Explainer: What is Universal Basic Income?

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When CERB was announced, some wondered if it was a gateway to “universal basic income”—cash provided to all of a country’s adult citizens, without requiring them to work or meet other conditions. But what is universal basic income, exactly? This explainer looks at who would receive it (and why), how we might fund it, and whether we are really poised to implement it in Canada.

What is Universal Basic Income?

The idea of a regular monthly income paid by the government to all citizens has been around for hundreds of years. In the 16th century, English philosopher and lawyer Thomas More proposed a form of basic income in his book Utopia. “Providing everyone with some means of livelihood,” he argued, would ensure that “nobody is under the frightful necessity of becoming, first a thief, and then a corpse.”

The concept of universal basic income (UBI) hasn’t really changed in the 450-odd years since More’s proposal. Today’s UBI is generally envisioned as a universal cash transfer to all adults, in amounts sufficient to cover “basic” needs—usually understood as an amount that brings the recipient’s income up to the poverty line. (In 2018, the federal government adopted an Official Poverty Line, the “Market Basket Measure” of poverty. Using this measure, there are poverty thresholds for 50 regions across Canada, ranging in 2018 from a high of $48,667 in Vancouver for a family of two adults and two children, to a low of $37,397 for the same family in small-town Quebec.)

Although the concept of UBI is easy to understand, there is little consensus on how it might be implemented. For example, some proponents argue for a nontaxable universal amount paid to all adults, independent of any other income they might receive; this is the “freedom dividend” model advocated by 2020 U.S. presidential candidate Andrew Yang. Others, such as Basic Income Canada Network, have focused on an income-tested benefit which would provide full benefits to someone with no other sources of income, with the benefit scaling down as income rises and eventually phasing out completely. 

What problem is Universal Basic Income meant to solve?

UBI is proposed as a way to ensure that all households have the economic means to be able to afford a modest, basic standard of living, including food, clothing, shelter and transportation—independent of whether they earn employment income. As social policy analyst John Stapleton points out, Canada already has a functional UBI for children and those over 65, via the Canada Child Benefit and the Old Age Security program, which includes the Guaranteed Income Supplement (GIS) for low-income seniors. The question is how working-age adults might also be included. 

Philosophically, the argument for UBI is often based on the premise that land and natural resources are the common property of all individuals, and the wealth generated from land and resources should be shared, at least in part, among all members of a society. This is the model behind, for example, the Alaska Permanent Fund, which distributes a taxable yearly payment—the Permanent Fund Dividend—to all Alaskan residents (including children) from revenues generated from the state’s oil reserves. 

Other rationales for UBI are based on the goal of reducing poverty, responding to current and anticipated labour-market changes (such as AI and automation replacing low-wage jobs), and simplifying our complex and poorly-integrated system of income transfers (including refundable tax credits like the GST/HST credit and the Canada Workers Benefit, and programs like social assistance and disability benefits) to provide more universal income support. 

What would a Universal Basic Income cost, and how would it be funded?

There can be no doubt that UBI would be an expensive program to implement. The cost, however, depends on the amount that’s paid to recipients, whether (and at what rate) the benefit is clawed back with employment (or other) income, and which existing programs are cut back or eliminated to finance UBI.