Pandemic proves it's time for basic income for all, economists say
COVID crisis a harsh reminder that 'people were not making enough money to meet their basic needs'
This is the third instalment in a series looking at the world we'll live in post-pandemic — and what the health emergency has revealed about our economy and our social safety net.
The next time the world is blindsided by a global emergency, the economy will better survive it if everyone is paid what they need to survive it -- before it hits, experts say.
And if employers don't cough up the cash, they say, governments should.
"It is now quite clear that virtually everybody in society has a profound interest in lower-income people having the purchasing power to buy food and pay their rent," said political scientist Ron Hikel.
"It's also quite clear, given the monstrous impact of the coronavirus, that the entire economy can come close to grinding to a halt if they lose that ability."
Many already have.
In the first month of the pandemic, Canada's economy lost more than a million jobs.
As a result, more than seven million people have applied for the Canada emergency response benefit, or CERB, since applications opened on April 6.
"The world wasn't rosy for a whole lot of people before the pandemic came along. But a whole lot of other people who thought they'd always have secure jobs … now find themselves in need," said University of Manitoba economist Evelyn Forget.
"There's nothing like a pandemic to remind us that we're all connected."
That's why both Hikel and Forget — and, for that matter, some world leaders — say it's time for governments to implement a guaranteed minimum income, or "mincome."
The concept is simple: determine how much money individual families need to meet their basic needs. And if that household's generated income isn't enough, the government tops it up.
Young people, low-skilled workers, part-time and lower quality jobs were disproportionately impacted by the COVID-19 crisis.- Rebecca Hasdell
Both Hikel and Forget know the economics behind it.
In the 1970s, Hikel was the executive director of a mincome experiment in Manitoba. Forget later studied the results from it.
In that case, about 30 per cent of the population of Dauphin, Man., was provided with a minimum guaranteed level of income.
The risk of it? No one would want to work.
The reality of it? The impact on "labour supply" was "small," Hikel says — usually under 10 per cent.
What's more, says Forget, the benefits went beyond basic financial needs. Domestic violence rates plummeted, mental health improved and those who didn't return to work used their personal time more productively (for everything from child care to furthering their education).
"So if you think about all of the attending costs of poor mental health, I think that a basic income has some pretty important effects on society," Forget said.
Still, Hikel concedes there is a risk with government "cash transfer" programs — that some would rather take a pass on work and take the cash instead.
Those concerns have already been raised about the CERB.
"The federal programs are designed, in large part, to pay you not to work," Manitoba Premier Brian Pallister said on April 24, as he announced a wage subsidy program for high school and post-secondary students.
Some employers have said that workers would rather take the emergency funds than return to their jobs.
Rebecca Hasdell, however, says that just reveals the big fail in our pre-pandemic economy.
Hasdell is a public health researcher and post doctoral fellow at Stanford University's Basic Income Lab.
"Young people, low-skilled workers, part-time and lower quality jobs were disproportionately impacted by the COVID-19 crisis — these people were not actually making enough money to meet their basic needs," she said.
"It highlights whom the economy was working for, and whom the work wasn't paying."
It's a risk, however, that can be mitigated, Hikel says. The trick is to find the right balance.
He says that means avoiding the "punitive" relief programs — like welfare programs, where recipients waive too much of their government support if they return to the workforce.
There are huge disadvantages to the universal model, in which everybody is given a flat-rate amount.- Ron Hikel
Likewise, avoid the cash transfer programs that pay so well they ''disincentivize" a person to re-enter the workforce, he says.
"Programs that are used now that are punitive and disincentivize people to work could be revisioned," she said.
That idea is gaining traction. A group of 50 Canadian senators — including Manitoba Sen. Marilou McPhedran — are calling on the federal government to implement a guaranteed basic income.
Hikel cautions that a cash transfer program would need to be carefully constructed. Governments would have to find the sweet spot between overpaying those who don't need the money and underpaying those who do.
"I'm a believer, a strong believer, that there are huge disadvantages to the universal model, in which everybody is given a flat rate amount," he said.
But it's a fix that needs to be implemented before — not if — there is another global hit to our wallets, he says.
"COVID is not going to be the last epidemic we're ever going to have, or the last substantial threat to the operation of the economy."
Read more from this series: