THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Tuesday, October 17, 2023
The Standing Senate Committee on National Finance met with videoconference this day at 9 a.m. [ET] to examine Bill S-233, An Act to develop a national framework for a guaranteed livable basic income.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: I wish to welcome senators as well as viewers across the country who are watching us on sencanada.ca.
[Translation]
My name is Percy Mockler. I am a senator from New Brunswick and Chair of the Standing Senate Committee on National Finance.
I would now like to ask my colleagues to introduce themselves.
Senator Forest: Welcome. Éric Forest, senator from Quebec’s Gulf region.
Senator Gignac: Good morning. Clément Gignac, senator from Quebec.
[English]
Senator MacAdam: Jane MacAdam, Prince Edward Island.
[Translation]
Senator Loffreda: Good morning and welcome. Senator Tony Loffreda from Montreal, Quebec.
[English]
Senator White: Judy White, Newfoundland and Labrador.
[Translation]
Senator Woo: Good morning. I’m Yuen Pau Woo from British Columbia.
[English]
Senator Pate: Kim Pate, and I live here in the unceded and unsurrendered territory of the Algonquin Anishinaabe.
Senator Smith: Larry Smith, Quebec.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
[Translation]
Senator Dagenais: Jean-Guy Dagenais from Quebec.
[English]
The Chair: Thank you, honourable senators.
Today, we begin our study of Bill S-233, An Act to develop a national framework for a guaranteed livable basic income, which was referred by the Senate of Canada to this committee on April 18, 2023, by an order of reference. Sitting at our table, we have the sponsor, Senator Pate.
We have the pleasure today, honourable senators, of welcoming Yves Giroux, Parliamentary Budget Officer. He is accompanied by Nasreddine Ammar, Advisor-Analyst. Welcome and thank you for accepting our invitation to appear in front of the Finance Committee. It’s always very enlightening to welcome you, Mr. Giroux, and to have your testimony and comments to help Canadians understand the process of budgets. We have common denominators, which are transparency, accountability and predictability. That said, I have been informed that you have comments to share with the committee.
[Translation]
Yves Giroux, Parliamentary Budget Officer, Office of the Parliamentary Budget Officer: Good morning, Mr. Chair and members of the committee. Thank you for inviting us to appear before you to discuss Bill S-233, An Act to develop a national framework for a guaranteed livable basic income.
As you mentioned, I’m accompanied by Nasreddine Ammar, advisor-analyst, who has drafted several of our reports concerning the guaranteed basic income.
First, let me provide a little context. In November 2017, to support parliamentary discussions on the government’s poverty reduction strategy, our office published a report in which it listed 75 federal government initiatives aimed at low-income people and other vulnerable groups. Together, these initiatives represented an overall total of $57 billion spread across some 55 programs, including the Guaranteed Income Supplement, and some 20 tax expenditures, such as the Canada Child Benefit and the GST/HST credit.
There’s an important point to be made: The programs and tax expenditures mentioned earlier share neither the same objectives nor the same structure, and do not target the same populations. Created independently, they were developed to address various specific problems.
I will now continue my presentation in English.
[English]
In 2017, Ontario launched a basic income pilot project in several areas, including Hamilton and Thunder Bay.
In April 2018, we released our first estimate of the cost of establishing a national guaranteed basic income based on the Ontario model. For fiscal year 2018-19, we estimated this gross cost at $76 billion, an amount that would rise to $79.5 billion in 2022-23. After subtracting federal aid already provided to low-income individuals, we assessed the net cost of establishing a national basic guaranteed income at $44 billion.
In July 2020, we responded to a request from your colleague Senator Woo to re-estimate the cost post COVID-19 of a GBI program using the parameters of the basic income pilot project established in Ontario. This request came after the introduction of the Canada Emergency Response Benefit, which propelled the universal basic income debate into the spotlight. The PBO presented three estimates based on scenarios that gradually phase out the benefit by 50 cents, 25 cents and 15 cents for every dollar of employment income. This report also provided the provincial breakdown of the GBI cost. At that time, we estimated a gross total cost of between $47.5 billion and $98.1 billion based on the three scenarios for the six-month period between October 2020 and March 2021. As directed by Senator Woo, the PBO also prepared a list of federal and provincial programs whose elimination could fund the GBI.
To complete the analysis, several parliamentarians asked us to assess the effect of such a government transfer program on income distribution and poverty rates, measure its budgetary impact and estimate the behavioural impact of its implementation. Another report in April 2021 indicated that a GBI would have a progressive effect on household disposal income and could reduce poverty rates by nearly half according to the Market Basket Measure, or MBM. We estimated that the annual cost of a GBI would increase from $85 billion in 2021-22 to $93 billion in 2025-26. These figures reflect the additional disability benefit payments and behavioural impacts.
That being said, we would be pleased to respond to any questions you may have on our work on a guaranteed basic income or other PBO work. Thank you.
[Translation]
The Chair: Thank you, Mr. Giroux.
[English]
Honourable senators, we will now proceed to questions. We will give you a maximum of five minutes each because we only have one hour.
Senator Marshall: Thank you, Mr. Giroux, for being here.
I was looking at your April 2021 report and the costs of the program. I know that there have been several pilots introduced in Canada, but it seems like the government backs away from it for whatever reason. You just released your fiscal update on Friday, which indicated that the government is facing some severe fiscal challenges. There is a cost associated with this program, and I think the number in your 2021 report for this year would have been just over $80 billion. This is something I got from your report. Do you have any comments on whether the government can afford to implement this program? I see from your report that part of this would be funded by taxpayers not being able to claim the basic exemption. I would like your comments on whether the government could afford the program on its own and whether Canadians would be willing to accept the higher levels of taxation that would be required to fund it.
Mr. Giroux: That’s probably the biggest question when considering a guaranteed basic income.
In the summer, we released our fiscal sustainability report which indicated that the government could either increase spending or reduce taxes or a combination of both to the tune of about 1.7 or 1.8% of GDP, so about $40 billion, and still be fiscally sustainable. That suggests that a guaranteed basic income would have to replace some of the existing programs, including some of the existing tax preferences, as you mention. In that vein, one would have to look at whether a guaranteed basic income could be fully or at least partially funded by reducing the basic personal amount, social assistance at the provincial level and other tax credits, such as the GST credit, to determine whether it would be sustainable or affordable without risking or jeopardizing the fiscal sustainability of the federal government.
But as others have mentioned before, there are many parameters to take into account in designing a GBI. It would certainly be possible to design a GBI that would be less expensive. We costed one with a series of assumptions and parameters, but as it is, it would only be sustainable if a series of programs and tax preferences were to be eliminated.
Senator Marshall: We’re talking about the federal government now, but you’ve also done work on the fiscal sustainability of the various provinces, and implicit in your report is that the provincial governments would also have to forego tax revenues, which is very significant. How receptive do you think the provincial governments would be to foregoing some of these provincial tax revenues?
Mr. Giroux: It would depend on the design of such a guaranteed basic income. For example, if the federal government was to take most of the costs, I think provinces could be willing to accept a guaranteed basic income as it would very likely negate the need for most of the social assistance expenditures at the provincial level, and it would also make less necessary a series of provincial tax credits, but a guaranteed basic income would require extensive negotiations with provinces and territories.
Senator Marshall: In the 2021 report, the summary of figure one shows first, second, third, fourth and fifth quintile and average numbers. Could we get a frame? It’s an average number, but with an average, something could be low and something could be very high. Could we have the range for each of those quintiles sent to the clerk?
Nasreddine Ammar, Advisor-Analyst, Office of the Parliamentary Budget Officer: That is possible, yes.
Senator Marshall: That would be appreciated. Thank you very much.
[Translation]
Senator Forest: Thank you for being here today to address this very important issue, and especially for the analyses and studies you have done over the years.
You claim that it could be a zero-cost plan if we removed certain programs with respect to tax credits. As we know, 10% of Canadians don’t file tax returns. Some do so voluntarily, in an attempt to avoid paying taxes, while others are part of a large majority who are among the most vulnerable populations in Canada. According to your estimates, would the costs of the program include this fragile population?
Mr. Giroux: It’s difficult to take into account people who don’t file tax returns. To estimate the costs of a guaranteed minimum income, we used a simulation model provided by Statistics Canada, which relies heavily on tax returns. There are overlaps with some other databases, but it’s pretty clear that this excludes people who, year after year, don’t file tax returns, even though it was to their advantage to do so in many cases. The estimates try to account for the fact that a segment of the population doesn’t file tax returns, but it’s not a perfect offset.
Senator Forest: That 10% of the Canadian population still represents a significant mass of citizens who are among the most fragile in some cases.
We want to implement a basic income program at virtually no cost by eliminating many programs that have impacts. Have we measured the impact on the middle class, which today is hard hit by inflation?
Mr. Giroux: We measured the impact by income quintile and came to the following conclusion: The elimination of certain tax credits, including the basic personal amount and the amount for workers — a list appears in Appendix A-1 of the 2021 report — would mean that people in the third, fourth and fifth income quintiles are the ones who would suffer a drop in net income, in disposable income, due to the elimination of some of these tax credits and tax benefits.
It’s estimated that about 40% of the population would gain, but 60% of the population would lose. Obviously, if you want to create a program of this scale at zero cost, you need losers. Yet the losers would mostly be found in the top 60% of income earners, which I believe includes a good portion of the middle class.
Senator Forest: One of the arguments we often hear is that such a program would be a disincentive to employment and that people would be less motivated. With the current employment situation, many companies and businesses are desperately looking for employees. How did you measure the disincentive to employment? Can you tell us a little about the conclusions you drew?
Mr. Giroux: There is literature that has measured the disincentives to employment of increasing marginal effective rates, that is, the tax rates and reduction of certain benefits that people face in certain income brackets. The literature explains the impact of increasing or decreasing these disincentives. Based on the experiments and studies that have been carried out, we came to the conclusion that there would be a drop of around 1.5% in the total number of hours worked, since, in some cases, benefits would act as a disincentive to employment, especially in the lowest income bracket.
Senator Gignac: Welcome, witnesses. It’s always a pleasure to have you back, Mr. Giroux.
Quebec is recognized as a fairly progressive society and among the most egalitarian in the OECD. If we take the Gini coefficient, which you’re familiar with and which measures inequality between income classes, Quebec is closer to Sweden, Finland and Norway and has one of the lowest coefficients in Canada, which is a good sign.
In 2016, the Quebec government established a committee of experts to analyze the possibility of a guaranteed minimum income. You may have read it. In its report, the committee came to the conclusion that, in fact, absolute or complete forms of guaranteed minimum income raised significant issues of equity, work incentives and social acceptability.
Are you familiar with this report? Can you tell us a little more about it? If Quebec has analyzed the issue and a committee of experts suggests that it might be better to enhance existing programs rather than jump into this, I’d be curious to hear your reaction to it.
Mr. Giroux: The expert committee came to the conclusion that there was a disincentive to work, which is not inconsistent with our own conclusions, to answer Senator Forest’s question. We have also come to the conclusion that there is a disincentive to work. The more sensitive issue, and one that is harder to quantify, is that of social acceptability. This probably refers to the fact that there would be a perception that people would be paid to do nothing.
The idea of a guaranteed minimum income is to guarantee a certain income, which is already the case, for example, with social assistance programs or Old Age Security for certain segments of the population. However, that’s a matter of political decisions on which I can’t comment. On the other hand, I believe Mr. Ammar had a comment to add about work incentives.
Mr. Ammar: To answer Senator Forest’s question, it’s true that we estimated what the effects would be on work participation. However, these effects are very sensitive to the parameters we use, as Mr. Giroux said. Nor should we forget that the most recent reports date back to 2021. We are well aware that there have been enormous economic changes to date, due to inflation and other structural changes. All this can also play a role in the analysis of a guaranteed minimum income and have an effect on work participation.
In fact, I find that work participation is a very important issue and I think we need to work more on this, especially as the studies used were conducted using data that, in general, are derived from other policies that are not necessarily linked to the guaranteed basic income.
Senator Gignac: I wanted to come back to the discussion you had with my colleague Senator Marshall. We all agree with Senator Pate that the goal is to reduce poverty. There’s no doubt about that. There’s the guaranteed basic income approach, and there are other approaches too. We saw it during the pandemic with the adoption of targeted measures and more recently with Ms. Chrystia Freeland’s grocery rebate.
In your report on fiscal sustainability, you said that the government had about $45 billion in leeway, or 1.6% of GDP, but since then, interest rates have risen significantly.
Today, in a context where interest rates are higher than what you were assuming at the time, and with the pharmacare plan apparently coming into effect soon, could Canada afford this guaranteed basic income? Wouldn’t it be better to adopt targeted measures, as the authors of the Quebec study had mentioned?
Mr. Giroux: Certainly, when you consider the other pressures on public finances, such as the drug plan and the dental plan, which are likely to be extended, the pressures in terms of national defence.... If we add the guaranteed basic income, choices will have to be made: We’ll either have to implement all these measures and increase taxes, or delay or slightly scale back some of these programs, if we want to implement them all. We may have to choose certain measures. We can’t implement all these programs without raising taxes while ensuring long-term financial viability.
Senator Gignac: Thank you.
Senator Smith: Thank you for being with us today, Mr. Giroux.
[English]
Providing people 17 years of age and up with a guaranteed basic income would have major behavioural reactions. In your 2020 report on the subject, you didn’t take these potential behavioural responses into consideration when estimating the cost of the GBI program. Why didn’t you include the potential implications of behavioural responses to the program?
Mr. Giroux: We didn’t take that into account in the first reports because there was not that much information available at that time and not that much time to take that into consideration. We were asked to estimate the cost. We did take these aspects into consideration in our 2021 report, where we had a bit more time to look at academic literature that considered both the incentive and the disincentive aspects of a guaranteed basic income.
As Nasreddine indicated earlier, that was in 2021. Things have changed. The economic fabric has changed a bit, and the labour markets have changed. Updating these studies now could lead to slightly different numbers in terms of the disincentives to work.
Mr. Ammar: When we did the first report, the request was about the gross cost of the basic income. To evaluate the behaviour, we need to identify the list of programs that will be replaced by the GBI and recalculate the marginal effective tax rate. Based on that, we then calculate the behavioural impact. We didn’t do that in the first report. We just estimated the gross costs. We didn’t identify any programs, and we didn’t estimate the behavioural impact. When Senator Woo asked for the cost of a basic income during COVID and possible programs that could be replaced to fund the basic income, it helped us to evaluate the behavioural impact of the GBI.
Senator Smith: Many COVID-19 support programs, like the CERB, included eligibility criteria such as having filed taxes in previous years. Most of these programs did not have built-in anti-fraud mechanisms in the front end. As a result, hundreds of millions of dollars in pandemic support ended up in the wrong hands. In any of the GBI programs you’ve reviewed, have you evaluated the risk of fraud or any additional risks?
Mr. Giroux: The CERB is probably not the best comparator because there was a sense of urgency to send the money as quickly as possible. We were told the checks and balances would be done later. We can debate whether that was sufficient or not. I would say it was not. For GBI, however, I don’t think there would be the same sense of urgency. I think the government could introduce guardrails and verification measures that would be a bit more rigorous than the virtual nonexistence of these guardrails.
Senator Smith: Are there any suggested guardrails that you would put forward at this time?
Mr. Giroux: Basing it on the tax system would probably be a good approach, but it’s a government decision when it comes to design.
Senator Smith: Thank you.
The Chair: Next is Senator Pate, the sponsor of the bill.
Senator Pate: Thank you very much to the witnesses for being here and for your work.
To clarify, I think you’ve been clear that you estimated gross costs. Your last answer is that you would have to look for actual net costs. You would have to look at what the offsets would be. That’s clearly part of what you’ve indicated.
Concerning this whole issue of the cost savings — I understand that, as the Parliamentary Budget Officer, you can comment on the impact of policy but not necessarily recommend the policy to us — did you experiment at all with different definitions of the benefit unit at all? Beyond the individual or the nuclear family, did you estimate the cost of the impact, for instance, of poverty reduction if the census family is used as a result? Getting to the question that Senator Smith just asked, the census family could include adult children living with their parents to allow for some offset. Some economists have suggested that including adult children living with their parents as part of the same family could lead up to a 40% reduction in net costs with virtually the same impact on poverty reduction. Would you have any reason to question that conclusion?
Mr. Giroux: We looked at the individual and the family as we normally consider a family. We didn’t look at the various possible permutations. However, based on what you said, I have no reason to believe that these numbers are not accurate. If you included, for example, adult children — which is the case in my household; I have one adult child still studying — that could well lead to slightly or significantly different numbers.
Senator Pate: It could be one of the guardrails that you mentioned that didn’t exist with CERB.
Mr. Giroux: Yes, it could well be.
Senator Pate: That led to some of the perpetuation of some of the stereotypes of freeloading adult children.
Mr. Giroux: Yes. There is an infinite number of permutations when designing such a program: clawback rates, administration, design issues, definition of family unit, individuals versus census or households. Yes, many possible design issues.
Senator Pate: In the 2021 report, you said that net costs, in the end, were about $3 billion. When you took in a number of the permutations, you mentioned in your testimony this morning that it was more like $44 billion. But if you looked at a number of the programs that currently exist, it brought it down significantly.
I understand that you weren’t able to look at the downstream costs in other areas, for instance, the criminal legal, shelter and health care systems. I’m curious whether you could clarify whether the PBO has costed such downstream cost savings in other studies. If not, could you please explain why not and clarify for the committee whether you believe there could be such savings and how we might best encourage them to be calculated?
Mr. Giroux: That’s a question that comes back often when we do our reports: Have you considered the savings or downstream impacts? The answer is that we usually don’t do that because we’re a budget office, so we’re asked to assess the cost of something or the revenues generated by something rather than the downstream impact.
On a program such as a guaranteed basic income, it’s quite clear that there would certainly be impacts on those who would receive a bona fide income, especially those at the lower end. We have not estimated the benefits for these people, the beneficiary population, as to, for example, better health outcomes and mental health outcomes or increased affordability of housing for them. That is something we have not done for lack of resources as well as time.
Senator Pate: In terms of using best available data, certainly UBC, University of Saskatchewan, the Basic Income Canada Network and others have looked at a number of different models. Would it surprise you to hear that they’ve estimated savings from those systems — health, criminal legal and other systems — in the order of $26 billion? That would be a return of $1.06 for every dollar spent on a guaranteed basic livable income.
Mr. Giroux: It’s quite possible. That doesn’t sound out of whack or incoherent with what we’ve seen.
Senator Pate: Thank you very much.
Senator Woo: Thank you, witnesses.
I have just a few questions on the estimates that you’ve produced. As I recall, you didn’t actually eliminate all of the basic amount in the calculation of the net cost. That has been preserved so that, if there were a further reduction or a reduction of the basic amount, the net cost would be even less; is that right?
Mr. Giroux: Yes, that’s correct.
Senator Woo: Secondly, I believe you did not eliminate the disability amount. Again, that is preserved for people who are genuinely and rightfully concerned about the special needs of the disabled. That has been protected in the estimates that you produced; is that correct as well?
Mr. Giroux: I think so. There are some supplements, some more targeted tax preferences or tax credits that have been eliminated.
Mr. Ammar: Regarding the basic amounts, we eliminated the total of the federal part of the basic amounts.
Senator Woo: In terms of the distributional effect of the basic income calculation, you’ve mentioned already that the burden, so to speak, rests mostly with the third and fourth quintile. The fifth quintile, surprisingly, doesn’t get affected that much. The average impact in the third and fourth quintile, I believe, is only 2% of the income; is that correct to say?
Mr. Giroux: Yes.
Senator Woo: So it’s a small amount of redistribution where people who are middle and upper income, essentially, share the largesse to bring about a large reduction in poverty and, I would say, in income security as well.
Let me ask you about the behavioural aspects. You’ve looked at the literature on the effect of a basic income on work effort. Do you look at short-term as well as longer-term elasticities, if I can put it that way? Is there any good information on whether, in the longer run, these kinds of cash transfers reduce effect over a longer period of time? I have reason to suspect that they might not, but I would be interested in your view.
Mr. Giroux: What we looked at was mostly the short-term impacts because that’s usually what people tend to react to, the short-term change in their work effort or incentives to work in response to the receipt of cash transfers from government or the absence of cash transfers. That would be the impact over a year or two years maybe.
Senator Woo: Do you have reason to believe that long-term elasticities would be different?
Mr. Giroux: No reason to believe they would be any different. What could change over the longer term would be health determinants, which could lead to better suitability for the labour market, but it’s not something we have looked into.
Senator Woo: If I could finish my round of questions on the modality of how the basic income likely would be delivered, which is through the tax system, you’ve already mentioned, and my colleagues have pointed out, that there is too large a number of Canadians who don’t file taxes, so they would have to be brought into the system. Of course, CRA is experimenting with automatic filing, so that will help with that challenge. Isn’t it correct that the fact that so many people don’t file currently puts them at a disadvantage as it is because they’re not getting these non-refundable tax credits, so even the effort to bring them into the system, whether or not we have a basic income, would be beneficial for this population?
Mr. Giroux: Clearly, although those who don’t file are not all people who would benefit from filing. I know public servants who don’t file taxes because they know they don’t owe any taxes. They expect a small, humble tax refund, so they don’t bother filing. So not everybody who doesn’t file would have a big benefit in filing. However, it is true that ensuring that those who would benefit from government benefits file would bring a couple of hundred thousand people into benefits or would give them benefits to which they are eligible but don’t get because of lack of filing.
Senator Woo: That’s a really interesting question. Perhaps at some point you could help us understand the distribution of non-filers and how many of them are in situations where they are probably very poor and unable to file taxes by themselves and therefore would benefit, as opposed to the group of public servants who are too lazy to file because they feel that they’re not going to get anything back. Thank you.
The Chair: On that question, could you follow up, Mr. Giroux, in writing, please?
Mr. Giroux: We’ll do that.
Senator Loffreda: Thank you to Mr. Giroux and Mr. Ammar for being here this morning.
The huge positive of a guaranteed livable basic income would be that it would reduce poverty rates by one half. My question is this: Why isn’t that number greater than one half? How do you consider the cost-benefit of such a program on the economy as a whole? Have you analyzed its impact on the economy? How would it affect the majority of Canadians? Obviously, the impact on the economy will affect the majority of Canadians. Without getting into the details, we know why it’s being questioned at certain levels.
Mr. Giroux: In terms of the first question, why isn’t the reduction in poverty greater than one half, it’s because of the very design of the guaranteed basic income. The parameters that we used established the benefit at I think 75% of low and moderate income, or LMI. By design, it’s set at a rate that would keep a portion of the population below the poverty line. Its very design is such that it will not reduce poverty to zero.
Senator Loffreda: Before you answer the other questions, would you not want a guaranteed livable basic income program to reduce poverty rates greater than one half? We’ve looked at the numbers, and the cost to society is not nominal. Wouldn’t you want that to be one of the objectives?
Mr. Giroux: That certainly could be one of the objectives, but it would mean an even higher cost and potentially higher disincentives to work. It’s a policy decision, and we were given parameters to estimate and to cost the program. That’s what we used, but we could do the same exercise with a higher guaranteed basic income. The cost would be higher, and we’d get slightly different numbers in terms of incentives and disincentives to work.
Senator Loffreda: Impact on the economy and majority of Canadians?
Mr. Giroux: We did not estimate the impact on the economy per se, but having a segment or a majority of the population reduce their own disposable income, quintiles three, four, and five would suffer or would have a reduction in their disposable income. That would reduce their consumption and investment. On the other hand, consumption of the first two quintiles would go up, but the impact would probably mostly come from the disincentives to work. We did not estimate the impact on the economy, but we can guess that the impact on the economy could potentially be slightly negative through a reduction in the work effort due to the introduction of a guaranteed basic income.
Mr. Ammar: We have an estimate of the impact of the number of households that would be affected, but also on the payroll overall, and there is a difference between these two aspects. We have seen it would be a negative effect of around 1.5% for the number of working hours, but the payroll will be reduced less than that, maybe 0.5 or 0.6, because this disincentive would be mainly observed for the low-wage people. If you relate that to the economic impact, you can assume that it would not be that big in terms of consumption or other aspects.
Senator Loffreda: You mentioned disincentive to work a few times, and if it does create scarce resources, we know excess liquidity and scarce resources lead to inflation. We’ve seen it in the CERB to a certain degree. Would that not hinder the same people we are trying to help? Inflation helps those who have assets. Those who don’t, it penalizes; it becomes a punitive measure. What are your comments on that?
Mr. Giroux: Yes, if it was to further increase inflation, it could have a marginal impact on the inflationary suffering of those individuals, but we have not looked at that in detail. It would depend on the monetary response from the introduction of such a program, and it would depend on the macroeconomic conditions, so it’s very difficult to determine with a high level of certainty without running that in an economic simulation model.
Senator MacAdam: Thank you for your work on this subject.
I have a couple of questions. Your April 7, 2021, report shows gross GBI costs ranging from $85 billion to $93.3 billion over the five-year period ending 2025-26. That includes the disability cost and the behavioural costs; correct?
Mr. Giroux: Yes.
Senator MacAdam: Thank you.
Throughout the various reports that you’ve produced, there’s mention of offsets that could be used to fund the guaranteed basic income, and one that you mentioned in your April 2021 report is the full cancellation of the federal basic personal amount and a 44% reduction in the provincial personal amount. In an earlier report, in July 2020, Table B-1 included potential savings of various credits, including the basic personal amounts, and it was calculated at $46.4 billion for I think it’s a six-month period. I just want you to elaborate a bit on this calculation. I’m wondering how much of this $46.4 billion is for the cancellation of basic personal exemptions versus tax credit offsets regarding programs that are in place for low-income Canadians. Do you have equivalent figures for the five-year period ending 2025-26? Have you updated that $46.4 billion?
Mr. Giroux: I can answer that last question. We have not updated these numbers yet, so the last calculations and estimates we’ve done are indeed in the April 2021 report.
With respect to how much of the gross costs would be offset by the basic personal amount and other equivalent provincial credits, we would have to get back to you with the specific numbers. We did list all the potential offsets to reduce the net cost, but I don’t have the specific line items and their contributions to the offset here with me.
Mr. Ammar: Yes, that’s right. We don’t have exact numbers, but it’s not that simple, actually. This whole transfer of programs is connected. There is correlation. If you cancel one, it will affect other programs. Even the order of cancellation matters. If you cancel one program before the other one, it will affect the transfer of the other one. You can’t really estimate the exact share because it depends on many factors. You could get an idea of the approximation of these shares in terms of the basic income fund.
Senator MacAdam: So is the cancellation of the basic personal exemption included in that $46.4 billion? This is on Table B-1 of your July 2020 report.
Mr. Ammar: That is the report with COVID taken into account. In that report, we didn’t really try to see what exact dollar amount would be needed to fund the GBI. We identified what potential program would be used to fund the program. The next report is really the one where we have identified exactly what the programs will be and the rate of cancellation that is needed to fund the program itself.
Senator MacAdam: Thank you.
[Translation]
Senator Dagenais: Welcome, Mr. Giroux. For the past few years, we’ve seen the government’s record get worse and worse when it comes to providing services to the public. The problem often comes down to bureaucracy. I worry about all the ways the program will change services, especially if the idea is to operate in a fiscally sound manner.
With the program estimated to cost $93 billion annually and the fact that provincial jurisdiction is at play, would it not be smarter for the government to undertake federal-provincial talks? That way, the government could find out how much capacity and support there was at the provincial level — not to mention what the provinces’ expectations were — in relation to the program changes stemming from this policy. Does this create expectations among those who are less fortunate? I would argue that the politicians haven’t done all their homework.
Mr. Giroux: When we estimated the cost of a guaranteed basic income, or GBI, we didn’t examine how it would work or what jurisdictional challenges would arise. A program like this would largely replace social assistance as well as some federal and provincial programming, so clearly, it would be hugely beneficial to the program’s implementation for the federal and provincial governments to coordinate closely — if the goal is indeed a universal GBI.
As you pointed out, this program would require discussions involving 14 jurisdictions, the federal government, all 10 provinces and all 3 territories. If the idea is to reduce the net cost by getting rid of existing tax benefits or programs, the federal government and the provinces are going to have to have a frank discussion and work together in a very coordinated way. Our analysis didn’t cover that. We estimated the costs and measured the impact on the labour market, but, obviously, we didn’t address how the program would work or be administered, or what the best way to achieve the goal was.
Senator Dagenais: Do you know how many staff would be needed to run a program like this for the federal government? Doesn’t it make more sense to transfer the funding to the provinces? They could take more targeted actions.
Mr. Giroux: It’s possible, but it would largely depend on how the federal government or the provinces chose to design the program. It’s possible that the best option is to transfer the funding to the provinces so they can administer the program in accordance with federal standards. That’s why, in our reports, we often break down costs by province. It provides a better sense of what a particular option would mean — in this case, transferring the funds to the provinces. Nevertheless, I can’t say which approach is better since it depends on the program design as well as policy considerations.
Senator Dagenais: Is a GBI program more likely to reduce poverty in Canada than a wide range of targeted programs, some of which already exist?
Mr. Giroux: It’s hard to answer that. On the whole, though, I would say a single program that encompasses existing supports scattered all over the place, has a greater likelihood of reducing poverty than small programs here and there. The interface between those programs is often overlooked or not well understood, they can work against one another at times, and they each have their own specific requirements and administrative authority. Basically, a single program with greater consistency is likely to be more effective than a bunch of small programs each targeting a slightly different population.
Senator Dagenais: Thank you, Mr. Giroux.
[English]
The Chair: Honourable senators, in order to maximize our time with the first panel in the second round, I would ask senators to ask one question each. We’ll ask the PBO to send us the answers in writing. This will enable maximum time for the first panel. There is a consensus around the table to do that.
Senator Marshall: Mr. Giroux, in your report, you say that 6 million Canadians will benefit from the program and 16 million will incur a net loss or a net reduction in their disposable income.
We have a progressive tax system. In Figure 1 of your April 2021 report, in the fourth quintile, the average household disposable income is reduced by $1,900, but the fifth quintile is only by $1,600. It seemed like the numbers should be reversed. I would like an explanation of that. If you can send some information on that, that would be helpful.
[Translation]
Senator Forest: I have an important question, and here it is. In 2021, you endeavoured to adequately measure the impact of a GBI, but there’s still another step, measuring the impact of a guaranteed minimum income on poverty and the rate at which people access health care and other social services. Everything is at play, everything factors into the equation when it comes to investments in GBI versus the positive impact of people not accessing social services or accessing them less. How do you measure all that to come up with a credible equation, one that reflects all the positive effects of the program?
[English]
Senator Gignac: I will ask you if it is possible to update your fiscal sustainability report, given the new environment with interest rates and the fact that this government wants to integrate the universal drug program plan and dental service. In both cases, you have published some estimates. I want to know if it’s still around $45 billion.
The Chair: As we conclude, honourable senators, I will ask the sponsor of the bill if she has questions.
Senator Pate: Thank you again for coming.
To follow up some of my colleagues’ questions and the whole issue of debt financing and potential impact on inflation, I would ask you to explore a bit more the models that could be looked at in terms of debt financing, including your own costing, which — you seemed to agree and repeated — would not worsen inflation, and to look at some of the examples, for instance, the CMHC rent assist program which operated in Manitoba for many years and was seen as a form of cash transfer. It did not result in inflationary impacts on rent.
As well, in terms of the potential work incentives, could you clarify that in terms of some of the modelling? You clearly identified there’s a negligible impact. I would appreciate you, Mr. Ammar, expanding on that — many who have received cash assistance utilize those resources to take time to find other kinds of training or work to care for other people — and whether there’s been any costing of those that you look at.
Finally, in terms of a 2020 literature review of a guaranteed livable basic income type measures, it concluded that a detailed research did not find any evidence of a significant reduction in labour supply; instead, they found evidence that labour supply increased globally among adults, men, women, young and old. If there’s anything that contradicts that, could you advise; also, if you could provide any additional information that supports those conclusions, that would be helpful.
Thank you.
The Chair: This concludes the panel. I want to reiterate, Mr. Giroux, that we have common denominators of transparency, accountability, reliability and predictability.
We have asked and agreed that written answers are to be sent through the clerk by the end of the day on Tuesday, October 31, 2023.
In closing, do you have any additional comments for the senators, Mr. Giroux?
Mr. Giroux: Yes. I have to say it’s always a pleasure to testify before you, but that last round always makes me nervous because you give me and my team a lot of homework. That’s probably the worst five minutes of that testimony.
The Chair: That said, we’ll see you again tomorrow night.
Honourable senators, we are now joined by former Premier of Ontario, Kathleen Wynne. Welcome, madam premier. We are also joined by Evelyn Forget, Professor, Community Health Sciences, University of Manitoba; and Jiaying Zhao, Associate Professor, University of British Columbia. That’s my Acadian side of New Brunswick. Welcome and thank you for accepting our invitation to appear in front of the Senate National Finance Committee.
[Translation]
Starting things off will be former premier Kathleen Wynne, followed by Ms. Forget and then Ms. Zhao.
[English]
Kathleen Wynne, Former Premier of Ontario, as an individual: Thank you very much. I really appreciate all of you for inviting me to speak in support of Bill S-233.
The idea of a guaranteed basic income for Canadians most in need of support is not a new one. I think all of the senators recognize that. There is already a range of programs in place that provides that exact guarantee to certain groups in our society, but not all. The Guaranteed Annual Income System supplement in Ontario is provided on top of the Old Age Security payment for seniors in need. The Ontario Child Benefit and the federal Canada Child Benefit guarantee a supplement to families with children. The Canada disability benefit to be introduced will supplement provincial supports. Those programs are already in place, and we see demonstrable benefits from those.
When I became premier of Ontario in 2013, our government was about to receive a report from Munir Sheikh and Frances Lankin, one of your colleagues. They had done a review of our social assistance program because we were looking for ways to improve a system that was not working as it should. The task had been to recommend changes to make the system more rational, more dignified and more supportive of both people who could enter the workforce — for example, to allow recipients to own more assets and earn more money and still not lose benefits — and people who could not enter the workforce. However, the authors were not asked to comment on the adequacy of social assistance programs, in other words, the amount of money that was received.
I became increasingly concerned that our efforts would amount to no more than an incrementalist approach around the edges of a system that had demonstrated that it already had not succeeded in lifting people out of poverty. I had been impressed by the work done in Manitoba with the Mincome pilot in the 1970s. Ms. Forget may talk more about that. As a member of our government’s poverty reduction committee, we were tasked with providing input into our poverty reduction legislation. As premier, I was looking for tangible improvements in people’s lives as a result of a government program that would support involvement in the community, including work placements, encouraging school retention and potentially supporting improved health outcomes. Those were all anecdotal benefits of the Mincome project.
Having listened to the Parliamentary Budget Officer, it’s so clear that we do not look at the cost savings of having those benefits in place. I don’t think we can assess the impact of a guaranteed basic income unless we understand that there will be savings as a result of those improved lives. Those were exactly the kinds of outcomes that we were starting to see as a result of the Ontario Basic Income Pilot before it was cancelled by the current Ford government in Ontario. Despite the fact that the current government had promised to maintain the pilot for the three-year duration, it was not maintained and we did not get the evidence we were looking for.
In the setting up the Ontario Basic Income Pilot, I had turned to your former colleague Hugh Segal to help us. We used the report that Hugh produced as a basis for the Ontario pilot, and in designing the pilot, we took a lot of care to attach real dollar amounts to the program so that researchers would be able to draw concrete conclusions about the cost of the model. We budgeted a total of $50 million over three years to support 4,000 people, plus set-up costs, evaluation and maintenance of health benefits for social assistance clients.
It seemed to me that we had the evidence from the supplements that are already in place, which I already enumerated, that such a system can work and can make a substantial difference in people’s lives while the social assistance programs in place for the people of Ontario between the ages of 18 and 64 were often humiliating, inadequate and ineffective traps keeping people from breaking out of intergenerational poverty.
At the same time, we were grappling with the realities — and we still are — of technology displacing workers across all sectors of employment: industry, commerce and service. We have made a decision as a society that we are not interested in institutionalizing people, and yet we have not put the supports in place in the community that are needed. On a daily basis, we hear from cities, towns and villages across this country about homelessness and food insecurity crises that are not abating.
Right now, the Canadian government has an opportunity to develop cross-jurisdictional supports for our most vulnerable Canadians. I had always hoped that the Canadian government would work with us and other subnational jurisdictions who had expressed an interest to test the implementation of a guaranteed livable income as a national strategy. That can happen now. We actually know that the cost of not putting these supports in place is visible to us. It’s visible to us all socially in terms of health outcomes and in the reality of increasing income inequality. The Canadian government has the opportunity right now to lay out a transition to a better way.
I’m going to bring Hugh Segal into this again because I know many of us are thinking of him. He would have loved to be here to have this conversation. In his book, Bootstraps Need Boots, he says:
Simply put, my life experience has shown me that poverty is a cause of much of the dysfunction that our societies need to address. It is not rocket science to figure out that someone can live a better life at 70 percent of the poverty line than at 45 percent, or that a basic income design that encourages work will be more helpful for a dynamic and growing society than a welfare regime that discourages it.
There are people sitting in your committee room today — and I’ve seen them on my screen — who benefited from the basic income, who got back into work and who were able to put themselves back into the community in a good way. I believe that we have an opportunity right now to look at the entire picture of what a program like this could offer to people in this country.
Thank you very much. I look forward to your questions.
The Chair: Thank you very much.
I will now recognize Professor Forget.
Evelyn Forget, Professor, Community Health Sciences, University of Manitoba, as an individual: Thank you for inviting me to speak to you today.
This bill that we’re considering today specifically addresses adults of working age — that is, people between 18 and 64. This is a challenging group to talk about, and many people wonder whether it might not be better to introduce good job training programs and labour market policies that lead to better wages and working conditions than to take a chance on a basic income that might discourage people from working. We know that the best empirical evidence out there suggests that a well-designed basic income will not substantially reduce the number of hours worked. Some people have argued that it will increase the hours worked or move people into better jobs. We’ve just seen that the PBO estimated a reduction in the number of hours works of only 1.5% at most.
However, what I’d like to argue is that we need both better labour market policies and a basic income. Not everyone can work at a regular job that pays enough to allow them to live above the poverty line. Some people have disabilities and receive disability support, but many people with disabilities don’t qualify for such support, particularly those with recurring disabilities, including especially mental health conditions. Other people simply don’t have the job skills that would pay a living wage. Some of those people can be retrained, but clearly not all. Sometimes, there are no jobs to be had because the Bank of Canada has taken particular policies or there is no transportation to the jobs that do exist. Other people have personal responsibilities and limitations that make regular paid employment impossible. Some people have lived with such devastating personal and generational trauma that they have to do a great deal of work on themselves before they’re ready to work for anyone else. I was at an event on October 4 at the Canadian Museum of Human Rights on behalf of missing and murdered Indigenous women that reminded me, once again, of how many Canadians have lived on incomes between $6,000 to $10,000 a year for most of their lives. Few people who have lived on the streets for any stretch of time can expect to take a short job training course and become employable at a job that pays a living wage.
You look at that kind of evidence and wonder whether what we need is social programs designed to address the special needs of marginalized groups instead of a basic income. Again, the answer to that is we need both specific social programs and we need a basic income. We need treatment for people who use substances. We need harm reduction policies and mental health services. We need all kinds of supports. But it’s hard for people to take advantage of these policies when they don’t have a full belly and a roof over their heads, shelter from the cold.
I live in Winnipeg, which has the largest Indigenous population of any city in Canada. Many of the absolutely essential social programs we have in place struggle to be perceived as something other than colonial overreach. There isn’t a lot of trust among the population, and coercing people into a job training program or addiction treatment program in order to meet their most basic needs is both ineffective and demeaning. The stability that a basic income introduces into people’s lives allows them to take advantage of these social programs on their own terms to move forward to benefit their own lives.
I think many people recognize that a basic income might be a beneficial policy, but they wonder if we can afford it. They wonder if this is the right time to be talking about a basic income. Years ago, I looked at the Mincome project which took place in Manitoba in the mid 1970s. That project ended in 1978, as it was planned. The results were very positive. The researchers wanted to continue the project, but instead they were told to archive the data because times were tough. At the end of the 1970s, we were looking at high interest rates and high inflation rates. It just wasn’t the right time. A few years later, the Macdonald commission, which reported in 1984, recommended a guaranteed income. We got NAFTA, but the guaranteed income was sidelined because, again, in 1984, times were tough. It wasn’t the right time to talk about a guaranteed income.
I’d like suggest that times are always tough. The economy is always in crisis, or it’s about to fall into crisis, or it’s just emerging from a crisis. We have an opportunity to look beyond the immediate future and to make plans over a long period of time that can transform people’s lives and transform the kind of society we live in. We have to remember especially that hard times are always hardest for those who have the least. We need a basic income. I would urge you to look at this bill carefully and to talk to a wide range of people who can help to bring together a good project design for a basic income that can make a real difference in the kind of society we live in.
Thank you.
The Chair: Thank you, Ms. Forget.
Professor Zhao, the floor is yours.
Jiaying Zhao, Associate Professor, University of British Columbia, as an individual: Thank you for having me today.
As a cognitive scientist, I’ve studied how humans perform in the conditions of scarcity. My work has shown the detrimental cognitive tax of poverty, and that is that our cognitive performance declines when we experience poverty equivalent to a 13-point drop in IQ. This drop is equivalent to aging 15 years, from 45 to 60 years old.
My colleagues’ work has also shown that poverty makes workers less productive and more prone to errors at work. In fact, a growing body of studies has shown the psychological trap of poverty, and that is that poverty saps brain power, making it more difficult to escape poverty.
Giving people cash is one of the most effective and cost-effective ways to reduce poverty. Basic income provides not only the critical financial resources to low-income individuals but also freedom and dignity.
My team at UBC and Foundations for Social Change recently published a peer-reviewed article at the proceedings of the National Academy of Sciences where we show that giving $7,500 to people experiencing homelessness in Vancouver, B.C., improved their cognitive function and well-being within three months of the cash transfer. Over one year, these recipients reduced homelessness by 99 days, and the reduced reliance on social services generated a savings of $8,277 per person per year. That is a net savings of $777 per person per year.
We also found that the cash transfer did not lead to increased spending on alcohol, drugs and cigarettes. Instead, the cash transfer reduced substance use severity by 90% in our recipients. The cash was primarily spent on food, rent, transit and durable goods. We have heard from our participants that this cash transfer gave them peace of mind so they could think properly and make good decisions for themselves and for their family.
Our study is not the first one to show the benefits of cash transfers. In fact, hundreds of cash transfers around the world have demonstrated the same pattern of results: improved well-being, health conditions, cognitive function and food security. In some cases, cash transfers led to reduced crime rate and reduced alcohol and substance use.
We’re currently expanding the cash transfer study in British Columbia so that it can benefit more people and lift people out of homelessness on a larger scale. We want to scale up the project to benefit more low-income individuals as well as to demonstrate that this can work in other regions in British Columbia.
The need to raise the income floor has never been greater since more people are being displaced by the rising living costs and the devastating environmental disasters in Canada. In a recent national survey, 50% of Canadians are pessimistic about their personal finances. A quarter of low-income households cannot pay for monthly expenses. This puts tremendous stress on people’s minds, increasing the risks of a downward spiral into deep poverty, which will only cost us more.
Bill S-233 aims to provide a guaranteed livable basic income to all Canadians. This can not only alleviate financial strains but unleash the vast human potential that’s currently trapped by poverty. A livable basic income can make Canadians more productive members of society and generate net savings for the government over the long term. This is a true investment in Canadians.
In this spirit, we’re actively looking at designing a guaranteed livable basic income project in Prince George, B.C., with support from Mayor Simon Yu, Indigenous leaders and stakeholders in the province.
In closing, I strongly urge the government to test the implementation of a guaranteed livable basic income as a national strategy to reduce the economic, social and human costs of poverty.
Thank you.
The Chair: Thank you very much.
Honourable senators, we will now move to questions, and the first round will be five minutes each.
Senator Marshall: I’m going to start with you, Ms. Wynne, because you’ve lived the experience. I’m very interested in your testimony. Could you clarify a couple of facts for me? Was the $50 million for each of the three fiscal years, or was it $50 million in total?
Ms. Wynne: It was a total amount, senator.
Senator Marshall: And it was funded completely by the province; there was no federal or municipal?
Ms. Wynne: We had no federal funding.
Senator Marshall: It was all provincial money?
Ms. Wynne: Yes.
Senator Marshall: Was there ever an evaluation of the program or an interim evaluation of the program? It seems like that’s what we’re lacking in a lot of these cases.
Ms. Wynne: We had hoped, senator. In the election in 2018, the opposition party at the time said that they would continue the pilot. However, as soon as the Ford government was elected, they cancelled it in the first year.
To me, the great tragedy of this is that we don’t have the evidence. Evelyn Forget was involved in the design, and we were hoping we would have the evidence that would allow us to move forward and design a program that would work for Ontario. I’m sorry to tell you that we don’t have the statistical evidence. What we do have is anecdotal evidence, senator.
Senator Marshall: That was my next question.
Ms. Wynne: Absolutely. During the time I was still premier, I visited with people who were on the basic income. After the program was cancelled, I became part of the conversation with people who had had the experience. What we found was exactly what both the other panellists have talked about. We found that people were more motivated and more able to get into the workplace. For example, I met with a man who was able to get his car back on the road and get back to work. He’d had to leave the workforce to look after his mom. He had fallen into poverty and got stuck. When the basic pilot project came along, he was actually able to get back into the workforce. I met young people who were able to buy some clothes in order to be able to apply for jobs and also go back to school.
It’s all anecdotal, but we did see the movement and the security and calm that came from having just that extra bit of cash. It was $17,000 a year. Not a lot of money was given to each recipient, but it was enough that the worries about putting food on the table, having something to wear to work and having transportation to get to work started to be less of an issue.
Senator Marshall: Thank you.
This question is for all of you. In terms of the issue of the guaranteed basic income being a disincentive for work, is there a fear that once you provide additional financial assistance, they could lose other benefits? I’m thinking about a drug card. Once you get to a certain income level, you would lose your drug card, which is very important to people receiving financial assistance. Can you address the concern about the disincentive to work?
Ms. Wynne: We did encounter this when we first put out the call because it was randomized access to people across the province. We found that there was low uptake among people who were worried about that very thing. We actually had to work to adjust the program. When you listen to the Parliamentary Budget Officer, there are a whole lot of parameters that have to be looked at. The last thing we want to do is create a system where people are worse off than they were before. We actually had to adjust the program so that some of those benefits were incorporated into the program.
Ms. Forget: I would echo that. No one sees a basic income as a program that is just pasted on top of all the other programs. The existing programs already have a lot of contradictions built into them. Basic income gives us an opportunity to clean out a lot of those programs and make sure they work together. It’s a much larger scheme.
Ms. Zhao: In terms of the work disincentive, the empirical evidence argues otherwise. Basic income has increased employment in certain demographics. In a currently running Denver project, basic income has increased full-time employment by 50%. That’s what the evidence says.
[Translation]
Senator Forest: Thank you very much for being here. My first question is for Ms. Forget.
When we look at the situation post-pandemic, we see that the federal government doesn’t have a direct way to really identify rights holders under the various programs. The proof, and this really worries me, is that 10% of Canadians don’t file income tax returns. These people who fall through the cracks are, in my view, the most vulnerable and the most disadvantaged members of our society.
I’m interested in what you observed when the Canada Emergency Response Benefit, or CERB, was rolled out — thanks to our hard-working public servants, the money did make it out to people, after all. In light of what you observed at the time, what would you say are the benefits of a GBI?
[English]
Ms. Forget: You were asking about non-filers and the implications for delivering a program. First, I would say that basic income doesn’t need to be delivered through the tax system. That is one option, but there are other ways of delivering a basic income. For example, if there were cooperation between the provinces and the federal government, there is a lot of machinery at the provincial level that can be drawn on to deliver a basic income. This is part of the design of a project. How do we do that?
In terms of tax filing, I think that a lot of people don’t file tax returns because it’s not worth their while. It’s true that many marginalized people don’t get the benefits that they should be getting because they don’t file tax returns, but there are a lot of efforts put into place across the country to increase that. For example, there was a political decision on many of the reserves not to become involved in the tax system, for all kinds of reasons. When the Canada Child Benefit was substantially increased in 2016, a lot of effort was made to ensure that people received the Canada Child Benefit, which was delivered through the tax system. That was done both through a concerted effort to make sure that the people who should be filing are filing, to make sure that information was available, but CRA also developed a simple one-page attestation of income. I can’t remember the number offhand, but it became very convenient and very possible for people to file income taxes under those circumstances.
I think we have to look a whole lot at how we can improve that system if we’re going to use the tax system to deliver benefits. That can be part and parcel of designing a basic income and asking ourselves how best to get it into people’s hands.
[Translation]
Senator Forest: Ms. Wynne, unfortunately your pilot wasn’t evaluated, so I’m curious to hear who the target population was. How did you choose the 4,000 people? Were they in a specific community? Was the decision based on their financial or social situation? How did you select those 4,000 people?
I’m interested in your experience. Canada is, of course, a federation, and the provinces control numerous levers of social development, from labour and social assistance to tax credits. If the federal government showed support for a GBI, how would it go over with all the provinces?
Ms. Wynne: Thank you, senator. I didn’t get the interpretation, so I’m not sure I fully understood your question.
[English]
I think what you’re asking me is the ability of us, as a federation, to have the provinces take part — that was the subquestion — and the willingness of the provinces to take part. Then the first part of the question was the 4,000 people who were involved. Can you give me the last part of that?
Senator Forest: Why could you not select 4,000 people for your experience?
Ms. Wynne: Why we couldn’t get the 4,000 people at the beginning?
[Translation]
Senator Forest: Yes.
[English]
Ms. Wynne: That was very disturbing to us at the beginning of the process, and we had to do better education in the communities we were looking in. People needed more information. They weren’t sure what we were trying to do. As the previous senator mentioned, there was some concern about losing other benefits, although in that 4,000 people, it wasn’t just people who were on social assistance who took part. It was people who were working or who did not have supports at all. We needed more information to go out to people. Part of it, senator, was there wasn’t a lot of time for that education to take place. Any framework developed as a result of this legislation would need that period of time to let people know what it was they were doing.
Second, in terms of the federation, I believe that a design for a program across the country would be palatable to provinces, depending on the parameters, because every province is dealing with issues of poverty.
The Chair: Thank you, Ms. Wynne.
[Translation]
Senator Gignac: Welcome, Ms. Wynne. Having been actively involved for a few years in the government of Premier Charest, whom you know well, I would like to thank you for your public service. I understand the sacrifices you have to make, especially when it comes to your family.
[English]
I will do my best to ask my question in English.
In Finland, contrary to Ontario, they have implemented a basic income trial for the last two years, and we now have the postmortem of those two years. They mentioned that the people’s well-being has increased and they were happier, but there was no real impact on the labour participation with those who participated in the program. Have you analyzed the Finland experience? Contrary to Ontario, the program was not cancelled due to an election and change in government. Do you have any thoughts on that?
Ms. Wynne: I have not done any analysis. Perhaps Professor Forget or Professor Zhao can speak to that. I do know Finland has been a leader in terms of creating a social safety net. There are certainly lessons we’ve been able to learn from Finland’s education system. I think that the improvement in quality of life in the broader community is a really important lesson that we take away. We had a bit of a glimpse of that from the Mincome project, and that was why we set up what was called a saturation site in Ontario, but the principle of that is that if the people who were doing the worst in our society do better, then everyone does better, and I think that’s an important lesson for us to learn.
Senator Gignac: In Quebec, which is a progressive society, we discussed in the previous panel that the Couillard government put in place an expert group and arrived at the conclusion that this basic income would have a low social acceptance because a lot of people in the middle- and high-income brackets would have a tax burden increase, the incentive to work is very low, and they have an equity problem because some people with a disability will earn less under basic income. Is there any reaction to this expert from Quebec who analyzed this project in 2017?
Ms. Wynne: It depends on the design of the program. If there are challenges we confront with a particular model, then we need to look at the problem we’re trying to solve and then adjust the program. I think this legislation is about looking at all those parameters and developing a framework that would work across the country.
Senator Gignac: So rather than going with a coast-to-coast program, do you think it would be better for the federal government to offer a pilot program to one province or territory that wants a pilot program rather than trying to offer it to all provinces and territories together? What is your Politics 101 suggestion for this one?
Ms. Wynne: I was hoping that when we did our pilot project in Ontario, that we would have the cooperation of the federal government, but it didn’t work out that way. Either model could work, but I do believe this is a national conversation now. Issues around poverty and homelessness and food insecurity are not relegated to one province, senator. We actually need to have the national discussion, and this legislation would allow us to do so.
Senator Gignac: Thank you.
Senator Smith: Dr. Zhao, the recipients in your study generally represented a third of the homeless population in Vancouver. It was noted there were mild users of substances and mild psychiatric symptoms. Did you look at more of the risk population so that you would have had a total study? I’m thinking of the higher users of substances and those with psychiatric problems, et cetera. Have you done any further research to try to get that group, which possibly would give you a higher degree of credibility when you’re talking to people who would be resistant to trying to implement such a program?
Ms. Zhao: That is a good question.
We looked at individuals with moderate levels of use, just not severe levels of use. A lot of our participants currently have active addiction, substance use issues, currently. We are expanding the project to see how the cash transfer would generalize to the broader population, but we have not included people with severe mental health or substance use challenges at this point.
I think the motivation for that question is to understand the potential risks of cash transfers to people with severe levels of substance use or mental health symptoms. My answer to that is this cash transfer is unlikely to increase the risks of cash on these individuals because they already have access to cash as the welfare programs currently exist. Receiving $7500 as a basic income will not lead to an increase in overdose because it only takes $10 or even less to overdose. It does not depend on the amount of cash they receive.
Second, past basic income programs around the world have shown that basic income actually reduced reliance on alcohol and substance over time. That evidence comes from the Cherokee Nation in North Carolina. Over 11 years, the basic income in that community actually reduced alcohol and substance use. That speaks to the other side of the puzzle, which is people use because they’re in poverty or homelessness, not the other way around. That’s my response.
Senator Smith: Madam Forget, as we look at this, there are so many individuals who are trying to do good things in this program or potential program. The simple question that strikes me is this: How do you mobilize people from all the different geographic places in our country who are concerned and have some fantastic ideas in their minds? How do you mobilize this group to set up? I know that Senator Pate is doing this with the bill. How do you mobilize that population of people out there who are leaders and who are going to say, “Hey, let’s get this thing organized properly so people can’t say no to us”?
Ms. Forget: That is probably the hardest question you can ask me. I think one of the real limitations of this system we have is that there are literally hundreds of programs across the country. Some of them are simple cash transfers. Some of them are a combination of services and transfers. Some are services. They’re all run by people in their own little silo, in a sense. Everybody thinks that they have got the answer to whatever it is we’re doing.
One of the things that is becoming more commonly recognized across the system is that these problems are all interrelated. If we’re trying to deal with the issue of missing and murdered Indigenous women, we can’t do it without looking at a whole range of other issues that impact on people’s lives. If we’re looking at issues of addiction, of substance use, we can’t do it without looking at poverty, homelessness and all of the things that go along with it.
One of the things we see at its core is that poverty actually requires money. You have to get money into people’s hands so they can make decisions. It really does simplify, in some ways, the possibility of those people who fall between the gaps in the programs, those people who aren’t compliant and who don’t fit into the programs that are set up. What cash does is it allows them to make their own decisions, come to the programs and make use of them the way that they can. I think a basic income is foundational. How do we get to that? I think we are moving towards it, but the progress is a whole lot slower than I’d like to see.
Senator Pate: Thank you to all our witnesses for your lifetimes of work on this and so many other issues.
I’d like to pick up on Senator Smith’s question. My question is for each of you, in the order that you presented, starting with former premier Wynne, then Dr. Zhao and Dr. Forget. Why now, and how would this assist people to deal with the current crises we’re seeing? You mentioned environmental and financial crises. You mentioned the homelessness and poverty that we’re seeing. You’ve mentioned that we have looked at stage models from the child benefits to guaranteed income supplements, and now the disability benefit. We know that Quebec and B.C. have said not the full thing, but let’s do it in incremental ways. What is holding us back? Can you expand on what each of you were saying? Why is it that we’re seeing the Missing and Murdered Indigenous Women and Girls inquiry, for instance, the status of women, others clearly go to this kind of approach, and yet governments balk at it? First to you, Premier Wynne. You didn’t, I know.
Ms. Wynne: What’s holding us back? I think what Professor Forget said was interesting, that times are always tough. I’m reminded of when we in Ontario said we were going to raise the minimum wage to $14. Four years before, business had said that it’s not the right time. Four years later, when the economy was better in 2017, they said the time is not right. There’s always going to be an argument that this is too expensive, we can’t afford it and the time is not right.
I would suggest to you that some of the issues that we’ve already raised, that you just enumerated, are reaching crisis proportions and that we have tried a lot of things that haven’t worked. Now, I think it’s time to try something that we actually know does work: putting money in people’s hands. Both Professors Zhao and Forget have talked about the realities of that in other programs. We saw it in Ontario. It’s time that we use what we know and design a program that we know is going to help.
Ms. Forget: One of the things that strikes me right now is that many of our social programs out there are labouring under excess demands. They’re barely coping. I am on the board of a community financial counselling service. We’re running through counsellors. We’re burning out our counsellors because they’re dealing with massive problems that they’ve never had to face before. That’s true in my sector. It’s true for food banks. It’s true for every organization I can point to. We are reaching a crisis position. We have to make some decisions going forward.
I am a bit of a historian. I’ve been doing health care for a long time. One of the things that really comes to mind over and over again when we talk about basic income is some of the battles that led up to the introduction of medicare over the years. Sometimes crisis gives you an opportunity to do better things.
We also need to be able to look beyond the next election cycle, this short-term perspective and this notion that times are tough right now so we’ll boot it forward and somebody can deal with it five years from now and the next regime can answer the questions. Things can happen over and over again. We have to bring a longer-term perspective and start asking how our society would be different if we put in place a basic income today.
Ms. Zhao: There is an emergency of homelessness and crisis in Canada. The recent homelessness count in Vancouver shows there’s a 32% increase in the homeless population, while the entire population of Vancouver only increased 3%. The current approaches are failing, and failing significantly, so we need to try something different.
Basic income is a rational investment to reduce homelessness and poverty effectively. The biggest pushback I’ve heard is increases in taxes, that people think it’s not fair to use my tax dollars to pay for the poor. The reality is that that’s not the case. If we implement basic income, it would only affect the top maybe 5% of income earners. It won’t impact the taxes of the vast majority of Canadians, that’s number one. Number two is basic income actually reduces our taxpayers’ money. It’s cost-effective overall. It’s less than what we currently spend on poverty.
Senator Woo: Thank you, former premier Wynne, Professors Zhao and Forget.
There’s a body of analysts, particularly economists, who have studied this issue and who would likely share — I am sure they would — your concerns about poverty, homelessness and people who are displaced for various reasons. They would perhaps also share your findings on the beneficial effects of cash transfers but might say that a targeted approach is better than a universal basic income. This is basically the thesis of both the Quebec study and the B.C. study. I would like you to speak to why you are advocating universality. There are different ways to calibrate that. Why don’t we just do a more targeted approach, find the people in the Downtown Eastside, all of them, and give them the cash transfer, but don’t give it to anyone else? Perhaps Professor Zhao can start, followed by Professor Forget and former premier Wynne.
Ms. Zhao: The targeted approach is both ineffective and inefficient. It ends up costing us more over the long run, because that’s what we’re currently doing. What we see is that this is not working at reducing poverty or homelessness. A basic income is more effective and cost-effective over the long run. That’s my short answer, but I can pass it over to Evelyn Forget to speak to more specifics.
Ms. Forget: I would agree with that, absolutely. It’s not an efficient way of dealing with things. The more targeted programs you introduce, the more gaps you introduce into the system. The more gaps there are, the more opportunities there are for people to slide through and not quite fit. Basic income is a more universal approach, so everybody can get access to at least some supports. I think that is one answer.
I am an economist, and I understand the criticism. If you’re dealing with a small problem, I think a targeted approach is appropriate. I don’t think we’re dealing with a small problem. We’re dealing with a lot of interrelated problems, and I think that targeted approaches simply don’t work under that kind of a setting. We need something bigger than that. We need better ways of integrating what we have out there.
Ms. Wynne: I’m not a researcher, like the other two professors. In Ontario, we went for a program that identified a population that would be eligible. I guess my response, Senator Woo, is that there are different models, and there are different models within the frame of universal. I think that that is exactly why this legislation is important. We need to look at those models and work with people like Professor Forget and Professor Zhao and figure out how to design a program that does not exclude but includes everybody who needs to be included.
Senator Woo: I think I know what you’re saying. The leakage comes from a universal program because some people will get it that maybe you feel don’t need to get it, but the leakage is less than the leakage of a targeted program so we’re better off with a universal program. I get that.
This bill doesn’t actually call for the implementation of basic income or a guaranteed livable basic income. It calls for the construction of a national framework. In your opinion, what should this framework constitute? What are some concrete ideas that a framework could put in place so that we can move forward, even if it’s in an incremental manner? Professor Zhao, would you like to start?
Ms. Zhao: I think the ideas behind the framework are to establish the principles, what are the conditionalities, establish the parameters on requirements, who will be qualified or eligible for this program and at what costs and what benefits. I think establishing these core principles of basic income is crucial. The actual implementation will vary, depending on the province and territory, so I think the framework should give us the principles.
Ms. Forget: We heard this morning from the Parliamentary Budget Officer that a basic income has a lot of parameters, and I think that an opportunity to study it is an opportunity to bring people together from a lot of different sectors — to bring the provinces together, to bring federal representatives together and to bring non-profits in — to talk about what those parameters should be.
There are a couple that are, sort of, favourites, to my mind. I think we’ve approached the design of basic income with a certain lack of imagination. I think one of the most important things is to look at the definition of the family and the implications of different ways of defining the family, the benefit unit, and delivering the program. I think that all of those factors, tax back rates, et cetera need to be —
Senator Woo: Could it include encouragement for the design of pilot projects at the provincial, municipal and regional level?
Ms. Forget: We have 13 different jurisdictions.
The Chair: Can you follow up through the clerk in writing, please? Thank you for the question, Senator Woo.
Senator Loffreda: Thank you to our panellists for being here this morning.
I agree that poverty is a dysfunction that our society must address, and it’s a major worry across the country. The main concern with respect to a guaranteed livable basic income is not only the increase in taxes and costs, but it could lead to a disincentive to work, which leads to scarce resources and inflation and will hinder the same people we are trying to help. Dr. Forget, you mentioned that a guaranteed livable basic income will increase hours worked and not disincentivize work. I would welcome additional insight on those comments and conclusive findings on what you may have on that. Comments from other panellists are welcome on those findings or conclusions.
Ms. Forget: The whole work disincentive issue is a really good question. In my opinion, a basic income has very little impact on the number of hours worked. I believe that’s going to be the finding. There was a question about Finland, the Finnish experiment, a little while ago. They began that experiment with the hypothesis that people who received a basic income would work more hours than people who didn’t receive a basic income. They didn’t find that. They found absolutely no difference between the control group and the subjects.
I talked, though, to the director of that program, Olli Kangas, and he told me something very interesting. Towards the end of the program, he did find a difference, not in terms of the number of hours worked but in terms of the kinds of jobs that the subjects found relative to the control group. The control group, to the extent that they were working, were still working the temporary kind of jobs — such as handing out leaflets — that they had been working before the project came along. What happened to the subjects is that some of them were moving into real jobs, jobs that continued over time and that they would expect to see improve their lives. That didn’t show up statistically, partly because the project wasn’t long enough to see it.
I would like to see those kinds of long-term impacts. I don’t know if that’s going to happen. I don’t believe that there’s any evidence at all that a basic income either incentivizes or disincentivizes work. I don’t think you’re going to see a huge difference between the two. If you introduce a basic income, people aren’t going to flee the job market. They haven’t in any of the experiments we have put in place. They haven’t when we have introduced basic income-like programs. When we introduced the Canada Child Benefit, mothers worked more, not less. I just don’t think that there’s going to be a huge difference out there.
What I meant to say when I was presenting was that some people seemed to think it was going to increase labour market participation. Some people seemed to think it’s going to reduce it. I don’t think there’s any difference, and I don’t think there’s any evidence to support the notion that it’s going to create much of a difference. I think the PBO was quite correct to use as a first estimate a 1.5% reduction in the number of hours worked when they did their report. That’s a very small amount. It’s an appropriate choice to make.
Senator Loffreda: Thank you.
Senator MacAdam: Thank you to the panellists.
The Parliamentary Budget Officer, in all the costing reports for a guaranteed basic income, used the low income measure as the basis for estimating the number and percentage of Canadians living in low income, and I believe it was also used as a basis for payments to participants in the Ontario pilot. There are other measures that are often mentioned, like the low income cut-off and the Market Basket Measures. I’m wondering, in your opinion — for all the panellists — which of these measures would be best suited for designing a program for guaranteed basic income and why?
Ms. Forget: I think that’s one of the parameters that can be determined in terms of the design of a project. I’m not a person who is very much committed to one measure over another. I think we want to see improvement over time. Depending on data availability and so on, I think that there are various ways that we can approach the problem. I don’t have a firmer answer than that.
Ms. Zhao: I would like to go back to the problem raised by Senator Woo. I think this is exactly what this framework needs to figure out. What metrics are we using, and are provinces reporting back to Parliament over time?
I agree with Evelyn that there shouldn’t be one single metric, because that will never work over the long run. Instead, I’d encourage use of multiple metrics assessing productivity, well-being and cost savings in those domains.
Ms. Wynne: I’m just going to say the same as what they said.
[Translation]
Senator Dagenais: My question is for Ms. Wynne. As a former premier of Ontario, you no doubt appreciate what a struggle it would be to get all the provinces to agree on a program like this. Provincial jurisdiction isn’t really negotiable, as you know first-hand, having been premier.
I want to revisit something Senator Forest brought up. I asked the Parliamentary Budget Officer this question. Do you think the federal government should start by coming to an agreement with the provinces as to what they want or what provincial programs they are willing to give up, before jumping into a federal GBI program? I think we should avoid discussions that will get us nowhere and focus on a more realistic approach. If you agree, how many months or years do you think it would take to reach those kinds of agreements?
[English]
Ms. Wynne: Were you asking me about the amount of time you think we would need to bring the provinces in and whether the provinces would be prepared to work with the federal government? Is that correct?
Senator Dagenais: That’s right. I’m sure you understand the situation of agreement between the provinces and the federal government.
Ms. Wynne: Yes, of course.
I can’t say how much time. I don’t know what that would look like, but I do believe that, as part of this framework, there would need to be this discussion, senator. How would we bring provinces on? What would be the exchange?
I would hope that at the Council of the Federation, where the premiers sit, there would be the ability to build consensus. Having sat at that table, it can be a very non-partisan conversation. If the federal government were willing to take part in a discussion on the reduction of poverty through a basic income program, I think there would be a willingness to engage in that conversation. I would be optimistic if not completely confident that it would happen immediately.
[Translation]
Senator Dagenais: Do you think the federal government is the right authority with the right tools to administer a GBI program?
[English]
Ms. Wynne: Do I believe the federal government is the right level of government? Yes. As I said before, I think we are dealing with national crises. It’s very important that we have a national conversation and that we recognize that this is not about one province or another or one region or another. There are consistent issues across the country that people are dealing with, and every province needs to be part of this conversation. So, yes, I do believe that the federal government can provide the catalyst for that conversation.
[Translation]
Senator Dagenais: Thank you very much.
[English]
The Chair: Honourable senators, this concludes our second panel.
Thank you to the witnesses for sharing your thoughts, your ideas and your visions with the Finance Committee. I would like to remind the witnesses that we have agreed that you would send some answers in writing through the clerk, please, and, if possible, before the end of the day on Tuesday, October 31, 2023.
Before closing, the deputy chair has a question or a comment.
[Translation]
Senator Forest: I think we have only one meeting on the topic, so I was wondering something. Since it’s impossible to cover everything, will there be an opportunity when we could recommend setting up a pilot project, to measure the positive or negative impact? After all, the committee does have an order of reference from the Senate. Do you think that could be discussed at the beginning of the next meeting? Alternatively, could we send suggestions to the analysts so we could, at the very least, report something to the Senate?
The Chair: Rest assured, Senator Forest, that will be the first topic of discussion at the steering committee’s next meeting.
Senator Forest: I have full confidence in you.
[English]
The Chair: I would like to thank the entire support team, those in the front of the room and also behind the scenes who are not visible. Thank you for your hard work and your contribution. It makes our job as senators enlightening in order to share the information with the public and Canadians from coast to coast to coast.
(The committee adjourned.)