to scrap. Some GAI models envisage replacing not only welfare, but employment insurance, daycare and pensions. But these are very different programs, designed for different purposes: EI, for instance, is properly about income replacement, not income support. It’s probable some current social assistance programs are ineffective and unnecessary; it’s not obvious all of them are.

So any reform will probably be incremental and piecemeal, rather than the kind of revolution some proponents have in mind. The good news is: we’re already part way there. The Guaranteed Income Supplement for the elderly, the National Child Benefit for parents with children, and the Working Income Tax Benefit for the working poor are all very GAI-like, as is the GST credit available to those on low income generally. Perhaps it’s simply a matter of building on those foundations.

[andyt]

It's not just about the 10% poor, but all the people staying static or dropping down while the top 20% gobble up a bigger and bigger share of increases in GDP - in the US it's gone from 8 to 30%.

But even taking just Coyne's 10% - how are you going to pay for a program like this? By taking tax money out of people who have it, there's no other source. So you still have to take money away when people who make money.

By all means raise the supports for people who truly can't work. But for most people, give them a job, a job that pays enough that they can save a bit, not live one paycheck away from homelessness every month. Maybe that requires hiring some of these people to work for the govt in some capacity, if the private sector can't absorb them all. Still better to have people working if possible than just collecting the dole. But if the private sector doesn't have jobs for them, why are we importing 250,000 immigrants every year, and another 450,000 temp workers?

Also support people who want to and have the ability to better themselves, we can do a much better job here.

Lastly they would have to do something about the cost of living disparity in this country. Paying somebody $12,000 a year is probably pretty good living in certain parts of the country, (and not much incentive to find a low paying job) but it sure doesn't go far in the Vancouver area. Something needs to be done about affordable housing for instance.

[cora]

Andrew Coyne doesn't understand the concept of 'guaranteed annual income: It means everybody gets it, all the time, even the rich.

Need-based aka means-tested income support for some people requires a lot of paperwork and a lot of bureaucrats to push the paper around.
That bureaucracy costs a lot of money, and we pay for it.

Coyne's concept is to give an inadequate amount to those who need it, and claw it back when they don't need it ... inadequate support AND costly bureaucracy for means-testing.

A GAI would replace
welfare
disability
employment insurance
Student grants and loans
child tax credit
day care subsidy
veterans allowance
CPP
OAS
GIS
and any other income support.

It would substantially decrease the size of government bureaucracy, and costs - salaries, offices, etc. - as it would be the same automated payment to. every adult, likely monthly.

[matwilson]

Andrew Coyne is an intelligent man. He understands more than most.

[BartSimpson]

andyt andyt:

It's not just about the 10% poor, but all the people staying static or dropping down while the top 20% gobble up a bigger and bigger share of increases in GDP - in the US it's gone from 8 to 30%.

That top 20% are the people responsible for the increase in GDP so it makes sense that they should reap the most from their efforts.

[andyt]

Yep, those 80% are just not contributing anything, so they deserve smaller and smaller pieces of the pie.

[Thanos]

Structural increases in costs are probably just as likely to be victimizing people at the lower end of the spectrum as taxes are. Every regular yearly increase in costs, from utilities to food to bus passes to vehicle fuel to phone services, can hurt just as much as tax increases do. Maybe even worse, especially when former government services like utilities get privatized and are immediately subject to massive for-profit cost increases for the corporate benefit of the new service managers. At low incomes people can at least see a fair amount of income tax returned back to them. With non-taxation increases in prices they, and no one else either, get anything back.

[BartSimpson]

andyt andyt:

Yep, those 80% are just not contributing anything, so they deserve smaller and smaller pieces of the pie.

If someone isn't contributing to the increase in GDP with their work then they deserve nothing.

[andyt]

And their work doesn't contribute to GDP? WTF are they working for then?

[Khar]

andyt andyt:

By all means raise the supports for people who truly can't work. But for most people, give them a job, a job that pays enough that they can save a bit, not live one paycheck away from homelessness every month. Maybe that requires hiring some of these people to work for the govt in some capacity, if the private sector can't absorb them all. Still better to have people working if possible than just collecting the dole. But if the private sector doesn't have jobs for them, why are we importing 250,000 immigrants every year, and another 450,000 temp workers?

Lastly they would have to do something about the cost of living disparity in this country. Paying somebody $12,000 a year is probably pretty good living in certain parts of the country, (and not much incentive to find a low paying job) but it sure doesn't go far in the Vancouver area. Something needs to be done about affordable housing for instance.

Yeah, I wouldn't have bought the "more people involved in our economy will kill our economy" argument when women got involved in it, and I don't buy it today, especially since unemployment and labour force participation have not been impacted by the existence of immigrants (have fun running that correlation). Nor would I buy the "b-but it has to be bad" wailing when this entire nation is built upon the existence of immigrants, their children, and their involvement in this country. We've been around this way too often and I've provided the papers and statistics to prove it, so I've no interest in arguing over it again, however many times you want to parrot the same simplistic view on how a society is built.

You want people out of Vancouver, force people to follow the incentives that demonstrate more to be gained by moving East. Paying people to remain in Vancouver only skews the market in such a way that it pays for the inefficiency of these people remaining there, and reduces movement out of Vancouver to other places. It will more or less snowball the issues and the next year you'll be facing the same issue on a slightly larger scale. Each time you compound this issue, according to your own logic, not only are the poor harmed, but every person up the ladder who see their comparative income decrease and watch prices rise are harmed too, including those who may have just been above the poverty level before. Keep in mind as well that if you raise the minimum rate, all that will happen is that the cost of basic needs, the low end CPI, will simply rise to meet this new rate of income.

Businesses can only take on so many people at higher wages, since a lot of positions do provide very marginal benefits to businesses already. It's more likely the methods you tend to espouse (increasing to the family LICO, which in Vancouver would mean doubling minimum wage) will definitely constrict the labour market, and reduce the ability for businesses (especially the small ones you WANT to compete with chains and bigger stores) to hire people. A lot of jobs simply offer marginal benefits to the store, but are worth enough to hire someone for -- my first job (and third job, come to think of it) would definitely not have existed under such paradigms, even though I used it to put myself through my second year of university. New immigrants by their very nature of spending, bringing their lives savings, buying living space, paying income taxes, and working jobs (often higher up in the chain) have beneficial impacts on expanding the entire economy, but the lower end is dominated by those not competing with immigrants for their jobs, or not willing to take the jobs immigrants take. In the minimum wage category, the major competition is teenagers, who make up over 70% of min-wage earners.

You want to create change? Use re-distributive tax methods, inclusive of this call for greater progressive taxation. Reduce barriers on what can be bought, especially at the low end. Improve access to education, or subsidized transportation costs for those in impoverished areas to get to areas of growth (typically rural Canada). Limit structural employment via such skill and movement programs, since that is what causes the unemployment and poverty you so care about, not immigration. Use the RTF strategies I've talked about in the past and which you've (wrongly) called a subsidy for business, even though under such systems people seek higher paying jobs and are able to bypass jobs that will not improve their welfare. Increase support for those with jobs especially. Whatever way you like. The method to improving poverty is not to fuck around with business (we discovered that working with the global south), but to use government resources to effect change among those it's supposed to represent. To increase spending power without skewing the market in a way that can offset the gains we make. We have the ability and infrastructure to do so in Canada, thanks to our income tax system, and we've seen such paradigms succeed around the world, from Germany and other European nations (many lacking min wages) to South American poverty reduction schemes.

As the son of a farmer, I know exactly how difficult it is to be working all the time and be below the poverty line. Government subsidies only go so far and you can only make so much. Improving incentives, access to programs, or even the amount of money someone could bring in provides a lot of abilities to invest money in ways beneficial to the poor. Remember that the poor spend almost everything they have, so money in their pockets is money spent on consumption, without the market-skewing wages and less impact on the low end CPI. Make businesses compete for your labour and make changes that don't kill the small businesses you want to survive. Because in the end, that's what happens with programs that impact business -- they tend to hit the small guys disproportionately harder, and you end up with fewer businesses, fewer entrepreneurs, less competition, and more reliance on big name chains who can absorb these costs.

[cougar]

BartSimpson BartSimpson:

That top 20% are the people responsible for the increase in GDP so it makes sense that they should reap the most from their efforts.

I cannot help but laugh at your logic Bart.

The top 1% are the people stealing the natural resources, oppressing the regular Canadian and giving regular Canadian jobs to other nationals so that the job can be done at the labor going rate of lets say China. This is how the money is made; not through hard labor, some exquisite invention or contribution to society. If anything, those 1% deserve to be hanged.

[PublicAnimalNo9]

$1:

Maybe there is less talk about poverty nowadays because, in Canada at least, there is less of it about. And indeed that’s true: though it has gone all but unreported, the proportion of the population on low income has fallen sharply over the last decade. By the most common measure, Statistics Canada’s Low-Income Cutoff, it has fallen from 15.2% in 1996 to 9.0% in 2010 — the lowest level in nearly four decades.

I'd be curious to see the corresponding numbers of homeless over the same time-frame. Might explain some of the decrease.

[Public_Domain]

[martin14]

cougar cougar:

BartSimpson BartSimpson:

That top 20% are the people responsible for the increase in GDP so it makes sense that they should reap the most from their efforts.

I cannot help but laugh at your logic Bart.

The top 1% are the people stealing the natural resources, oppressing the regular Canadian and giving regular Canadian jobs to other nationals so that the job can be done at the labor going rate of lets say China. This is how the money is made; not through hard labor, some exquisite invention or contribution to society. If anything, those 1% deserve to be hanged.

[martin14]

Gunnair Gunnair:

Some GAI models envisage replacing not only welfare, but employment insurance, daycare and pensions.

The UK has just started a program similar to this, also including benefit caps
of 500 pounds a week for couples and single parents.

That's still 26000 pounds a year, which is about the average wage level.
All that for not working.


Still, might be interesting to watch how it develops.