Canada's cancelled basic income trial produces positive results
A new report, from researchers at McMaster University and Ryerson University, has surveyed over 200 participants from a prematurely cancelled basic income experiment that took place in Southern Ontario between 2017 and 2019. The report suggests participants saw improvements in mental health, housing stability and social relationships, along with less frequent visits to hospitals and doctors that lowered the impact on general health services.
Over the past few years the idea of universal basic income (UBI) has moved from the fringes of economic theory and philosophy into mainstream politics. With concerns over the impact of automation, popular support has grown for some kind of basic income as a social welfare safety net.
However, in practice, basic income experiments around the world over the past few years have taken on a huge variety of forms, from specifically targeting unemployed members of a community to more complicated means-tested systems (payments that vary depending on an individual’s employment income).
The Ontario experiment
The Ontario Basic Income Experiment was a pilot project designed to test whether a basic income payment regularly given to low or no income participants would, “reduce poverty more effectively, encourage work, reduce stigmatization, and produce better health outcomes and better life chances for recipients.”
The design of the experiment presented a model where participants were guaranteed either 16,989 CAD (US$12,180) per year if they were single, or 24,027 CAD (US$17,230) per year for a couple. For every dollar a participant earns through employment they lose 50 cents from their basic income payment. This means the basic income proposal would only apply to individuals earning less than 34,000 CAD (US$24,380) a year, or couples earning less than 48,000 CAD (US$34,420).
The experiment enrolled 4,000 subjects and was planned to run for three years. Within months of the project commencing a new government was elected in Ontario and the experiment was swiftly cancelled. Social services minister at the time, Lisa MacLeod, said in July 2018 the project was expensive, unsustainable, and “clearly not the answer for Ontario families.”
By the time the project was completely cut off most participants had been receiving the basic income payments for around 17 months. The new report set out to gather data from a number of participants who took part in the project using online surveys and qualitative interviews.
The data gathered survey responses from 217 subjects and conducted in-depth interviews with 40 individuals. While the report is obviously limited by the premature cancellation of the three-year project and the small cohort evaluated in the surveys and interviews, the researchers say several interesting and useful patterns emerged.
In terms of physical and mental health the vast majority of the survey subjects reported notable improvements following the roll out of the basic income project. Around half of the subjects reported decreased use of alcohol and tobacco, while 79 percent reported better physical well-being and 83 percent reported better mental well-being.
Looking at the subjects’ use of health services, around a third of all subjects reported reductions in visits to doctors and hospital emergency rooms. This suggests basic income may be a useful general public health strategy resulting in a reduced load on public health services.
One of the frequent arguments against basic income proposals is they engender unemployment and would decrease motivation to enter the workforce. The data gathered in the new report doesn’t back up those concerns, with only 17 percent of those in the pilot leaving employment once the basic income payments commenced. And, most significantly, nearly half of those subjects who stopped working during the pilot returned to school or university to up-skill for future employment.
A 35-year-old man describes in the report how the basic income allowed him to complete a training course which resulted in him getting a security guard license. This released him from being dependent on a single untrained job, and allowed him to expand his employment opportunities.
“My boss was pushing me to get it,” the man said, according to the report. “But I could not afford it before basic income … I was actually able to pick up more gigs. I got more jobs and hours out of it.”
Over half of the subjects surveyed indicated working both before and during the project. Of those subjects, many noted improvements in working conditions and job security, often through a sense of being empowered to find better jobs. Economics professor Wayne Lewchuk, who worked on the new report, suggests the safety new of the basic income project allowed subjects a sense of security that helped their employment status.
"Many of those who continued working were actually able to move to better jobs, jobs that had a higher hourly wage, that had in general better working conditions, that they felt were more secure," said Lewchuck in a recent interview with CBC.
The Finnish experiment
Other basic income experiments looking at employment effects have presented divisive data. An influential pilot project in Finland, which ran from 2017 to 2019, randomly selected 2,000 young unemployed and long-term unemployed subjects. Each subject was paid €560 (US$630) per month with no strings attached. They would continue to receive the payment regardless of commencing employment, and during the course of the experiment were not required to participate in any employment training programs.
The goal was to test whether a targeted basic income payment, without any additional social structures, would increase participation in the workforce. The results were not positive, as social policy expert Heikki Hiilamo reported in a preliminary commentary on the study released last year.
“Basic income recipients did not have more work days or higher incomes than those in the control group,” writes Hiilamo. “Despite the fact that basic income recipients had clearly better incentives to work, there were no statistically significant differences between the groups. The results show that among the young and the long-term unemployed other obstacles for work, such as outdated skills and health issues, are more important than financial incentives.”
Hiilamo does note, however, the study was not particularly designed as an efficacy test for universal basic income, but instead was very focused on the employment results of a partial basic income in a highly targeted group of able-bodied people without work.
Although the failure of the Finland basic income experiment has been cited as an indication the method doesn’t help individuals engage proactively in the workforce, many have criticized the Finnish experiment as fundamentally flawed. Both the Finnish and Canadian studies in many ways are not at all indicative of a true universal basic income proposal, but instead are experiments examining alternative social welfare methods within pre-existing progressive systems.
So, although this new study examining Ontario’s basic income experiment is certainly presenting positive outcomes, and the prior Finnish study presented neutral to negative outcomes, neither is particularly indicative of the potential success or failure of an absolute universal basic income system.
Recent Democratic presidential candidate Andrew Yang hinged his entire campaign on the idea of a true universal basic income where every American over the age of 18 would receive US$1,000 every month. This somewhat extreme presentation of universal basic income is still relatively untested despite a number of different pilot projects around the world trialing variations of basic income over the years.
While Yang was unsuccessful in his bid to become the 2020 Democratic Presidential nominee, his universal basic income proposal has recently again been propelled into the mainstream discourse following the social and economic stresses caused by the COVID-19 pandemic.
As Americans debate how insecure workers will survive weeks without paychecks if subjected to quarantine or isolation measures, Yang’s universal basic income proposal has quickly shifted from a fringe idea on the progressive left, to one he claims is both financially feasible and beneficial to the majority of the community.
$1.5 trillion is enough to give $1,000 a month to everyone in the country for 4-5 months. https://t.co/vkElzb5bbb— Andrew Yang🧢 (@AndrewYang) March 12, 2020
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UBI is not a new idea. It's been tried on a large scale in many communist states and all have failed miserable with billions starving to death. "We pretend to work, and they pretend to pay us".
The problem with these small scale experiments is that it ends up feeling like winning a lottery. If the entire country gets UBI, I think it'll just raise the price floor of many essentials like inflation.
Speaking of winning the lottery, this is another example of money being difficult to use. If you win the lottery, you are highly likely to quickly revert back to your standard of living pre-lottery. You are unlikely to change to a millionaire mindset and start investing and running successful businesses. Or if you start investing, you'll just lose it all because the hat is bigger than your head. You'll make huge mistakes because you didn't take the baby steps and make the little mistakes along the way to become a millionaire.
Giving money is not the answer, developing people is. But it's important to note that people with low IQ will become more and more difficult to develop into someone useful as our technology continues to improve.
No wonder people getting Social Welfare don't want to work - they lose it when they do. That's the big difference.
Unfortunately a universal wage will not solve all poverty due to some people making bad life choices, spending money on the wrong things, getting into debit , too many children, bad financial management etc - basically a fairly common human condition!
But the advantage is that it does give everyone a basic living wage. The Ontario scheme was just wrong in reducing the payment as you started to earn, should be left to a progressive tax system rather than imposing a trap.
Done correctly a Universal wage might be no more expensive that the current welfare schemes that European countries have, including the UK which hints at a way forward with its 'Universal credit' system which tries to wrap up a multitude of social payments with one - good idea just poorly implemented.
Removing unemployment, housing benefits etc and replace it with a universal wage makes a lot of sense both financial and morally for a society. That just leaves social payments for those who have disabilities and need the extra help.