The Fraser Institute

The Fraser Institute

January 06, 2015 06:15 ET

Fraser Institute: Idea of Guaranteed Annual Income Appealing but Implausible for Canada

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Jan. 6, 2015) - Despite the conceptual appeal of a guaranteed annual income, the idea isn't likely to become reality in Canada, finds a new study released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

"The idea of a guaranteed annual income has entered and exited Canadian policy discussions for decades, garnering both proponents and detractors, yet the practical obstacles to implementing such a program are likely insurmountable," said Charles Lammam, the Fraser Institute's associate director of tax and fiscal policy and co-author of The Practical Challenges of Creating a Guaranteed Annual Income in Canada.

A Guaranteed Annual Income (GAI) program would provide individuals or families an unconditional cash transfer to ensure a minimum annual income. It would replace Canada's complex income support system (which includes several, often-overlapping programs within all three levels of government) with a single program administered by one level of government. (Most GAI proponents envision a program administered by the federal government.)

This single program, in theory, would increase government efficiency and reduce administrative costs.

Canada's income support system (including federal, provincial and local government spending and tax measures) cost an estimated $185 billion in 2013-or roughly 10 per cent of Canada's economy. And social benefits (cash transfers and in-kind benefits such as food subsidies) account for 22 per cent of program spending by all levels of government in Canada. So a GAI, if implemented, would reform about one quarter of all government activity.

Despite its conceptual appeal, there are major obstacles to a GAI. The biggest challenge: actually implementing a GAI while maintaining its simplicity and ensuring administrative savings.

For this to happen, all three levels of government (federal, provincial and local) would have to agree on a single approach with some levels abdicating their responsibility in the existing income support system. For example, if the federal government administered the GAI, every provincial government would have to stop providing welfare assistance. At the same time, federal programs (Employment Insurance, for example) would have to be integrated into the new GAI program.

"With federal and provincial governments disagreeing regularly on much smaller issues, it seems unlikely they would all agree to implement a reform as large as a guaranteed income program," Lammam said.

And of course, if governments simply maintain programs that target certain groups (Old Age Security for seniors, for example), there's a risk that the GAI will become just another income support program within the larger web of existing government programs.

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The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of think-tanks in 87 countries. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org.

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