Proceedings of the Subcommittee on Cities
Issue 4 - Evidence
OTTAWA, Friday, June 13, 2008
The Subcommittee on Cities of the Standing Senate Committee on Social Affairs, Science and Technology met this day at 9 a.m. to examine and report on current social issues pertaining to Canada's largest cities.
Senator Art Eggleton (Chair) in the chair.
[English]
The Chair: Good morning. Welcome to the Subcommittee on Cities.
I have the pleasure of chairing the committee. We have been dealing with the subject of poverty, housing and homelessness for the past year or so. We will continue to deal with it probably into early in the New Year, when we hope to have a report available.
This is another major event along the way, as we get into a discussion about ``Guaranteed Annual Income: Has Its Time Come?''
It has been around a long time and it has been discussed a long time. It goes back to the Croll Senate committee which first proposed the idea back in 1971 and it has been the subject of many studies and reports ever since. It is also the subject of a motion that my colleague, Senator Segal, who is here, has put on the Order Paper of the Senate with respect to a negative income tax approach to a guaranteed annual income.
The subcommittee has had some 80 witnesses and some 60 organizations. In fact, some of you have appeared previously before the subcommittee. We are about to publish an issues and options paper with respect to our findings. It will be about 100 pages; it is a big subject. After we get through poverty, housing and homelessness, since we are the Subcommittee on Cities, will go on to deal with every other aspect of life in our cities in terms of transportation, the economics of cities, in terms of governance, and so on.
This first instalment is a big one. The issues and options paper will be out, hopefully, in a couple of weeks. We will be having meetings in the major cities across the country — not all of them but a number of them, covering every region from coast to coast. We will be doing that starting this August. We will be starting in the summer. You did not think senators worked in the summer, but we do.
As I said, early in the New Year we hope to come out with a report with recommendations to the government. Of course, that depends on a couple of things: First, if an election is called, that delays us further; and, second, if there is another prorogation of the House, that will delay us further. We lost six months in this one-year time frame because of that.
Today, we will examine the concept of guaranteed annual income around the themes of its impact on poverty and its impact on labour market participation. We will get into administrative and design issues and we will then talk about moving forward to address income inadequacy, whether it is guaranteed annual income of one form or another or some modification.
Carol Goar, editorial columnist of the Toronto Star, has agreed to serve as moderator: Her knowledge, background and passion in this area is well known to me as a Toronto resident and a reader of the Toronto Star. I am glad she is moderating so that I can participate and heckle and things like that instead of being the chair.
I will now introduce you all. On my left is my colleague Senator Segal, a senator from Ontario — we go by provinces — but more specifically than that he is a Kingston-area senator. Next, we have Christa Freiler, Director of Research, Canadian Education Association. This organization endeavours to influence public policy issues and education for the ongoing development of a robust democratic society and a prosperous and sustainable economy. In her writings, Ms. Freiler has argued that the federal government should increase child and family benefits to build an adequate income floor.
Next to her is Derek Hum, Professor, Department of Economics, University of Manitoba, who has been criss- crossing the world lately, but he looks okay this morning. He is a graduate of Mount Allison University, Oxford University and University of Toronto. He is a former Rhodes Scholar. He is a specialist in social policy, particularly income maintenance programs and tax transfer issues. He was formerly research director of a large-scale experimental test of guaranteed annual income in Canada. This was the one done in the Winnipeg area. He has published widely in economics, sociology and public policy, including seven books and more than 100 articles. He has that experience with a model system.
David Gray, Associate Professor, Department of Economics, University of Ottawa, is not here yet. He has written extensively on the subject of employment insurance for the C.D. Howe Institute and other scholarly journals. He has focused on labour market participation effects of the changes from UI to EI, looking in particular at incentives and disincentives to work.
Next is my colleague Senator Marilyn Trenholme Counsell. She is a physician. She has great passion about early learning and child care. She is also part of putting together a report on that specific subject which, again, our main committee, the Standing Senate Committee on Social Affairs, Science and Technology, will be coming out with in September. Look for that one.
David Northcott, Executive Director, Winnipeg Harvest Food Bank, which he cofounded in 1984. He was also founder of the National Association of Food Banks and has served on the board of the National Anti Poverty Organization, NAPO.
Next is Sheila Regehr, Director, National Council of Welfare. The council has been analyzing patterns of poverty for over a quarter of a century, especially through its two signature series, Poverty Profiles and Welfare Incomes.
Rob Rainer, Executive Director, National Anti Poverty Organization, which is a non-profit, non-partisan organization working for the eradication of poverty in Canada. NAPO believes that poverty is a violation of the human rights to the security of the person.
On my right, we have my colleague Senator Wilbert Keon from here in Ottawa, Ontario. He is Deputy Chair of the main committee. I am the chair; he is the Deputy Chair. We have two subcommittees: this one on cities, which I chair, and one on population health, which he chairs. There is a lot of overlap in terms of issues. He is looking at the social determinants of health. Obviously, he is very knowledgeable in that department. Poverty is also big in that department, but we are trying to keep everything properly coordinated. I might also add that one of our other committees, the Agriculture Committee, is looking at rural poverty. Again, we are trying to coordinate that one.
Dr. Keon is most interested in what you have to say about this subject as well.
[Translation]
François Blais is a professor in the Faculty of Social Sciences at Université Laval and the author of Ending Poverty: A Basic Income for all Canadians.
[English]
Next is Lars Osberg, Professor, Department of Economics, Dalhousie University. His current areas of research include measurement and determinants of social exclusion and poverty, measurement of economic well-being and economic insecurity.
Next we have Philip Robins, Professor, Department of Economics, University of Miami. He has experience in both Canada and the United States on test programs relevant to a negative income tax. He was director of research for the Seattle and Denver negative income tax experiments. Welcome.
Senator Jim Munson has a foot in Ontario and a foot in New Brunswick. He is also very interested in the cities subject and has been a good colleague on this whole discussion.
Next is Michael Mendelson, Senior Scholar, Caledon Institute of Social Policy. He has held many senior public service positions prior to his appointment to Caledon. He was the deputy secretary of the cabinet office in Ontario. He has been part of the team of scholars examining the possibilities of a basic income program equivalent to Old Age Security and Guaranteed Income Supplement and delivered through the tax system. He has an interesting model of reforms to the program that we will be interested in hearing about.
Next is Chandra Pasma, Policy Analyst, Citizens for Public Justice. This organization promotes public justice in Canada by shaping key public policy debates through research and analysis, publishing and public dialogue.
Marie White, National Chairperson, Council of Canadians with Disabilities. CCD is a national organization with representatives from provincial consumer-led disability organizations and other national disability-specific organizations. She is a senior research and evaluation consultant in St. John's, Newfoundland and Labrador, who for the past several years has assisted in the successful completion of several projects at the local, provincial and national level.
Last, but not least, is Jim Mulvale, Associate Professor, Department of Justice Studies, University of Regina. He is the author of Reimagining Social Welfare: Beyond the Keynesian Welfare State.
I would like to introduce the staff. Barbara Reynolds is the clerk of the committee and she has been at the centre of organizing this event, as has Rob Meinzer of my office and Laura Corbett. Our researchers are Library of Parliament analysts, Brian O'Neal, Havi Echenberg and Tyler Kustra.
I will turn it over to Ms. Goar, who will introduce our opening presentation.
Carol Goar, Editorial Columnist, The Toronto Star: Thank you very much, Senator Eggleton. I am privileged and grateful to be here. My role is to be an impartial moderator and occasionally, I hope nicely, to cut people off if they are going on a little bit long.
I was asked when I agreed to be moderator whether I thought I could be impartial, and I told the person who put the question, quite honestly, that that would be pretty easy for me because I have never taken a position on a guaranteed annual income. I can understand why the question would have been asked, because my newspaper has been a strong and persistent voice for poverty reduction. However, The Toronto Star also has no editorial position on a guaranteed annual income, so I am here to learn.
I would like to invite Professor Osberg to kick off our session with a brief history of the guaranteed annual income.
Lars Osberg, Professor, Department of Economics, Dalhousie University: It is a great pleasure to be here. I brought a handout. I think it is useful, when we talk about the guaranteed annual income concept, to keep a clear idea in our minds of what the target and context is.
The top panel simply presents the poverty rate going back to the late 1970s in Canada. The lesson I would like you to take from that is that there have been rises and falls in the poverty rate in Canada, but there is essentially no trend. If you take the same poverty line, adjust it for inflation and ask what percentage of Canadian individuals are poor, there are rises and falls with the business cycle, but there has been essentially no progress in something like 31 years.
The second panel is equally important, because that looks at the level of deprivation of poor people — the poverty gap. It is an often-forgotten perspective. If we focus only on the number of poor people, we forget the crucial issue of how deprived are poor people in Canada. There you do have a time trend. From the point of view of the affluent, it may not seem like much of a time trend. However, from the point of view of poor people, it is a significant increase, from about $3,300 to about $4,000 in the year 2006. Everything is measured in 2006 dollars, so it is adjusted for inflation. It is about a 20 per cent increase, which amounts to $2,800 for a family of four, which is a significant change in their well-being.
The bottom line is that poor people in Canada are significantly worse off now, in absolute terms, than they were 30 years ago. A valid objective of a guaranteed annual income outcome, or of any anti-poverty policy, would simply be to lessen that deprivation, as well as affecting the poverty rate. That is a key point, and we will be coming back to that.
If you flip over the handout, that chart shows a bunch of the poverty lines that people have talked about in Canada over the last 30 years and puts them all to a common dollar value. They came out at different points in time, so they are measured in different dollars. This puts them all in 2006 dollars. There are measures of extreme deprivation, but the basic take-away message is that there is a basic consensus in Canada that for a four-person family living in a mid-size city, somewhere between $30,000 and $35,000 is what corresponds to an intuitive idea of the poverty line.
There is not a lot of disagreement, over all these years, by all these methodologies, with the exception of the Fraser Institute, over what constitutes poverty.
I want to talk about this first because that is our objective. It is important to keep in mind that reducing the deprivation of poor people is a key objective of anti-poverty policy. That is where we came to the question of whether the time has come for the guaranteed annual income.
Two questions asked of all transfer programs are: who gets it and how much do they get? The distinguishing characteristic of guaranteed incomes is the unconditionality. It is not means-tested or wealth-tested. When you ask whether the time has come for a guaranteed annual income in Canada: we already have guaranteed incomes. In fact, we have several, but they are restricted in focus and in amount. We have, for example, on the OAS-GIS system for senior citizens in Canada where everyone of a given age is eligible for payments. It combines the two elements of guaranteed incomes — a grant through the OAS system and a Guaranteed Income Supplement that taxes back. It is useful to use it as an example because the basic guarantee level of the GIS system is something like $630 per month or about $7,600 a year and the tax-back rate is 50 per cent. Those two parameters, that basic guarantee level and that tax rate, are the key parameters of any negative income tax system. Together, they define the break-even point at which benefits cease and one moves from receiving benefits to paying net taxes into the system.
In the case of the GIS, that is something like $15,000 in other income. That is the key parameter, because it determines the cost of the program, as it determines how many people qualify.
Those two parameters also illustrate the tension in policy design. The tension between people who want to look at the guarantee level and the issue of adequacy for those who cannot work, who cannot earn income, and those who focus on the tax-back rate, who worry about those who perhaps will not work, who want to maintain the issue of incentives. For that reason, we have this tension with a low tax-back rate, which implies a high break-even point — a high guarantee level also implies a high break-even point and a high program cost.
The major focus of research and of program design and controversy has been along those two dimensions, on the issue of adequacy and concrete parameters like the basic guarantee level and on the issue of incentives for which the tax-back rate is key.
The question that many generations of economic researchers have examined is, how much does this actually matter in terms of affecting people's behaviour? We know it will affect people's well-being through transfers, but how much will it affect their behaviour?
I am here as someone who has taught labour economics for many years, partly to tell you the dirty little secret of labour economics, which is that financial incentives to work do not explain much in terms of behaviour. Generations of economists have been brought up with these supply and demand curves. In fact, all these regressions that we run do not explain a lot of the variance. Most of the variance that is explained are the other variables, not the tax or wage variables in the equation.
As the income experiment people have found in experimental situations and many people have found it in non- experimental situations, there is enormous variation in the world out there in terms of how much people work, the annual hours of work. Most of it is in the decision of whether to go into the labour market at all and only some of it is in the number of hours of work once in the labour market. Of that huge variation in human behaviour that we observe, not a whole lot of it can be explained at the end of the day with respect to the incentives of the tax system or of a negative income tax system or of the pre-tax wage. Most of it is in personal characteristics, in random variation and in other variables that we cannot measure.
When Derek Hum and Wayne Simpson summarize the results of the Mincome experiment and say that basically they are small impacts in terms of labour supply effects, they are consistent with a large literature that essentially finds pretty small impacts of these program incentives on behaviour. However, pretty small is different from zero. Zero is a magic number in this literature because as soon as there is any impact of a negative income tax or guaranteed annual income on labour supply behaviour, that is enough to get editorialists going. The distinction between very small and a lot gets lost.
It is hugely significant politically, even if not very significant economically, that there is a very small effect on labour supply.
As a practical matter, when we instituted our several guaranteed income programs in Canada, we only did it for an appreciable amount of money for senior citizens, whom we do not expect to work in the paid labour market. That has been the major success of Canadian social policy over the last 30 years. The decline in the rate of poverty of Canada's senior citizens has been dramatic in the last 30 years. That is the one thing we can take to the bank as an unambiguous Canadian social policy success, even though it is hiding in this long-run trend of essentially no change in overall poverty.
I would say that the lesson we should take from that is that we can do it. We can have major impacts on the incidence and the depth of poverty through something like a guaranteed income program or a negative income tax program. It is all about the level at which you set that basic guarantee.
When we turn to the other programs that basically already have in Canada a guaranteed income design, such as the Child Tax Benefit or the GST credit, which are unconditional, those programs have the same basic design as a guaranteed income, but they are of mingy little amounts. They have the same structural characteristics of unconditional transfers and then tax back; they are set low enough to make some difference to the poverty gap, but not a lot. If we look at the trends, it is not enough to prevent that poverty gap from widening over time.
In a sense, that is my bottom line. We already have a framework for a guaranteed income in Canada. The problem in terms of the increasing depth of poverty, the increasing deprivation of poor people in Canada, is that it is just a mingy little amount. We could do better and make a significance difference to the lives of poor people by simply scaling up some of the programs we already have and realizing that the labour supply effects, the deleterious effects of that, are pretty small to marginal. We can go to this government's signature program, the universal child income support of $100 a month, and scale that up. That, too, has some of the aspects of a guaranteed income.
That is my bottom line. We can do a lot and we should do a lot more.
Ms. Goar: Turning to the question of adequacy, which Professor Osberg mentioned as one of the first aspects of a guaranteed annual income, I would ask Mr. Rainer of the National Anti-Poverty Organization to kick off this discussion.
Rob Rainer, Executive Director, National Anti-Poverty Organization: Thank you, Ms. Goar, and thank you, Professor Osberg, for your graphs. They are illuminating and helpful to this discussion.
I have been asked to respond to three questions to kick off this part of the session, but I also have some handouts which I will pass out after I speak. Those handouts come from a group of feminists who met in 2004 to develop a statement in support of a guaranteed liveable income. There is one page from the Green Party of Canada's pre-election platform document, where they indicate their support for fresh reconsideration of a negative income tax. There is also a statement from the Alberta New Democratic Party from 2006 giving their support for a guaranteed annual income. We are a non-partisan organization, but we wanted to bring forth a couple of examples of political parties that are showing some interest in this. Of course, there are others.
Finally, I have one copy of this booklet, which I will pass to the clerk or the research team, the Women's Economic Justice Report on Guaranteed Livable Income from Victoria. It is a collection of reflections from low-income women in Victoria on the difference a guaranteed annual income would make for them. They are powerful first-person testimonials which would be helpful to the committee's considerations.
The National Anti-Poverty Organization is pleased to respond to a request from the Library of Parliament to provide a brief opening statement in response to three questions: Could guaranteed annual income reduce poverty? Could it exacerbate poverty? Would it be as effective as multiple programs?
NAPO has supported guaranteed income since our inception in 1971. We are pleased to see guaranteed income receiving fresh consideration within Canada, including by the Senate Subcommittee on Cities.
Along with some colleagues at this table, we will participate in the twelfth international basic income congress, beginning this day next week in Dublin, preceded by a full day to learn about recent Irish experience with guaranteed income.
In response to the first question, as to whether guaranteed income could reduce poverty, NAPO believes that not only would a well-designed guaranteed income or framework reduce the poverty that today may hold some 3 or 4 million Canadians in its tragic and nationally destructive grip, it would also contribute to the outright eradication of poverty while yielding many other positive societal benefits by ensuring that everyone receives sufficient income to meet basic needs.
In considering the incidence and depth of poverty, our preliminary analysis suggests that the elimination of poverty may require redistribution of an additional $20-$25 billion of the national income pie, or about 1.5 per cent of GDP. That level of funding appears to be necessary to ensure everyone in Canada would have sufficient income to be at or above Canada's informal poverty lines, such as the low income cut off and the market basket measure. We as a nation could seek to be even more generous in redistribution.
Canada could provide that $20-$25 billion simply by backing off, at least in part, from budgetary emphasis on tax cuts over this and the next five fiscal years. Tax cuts provided in the 2006 and 2007 federal budgets are estimated to prevent nearly $190 billion from reaching the federal treasury, or about $31 billion per fiscal year.
Reversing the roundly criticized GST cuts from 7 to 5 per cent, cuts virtually invisible to most Canadians, would alone restore about $72 billion to the treasury over that six-year period, or about half of that required to meet the $20- $25 billion target.
As another alternative, Canada could develop a corporate tax structure obliging profitable corporations to share more of the wealth. In the first quarter of 2008 alone, Canadian corporations realized pre-tax profit of nearly $68 billion, thus on pace for some $270 billion in pre-tax profits for the year, or more than 10 times what would be necessary to ensure all Canadians have income above the poverty line.
Between 1996 and 2006, pre-tax corporate profit essentially doubled while the corporate tax rate dropped from 28 to 21 per cent, and the federal government intends to reduce this rate further to 15 per cent by 2012.
Such policy options suggest the possibility and the flexibility Canada has to ensure everyone has sufficient income for basic needs. We argue that having such income security should be viewed as a fundamental human right, conceptually part of the notion of the security of the person under the Charter and thus to be protected as vigorously as other established rights, such as freedom of religion, expression, assembly and electoral participation.
To the second question, could guaranteed income exacerbate poverty? Yes, it could, if the income provided by it alone is insufficient to meet basic needs and if alongside the introduction of an inadequate guarantee other forms of income or social supports are removed to make way for the guarantee.
That, we understand, was the reason for opposition to the 1985 Macdonald commission's proposal for universal income security program. NAPO will oppose any proposal for guaranteed income that threatens to worsen the situation for present or future low-income Canadians.
With respect to the third question, would a guaranteed annual income be as effective as multiple programs, we believe that a universal, guaranteed and adequate or livable income program or framework, if designed to harmonize administrative bureaucracy, would be more effective than today's confusing hodgepodge of inadequate, often stigmatizing and sometimes countervailing support programs. Conceivably, it could streamline income support by replacing certain programs. Most notably and notoriously, in this regard, would be provincial and territorial welfare programs, the cost of which for planning, administration and enforcement related to means testing must be sizable.
We wish to be clear, though, and the figure accompanying the statement illustrates this point, that guaranteed income would not be a magic bullet solution to social security. Rather, we envision guaranteed income being targeted to address the lack of income for basic needs and being nested within a modernized social security system in which other programs, such as child care and early childhood development, address other challenges to social security.
Given that the beginnings of guaranteed income exist, for example, in the form of Old Age Security and the Guaranteed Income Supplement for seniors, the challenge is not whether to introduce something novel to Canada but how to add to the foundation already in place. NAPO believes Canada can and should build on this foundation from an evolved respect for social rights. To do so, would set Canada on course for a new social contract. That contract would bind the nation to income security for all and better bind all Canadians to the practice of citizenship and community.
Thank you very much, and I will circulate a copy of my statement and the other documents that I referred to.
Ms. Goar: Thank you very much, Mr. Rainer. I will now invite comments, and I would urge you to confine your comments in this segment of the program to the impact that a guaranteed annual income would have on poverty. We will be discussing questions of design and so forth later.
Senator Segal: I would like to ask Professor Osberg a question about the two lines he showed us in his two charts. Would those lines lead you to conclude empirically that the effect of existing anti-poverty programs in the marketplace, welfare and all the rest, have not had any measurable impact on the trajectory of those lines? I am not questioning the good they may be doing in specific subsets of the population. With respect to the movement of those lines or the lack of any change in trajectory as the case may be, or getting worse, in some cases in terms of the deficiency that families have, could one conclude fairly that existing programs are not having any measurable impact in a positive way on the deficiency faced by those families? Is that an overreaction?
Mr. Osberg: The way I would put it is that up until the 1995-96 period, the Canada Assistance Plan was defined in terms of focusing just on need, for example. Unemployment insurance was still a real program until the early 1990s. We had a system that pushed against the wind of bad business cycles or bad secular trends.
We had a huge series of budget cuts in the mid-1990s, which set Canada on quite a different path.
Particularly over the last dozen years, Canadian social policy has not acted to anything like the extent it could have and should have over that period.
I would not take the whole period as a uniform period, but I would say there was a major change in the mid-1990s.
Senator Segal: Would these charts reflect pre- or post-tax?
Mr. Osberg: This particular chart reflects the low-income cut-off of Statistics Canada measured in terms of income after tax.
You will get essentially the same picture out of any of those poverty lines. It will be scaled up or scaled down, and that was the point of what is on the other side. Namely, that over all these years it is remarkable how poverty lines have just not changed and are all in the same sort of range.
Senator Segal: Does that argue, then, that the tax system, such as it is, with its efficiencies, inefficiencies, fairness or unfairness, is not achieving any meaningful redistributive function as it is presently constituted?
Mr. Osberg: The major function of the tax system, of course, is to raise revenue, and you raise revenue from people with lots of money. It does not have a lot of impact on the lives of poor people, simply because they have so little to tax. It does have a huge role to play in raising the revenue, which has been forgone, as was just pointed out, and could have made a major difference to poverty programs.
Senator Segal: Thank you very much.
Senator Trenholme Counsell: Mr. Rainer, you talked about cutting back on the proposed income tax cuts, and I immediately thought of what we call the working poor. I do not know the exact cut-offs for the different income tax categories, but it seems to me that this is exceedingly important for poverty reduction and the great struggles that individuals and families have, even though they are working.
Perhaps you did not want to suggest that those people would not get the tax cuts that many of us are advocating.
Mr. Rainer: A restoration of a more progressive tax system could be part of the solution to poverty. If the top 10 per cent of tax filers, based on their income, were to pay more tax than they are currently paying, that would certainly raise some revenue that could be redistributed to those at the lower end of the scale.
Only the top 10 or 15 per cent of Canadians have pulled ahead economically over the past couple of decades despite all the growth we have experienced in the country. We know this from the studies on the growing gap, et cetera. A recent Statistics Canada report showed that trend. It is reasonable to ask whether those who are pulling ahead, particularly those in the top 0.1 per cent, could pay more into the tax system and towards the redistribution to help those at the lower end. Some reduction of tax cuts for those at the lower end or even in the middle of the income spectrum is well worth considering, but increasing at the upper end certainly seems to be warranted.
Senator Trenholme Counsell: You do not mean reduction of tax cuts at the lower end. You would favour tax cuts at the lower end?
Mr. Rainer: Yes.
Senator Trenholme Counsell: You believe that reducing income tax at the lower end is good?
Mr. Rainer: Yes. In general, my vision of a more progressive tax system would include that, yes.
Michael Mendelson, Senior Scholar, Caledon Institute of Social Policy: Sen. Segal's question is important and I am not sure if Mr. Osberg answered it directly enough. A more direct answer is that you cannot tell from these charts what would have happened in the absence of government transfer payments.
The international evidence, as I understand it, is that except for the last few years, Canada's income would have become more unequal — and I want to distinguish between inequality and poverty — had it not been for the tax transfer system. You cannot draw the implication, which has been drawn by some writers in the United States, that the whole system is not working because poverty is not decreasing.
This does draw attention to something that is critically important, that is, the issue of market income inequality. I would hope that all discussions of income security programs would be, first, premised on the assumption that government income transfers and the tax system will not be the be all and end all when it comes to issues of poverty and inequality. Market income is a much more important determinant of poverty and inequality than is government income. You can fall into a conundrum if you focus solely on government income.
Yesterday or the day before in the United Kingdom, there were big headlines in the papers saying that child poverty and poverty among the elderly had increased there despite massive tax credits. The tax credit system and the redistributive system in the U.K. is substantially larger than in Canada. Despite the very serious undertaking of the government there to reduce child poverty, child poverty as determined by their measures, which we might not accept, has increased and market income inequality has increased.
Despite the fact that their programs are large and getting larger, government transfers are attempting to fill a hole that is getting deeper and deeper. That is not necessarily the way to go. They should probably stop digging.
We need to ask ourselves, in this context, what the economic context is. What kind of an economy do we have? We have examples in the world of successful economies that have reduced poverty and where there are very low levels of poverty. They are the Nordic economies.
If you look at them carefully, you will find that they have achieved that not through a guaranteed income and not through a system of government transfers, but through an array of programs that were designed for specific purposes and, more important, through a market income in their economy that is much more egalitarian than is ours.
People working in restaurants there are not 19-year-olds working for minimum wage or less plus tips. They are people who have made a career of it, often in a unionized job, earning a wage sufficient to raise a family. It is essentially about non-tradable goods, mainly in the service industry, and it is about very low wages.
I think there is still a critical role for government programs, but the first step in an anti-poverty program is an anti- poverty economy. We cannot ignore that reality.
Senator Segal, you have asked an important question, and underlying that question is the trend in market income, which I believe became much more unequal in Canada over that period.
Christa Freiler, Director of Research, Canadian Education Association: This is a very important initiative. I support Mr. Mendelson's point about contextualizing it more broadly to look at the economy. Related to that, I want to put in a plea for separating the delivery question around guaranteed income from the question of principle or objective.
One neat thing about talking about a guaranteed income is that it puts a focus on whether society or government has a responsibility to guarantee an adequate or liveable income floor. A guaranteed income is, obviously, one way of delivering that.
We need to look at the questions in the context of what that adequate or liveable income floor is and how it is to be guaranteed. I agree with Mr. Mendelson and others who say that it would require various ways of guaranteeing it, including adequate wages and income programs at different stages of the life cycle.
As Professor Osberg said, we already have guaranteed incomes for specific life situations or life contingencies, such as helping with the cost of raising children and old age, et cetera.
The question is whether what we currently have — the combination of paid employment for those who are expected and able to work, and our guaranteed income programs — does establish a livable, adequate guaranteed income.
Related to that question is whose responsibility is it to ensure that that adequate income is guaranteed? One of the exciting things about this being on the table is it again raises the question of the federal government's role as the only government in Canada that can ensure that all Canadian individuals and families have that adequate income floor through the variety of delivering mechanisms that are available.
Ms. Goar: I realize it is difficult to categorize your remarks specifically in little boxes, but we will be getting into questions of design and delivery later on in the program.
Sheila Regehr, Director, National Council of Welfare: I wanted to add a bit to the exchange between Senator Segal and others around some of these issues.
I brought a chart too. It demonstrates quite clearly Mr. Mendelson's point about labour market income. I cannot describe it effectively because it is very graphic. This is before-tax low-income cut-offs. It is really getting more at a sense of what the market is doing.
The red line that plummets is seniors' incomes. These two lines are everyone younger than 18 years, so that is children. Then the bottom line is the rest of the adult working population and its poverty rates have gone up. That does demonstrate clearly that there are a number of problems.
I also want to talk about the impact of the current system and what needs to be corrected. One of my researchers pulled out something that I think is quite startling. In one of our publications, we look at a sort of pseudo measure of deprivation — really, really low poverty. We use LICO at 50 per cent. These are people living on less than half of the poverty line and these are all for non-senior populations.
From 1989 to 2005, the percentage of people living in that really deep poverty, lone mothers, has gone from 8 per cent up to 11 per cent; a little bit. The percentage of two-parent families is up 8 per cent to 21 per cent; a lot. Married couples, 13 per cent up to 31 per cent; and unattached individuals, 17 per cent to 38 per cent. Those are huge populations of people living on practically nothing in this society, which I think is fundamentally quite startling.
I also wanted to pick up on two other things related to impact. Again, to reinforce what Mr. Mendelson was talking about regarding the difference between Canada and the Nordic countries. There is some work that Shelly Phipps has done that I came across recently that I find quite interesting. Not only is there a better income distribution in Sweden compared to Canada, there is a better time distribution. They have one of the highest female labour force participation rates in the world. However, no one is working high hours and driving themselves crazy in the labour force, especially in two-parent families, to make ends meet. Their quality of life is much better for the income they are getting as well.
The final point I want to make concerns economic theory, and I not an economist, but this is another thing that has come across my desk recently. It is a book called The Persistence of Poverty by Charles Karelis, and he completely turns the theory of diminishing marginal utility on its head. I will give you the concrete example he uses.
He gives the example of someone who is relatively well off. If I have one ice cream cone, the pleasure that gives me, the first one, is greater than the pleasure of the tenth one, because by then I probably have a stomach ache.
He gives the example of someone who has six bee stings and enough salve or ointment to address one or two of them. He says, that little bit of salve, that meagre little bit of something that you give to someone is not sufficient to alleviate, to relieve that pain, to really make any difference. He gives another example: imagine that you had two bee stings and someone was going to give you enough ointment to deal with one of them. Smoothing your consumption over those two days would not make sense. What you would do, most logically, is every other day you would live with pain and on the alternate day you would really be able to relax and have the relief. He is saying that unless you give people enough to get close to a subsistence level, all of this incentive to work and to earn more money will not work.
The Chair: I want to bring us back to the question of the impact of the guaranteed annual income effect on poverty. I want to draw on some comments made by Ken Battle from the Caledon Institute with, of course, Mr. Mendelson being a part of that as well.
The Library of Parliament held a session, a little preliminary session before this one today, and some of you participated in that. When it came to the GAI, Mr. Battle used that old Mackenzie King slogan, GAI if necessary, but not necessarily a GAI. He quite frankly said that there really is not an all-in-one or a big-bang solution that is workable, although, I suppose, if you throw any amount of money you can make it work. However, he pointed out in that paper that GAI technology, which we have referred to around here as OAS-type stuff, for example, GIS, and the Canada Child Tax Benefit, provides good models for extending that kind of technology into other areas, the working population, for example, and disabled, et cetera. Nevertheless you had to concern yourself with the services, with housing and homelessness, early learning and child care, all part and parcel of the solution. You cannot just put all your eggs in one basket in terms of this one income security program. It is not an adequate response to poverty.
Then a lot of the resolutions we hear about relevant to implementing a negative income tax, including, with all due respect Senator Segal's — if I have misinterpreted your resolution, let me know — talk about maintaining the same level of income security expenditures. In other words, the package, I would assume, would be at much the same level as it is today. It would just be re-designed into a negative income tax system.
The Caledon paper, it says that there would be more losers than winners in that kind of scenario, and while it might slightly lower the poverty rate, it would not reduce the depth of poverty. Therefore if we are speaking about roughly the same fiscal envelope, do I assume that it is impossible to have a positive impact on reduction of poverty?
Derek Hum, Professor, Department of Economics, University of Manitoba: I will not make a statement but I would like to say a few points on the impact of a guaranteed income on poverty.
I brought along some tables as well, not to be outdone by my colleague from the Maritimes. I did some work for the government in a previous life and I guess it took, because I gave my slides early and they are in both languages.
Look at the table called, ``Estimates, extent of poverty and the cost of basic income and guaranteed income plans.'' These numbers, if they are believed, may throw some light on the discussion we are having. I take Mr. Osberg's point, which is an excellent one, that we have to look at the depth of poverty, not simply the poverty incident rate. The second thing he did which I think is useful for the committee, was to catalogue all the different variations of the poverty line and show that with one outlier there is only a small variance around them. There is a great deal of consensus.
Remember that information and put it together with my table. My table takes two particular income poverty lines, the low-income measure and the market-basket measure. Then look at two situations, that I think the two senators might be interested in. This study was completed in 2006, so it was relatively recent.
Looking at the low income measure, the top line shows that if we have no transfers, the incidence of poverty in Canada is 28.8 per cent and the gap is $40.2 billion. The next line shows the situation if we only spend what we are now spending, which is the current level of transfers. This means, spend no more but use everything you are spending towards tackling poverty. This shows we have the incidence down to 15.3 per cent and the gap to $11.6 billion. If you use the market-basket measure, since that poverty line is lower, you simply have a different figure.
Then I did a series of simulations. Leave aside the one with basic income, as that is not being talked about yet.
Then I looked at guaranteed income plans. As Mr. Osberg says, you can categorize them in terms of their generosity, how big is the G — the guarantee — and how large is the tax-back rate. If you have tax-back rates of various levels, you get various effects on incidence and the poverty gap.
I did that exercise without knowing the details of the design but it gives you a rough idea of what is possible if we were to spend what we are spending now, and we do get a reduction in poverty. If you were to spend more, again, depending on how it is designed, you would achieve something further.
I completed this table as a straw-person table. Some people would say it costs too much and some people would say it gives too much. Then I said, let us be more reasonable about this.
The next table, which is the one that I think has more plausibility, is the one headed ``Additional Estimates.'' Again, ignoring the basic income, if you look at the guarantee level, there are two levels of guarantee with respect to the poverty line: 0.7 and 0.85. Those are arbitrary, but there is a certain rationale behind that arbitrariness.
I took the lower group, 0.7, because there is a group — Mr. Osberg identified them as a minority — who thinks all these poverty lines are too generous; we should go to a basic poverty line, called the survival line or whatever, the one associated with the Fraser Institute and argued for strongly in Canada by Chris Sarlo. We refer to it as the Sarlo- Fraser lines. If you look at those, they turn out to be 0.7 of the low-income measure. I put that in to say that for those who want a minimum poverty line, a judicious diet of Canadian root vegetables and herbs, that is what it would cost; 0.7.
Then, again, as Mr. Mendelson said not all the poor are sitting at home watching Hockey Night in Canada; they work. They do not work often at high wages and they sometimes do not work at full-time jobs, but what is the amount of work that people below the poverty line do on average? I factored in the number of hours that people below the poverty line work, at the wages that they work, and that turns out to be approximately 15 per cent of the poverty line.
I then said, let us make the guarantee 85 per cent of the poverty line with the — and this is mine — implicit social norm that people in poverty should work a little bit and this is what they are working now. As I said, they are arbitrary, but there is a rationale behind why I picked them.
If you take those and take the current market-basket measure of poverty — the one more in favour at HRSDC right now — expecting them to work a little bit at 0.85, we have the poverty gap — this is Mr. Osberg's notion — of $2.9 billion. You have to put that into perspective. I will not say it is zero, but I am editorializing in saying that is not a large amount of money either.
The lesson I am trying to portray here is that with clever design and some goodwill, it is not as impossible as some people believe. It is not like Aquinas saying, ``The poor we will always have with us.'' We can do better than we are doing. Those are my numbers.
Mr. Mendelson: I just want to clarify what the cost is. Is this the incremental cost of the program? Is that the total cost? The $49.4 billion dollars, is that the total cost of the program?
Mr. Hum: Unfortunately the tables not numbered.
Mr. Mendelson: Under ``Additional Estimates.'' What do you mean by ``costs''?
Mr. Hum: That is the total cost.
Ms. Goar: Thank you very much. I have quite a number of people who would like to speak so, if possible, please keep your interventions relatively short. I may still, with your indulgence, have to end this segment of the program and ask some people to defer their comments until a bit later.
Senator Munson: Without turning this into a graduate seminar for economists, I would like to bring it back to the street level, if I could. It is something I do understand. A lot of the charts are quite complex and to go through them all this morning would be difficult.
Some of my observations on the human rights aspect for people. I am wondering whether studies have been done for people whom I call the lost generation, the hundreds of thousands of Canadians between the ages of 45 and 65 who have worked in the private sector, or any sector, who have no work and cannot work anymore.
We have taken great pride this morning in delivering news about the success for seniors and others, and the child poverty tax. Yet, as we move along in our society, and economically it is a rapidly paced society, we see — I have friends in this position — people who have nowhere to go. They have done things in the private sector for 30 years, but that is it. There is no room for them. I believe there is a lost generation.
In that context, with the GAI, I will throw the question out, maybe for later in terms of delivery and design, where will these people fit? There are so many of them out there. They are crying out for help, just like a person who is part of the working poor.
The other issue is the impact on women, a GAI and women's economic equality. I throw these questions out because I found in my previous work as a reporter, that people pay attention to this kind of news. It is at the ground level and it is basic. At the end of the day, as Mr. Rainer said, the right to an income is a human right. I throw those things out on the table.
David Northcott, Executive Director, Winnipeg Harvest: I appreciate you putting the lens back where it belongs on families and I appreciate the framework on behaviour change that Professor Osberg talked about. The behaviour change I am looking for is government behaviour. If we put the lens there, then let us put the lens equally on both individuals and government.
I work at a food bank in Manitoba. In Manitoba during the last year, about 60 per cent of the people living in poverty are working poor. About 20 per cent are single parent families and about 10 per cent are people with disabilities.
A friend of mine is a single mother with two children. She struggles with housing issues where she has to go to social housing and fight for small increases in her support payment. She deals with education. One of her children is disabled. Therefore, she deals with the disability journey with both government and not-for-profit agencies to try and move the agenda forward. Her struggle to remain at work while being part of the working poor is huge.
She has an enormous work ethic when it comes to her family. She deals with health issues. She deals with Child and Family Services because they are looking at issues for her disabled child. She deals with not-for-profits all the time including the food bank. She also volunteers for the food bank so she has a very good work ethic already. She also struggles with travel costs. No one in this whole paternalistic system is willing to give too many dollars to transport a person from meeting to meeting.
At the end of the lens, for us on the food bank side, is the impact of the guaranteed annual income. It guarantees a basic threshold for her to have a basic level of income. When we talk about people at around 70 per cent of the poverty line threshold, we do not see people like that at the food bank. Professor Hum referenced 85 per cent and that makes a lot of sense to us.
Our challenge is to ensure that when we make small or large adjustments here, we are aware that it has a large impact on low income people where I work. The challenge we have is to ask ourselves the following questions:
Should anyone who works for a living have to live below the poverty line?
Should any single parent raising children be living below the poverty line? About 92 or 93 per cent of single parent households are headed by women. Raising children is one of the important critical tasks of society.
Should any person who cannot earn sufficient income because of various disabilities live below the poverty line?
Those three groups are about 90 per cent of the population living in poverty in Manitoba.
We would like to put the lens on how to get behavioural change from government relatively quickly to ensure the cash flows and to redefine this poverty issue because it is much more complex than simply following the dollars into the family pocket.
David Gray, Associate Professor, Department of Economics, University of Ottawa: I have not been teaching labour economics courses as long as Professor Osberg, but I do teach labour economics.
He talked about financial incentives; if you look at the phenomenon of labour supply and the people already working in the labour force, it is true that the taxes levied on them do not have much effect on their incentive to work. We are not able to explain much of their behaviour or the economic phenomena as a result of changes in incentives.
However, incentives still do matter for various sub-segments of the labour force. There is something labour economists call a heterogeneous response wherein not everyone responds to incentives and changes in incentives in the same way as far as their labour market behaviour and decisions.
It is possible that changes in wages, taxes, social protection payments, unemployment insurance or social assistance payments, might have an impact on certain workers. Most of the empirical analysis has only been able to search for average effects with everyone lumped in together. It is possible that certain people within the example do respond to changes in the incentives.
Ms. Goar: We will return to the question of work incentives shortly.
We will go a little over time for this segment because the remarks are so interesting and we are only getting warmed up. I do not want to cut off anyone.
Marie White, National Chairperson, Council of Canadians with Disabilities: My comments will be firmly rooted in people. It is lucky for all of you that I am not an economist.
I work and volunteer with a continuum of vulnerable people. I work with low income families, people who are homeless and people with disabilities. I, obviously, live with a disability and I am the voice of experience. I lived on social assistance for two years — two long horrendous years — when I acquired my disability. Prior to that, I worked as a teacher. That is my profession.
Regardless of whether we talk about guaranteed annual income or basic income, regardless of whether we talk about people who live in poverty or people who live in poverty and work, they all live in poverty. There are things we must consider in anything that we devise. We have to include early learning and child care; affordable housing; health systems currently attached to income assistance; and claw backs. Those are the other elements integral to any discussion we have around income.
We have to ensure that a program or an initiative does not become for ``them,'' whoever ``them'' is: single moms, people with disabilities or Aboriginal people who are homeless. We can never have a program that automatically delegates you to the program. If we do, that is your initial barrier right there because someone thinks the program is for you.
We have to ensure that no one is worse off. I say that somewhat ironically when I know that there is at least one province where single individuals with disabilities live on about $8,000 per year. I ask you to think about your own income and how you would live on $8,000 per year.
Finally, I will go back to Mr. Northcott's comment, I do not believe that anything will happen until social policy finds a home within the federal realm. I currently think it is homeless on all fronts. More philosophically, I think the question we have to ask ourselves is not what it will cost, but what will the social and economic costs be as we move into the future if we do not do something.
[Translation]
François Blais, Professor, Faculty of Social Sciences, Université Laval: I would like to go back to a comment that the chair made earlier. In a country like Canada, where transfers are very significant for people, it is possible, as Senator Hugh Segal is proposing, to have a guaranteed income at zero cost.
You are right when you say the issue is knowing who will win and who will lose. If the cost is zero, the government loses nothing and contributes nothing. But determining winners and losers depends on the choices that are made to abolish programs and replace them by a guaranteed annual income.
Two very simple examples illustrate the complexity of the problem and one of the paradoxical conclusions I reached. You could decide to reconsider, as I propose, the federal government's basic personal tax exemption. That exemption has a tax value in the billions of dollars today, and every Canadian taxpayer gets it. It is almost a hundred years old. It could perhaps be brought up to date by changing it into a refundable tax credit for all.
At that point, the exemption does not just benefit taxpayers, it benefits everyone. We will have spread its redistributive effect around. As a taxpayer, I will lose a little, and, of course, the poorest Canadians will gain because, at the moment, they get no benefit from the basic personal exemption. The small base amount would be the beginnings of a guaranteed minimum income.
Now, on the other hand, you could decide that provincial social assistance should be abolished in order to pay for a guaranteed minimum income, since it is very selective and presently goes only to the poorest in our society. But if you take the value of that program and distribute it among all Canadians, there will be a clear loss and an increase in the number of poor people in Canada. We have important choices to make and we will probably have to proceed in extremely small increments given the complexity of the transfer structure in Canada.
That leads me to my somewhat paradoxical conclusion — and I will come back to some of the comments that have been made here — that it is possible to reduce poverty more by starting with a small guaranteed minimum income than with a higher one. I did a number of simulations with my colleague Jean-Yves Duclos in the economics department at the Université Laval. We simulated, for example, the abolition of the employment insurance program in Canada. This would move billions and billions of dollars to a guaranteed minimum income program. But the analysis made us realize that we would get a significant guaranteed minimum income, but that some regions of Canada, where present programs have more impact that in others, would be greatly impoverished.
So, the choices that we will make are major ones. We do not need high income levels to have a positive effect on poverty. And yes, it is possible to increase both poverty and inequity with a guaranteed minimum income if the choices we make are not the right ones.
[English]
Ms. Goar: With my apologies to those people whose supplementary questions I will not take at this time. I will ask Senator Keon to wrap up this segment of the program.
Senator Segal: I do have a clarification that will take only five seconds. What I meant in that resolution that was passed, was exactly what Mr. Northcott referenced in his presentation. Gathering up the pieces so we treat the citizen with respect and give them the support they need automatically. It is not about reducing benefits but about administering them more efficiently from a people perspective as opposed to a government perspective. That is all I meant.
Senator Keon: I wish to point out complexity of the effect of the guaranteed income on poverty. With my population health study, I am currently visiting First Nation reserves. I asked experts to point me at the best reserve in Canada from a population health point of view and the worst reserve in Canada from a population health point of view. I have seen both. Both these reserves are getting fundamentally the same floor income per capita. One of them is a thriving business that has incorporated. They are selling convention, food, restaurant and other services to a larger community outside the reserve, so they are only dependent for 17 per cent of their income on the government. The one living in stark poverty, with unbelievable conditions, is getting all their income from government, but they are still getting the same floor income. What is the difference in the two? I will tell you. The successful reserve has a very high level of post- secondary education. The people in control are lawyers, engineers, teachers, business people, their own doctors, nurses, et cetera. In the poverty-stricken reserve, the people in control have virtually no education.
Ms. Goar: Thank you very much. We have heard many interventions that provoke a lot of thought and reflection in the first segment.
We will now move on to the intersection of a potential guaranteed annual income and people's behaviour in the labour market. To kick off that segment of the program, I will invite Mr. Hum, followed by Mr. Robins.
Mr. Hum: Thank you very much. I will be brief on this.
I agree with Mr. Osberg that the work disincentive issue is not an important issue among research economists. This is not to say it is not an emotional and very important issue among politicians or policy designers or the population in general who believe that if the number is not zero, it is still a major impediment towards moving forward. That being said, I would like to review what has happened since the time in which the guaranteed annual income and the issue of work incentive came on the policy scene and why I take that position now, and what the numbers are. That is probably the best information I can give this committee.
To give some background, prior to the experimental trials of the guaranteed annual income, there was a tremendous amount of disagreement among researchers as to what the extent of the work disincentive would be. That was a very legitimate concern because we did not really know. Many of the very best economic researchers and econometricians gathered in the United States at the time this was being considered and argued at great length as the best way to do this. As I pointed out in the material I presented, the credit goes to Heather Ross, an intern who was working in Washington at the time, who, unencumbered by the knowledge and training of advanced econometrics, simply said to them, ``If you want to know something about a program that does not exist, why not just try it out?'' Although her original design was not the one actually implemented, that was the germ of the idea within the concept of the American war on poverty.
The idea behind the experiment needs some comment. It is simply to say, we will take a group of individuals at random, give them a guaranteed annual income for a number of years and compare their behaviour to another random group of individuals who are not given it. Without being too technical, this has a great deal of appeal because it essentially takes away much of the noise and unique historical events that would confound most economic research.
To provide an illustration of how this was achieved and what its effects were, I refer you to one of the charts.
Ms. Goar: Can you be clear? People are having trouble.
Mr. Hum: ``Estimation of Elasticities.'' You do not need to look at this in great detail, but I do want you to have the visual image. These estimates in the upper panel by year of publication by researchers around the world show the estimate of this thing that we are trying to measure is all over the place, up and down. That is the visual image I want you to come away with.
On the other hand, on the bottom half of the panel, I hope you come away with the image that these are the estimates from the experiments. According to economists, they are allegedly more precise and have a lesser variance, so there is a greater consensus if you believe the experiments were useful at all as to what we now know. On the basis of what we now know about that professional consensus, the question then is: What is the number? Mr. Robins will speak to the American numbers.
Look at how much work response there was between those who got a guaranteed annual income, labelled ``treatment'', and those who did not get a guaranteed annual income, labelled ``controls''. In the United States, averaged over all of their experiments — for prime-age males who are not retired, not institutionalized, not in the military and not disabled — the difference was 6 per cent. In Canada, my estimate is 1 per cent; you can challenge my estimate later.
The main message I would like to put before this committee is that the Canadian number, for a lot of reasons I do not want to go into now, is smaller than the number reported in the United States.
The bottom figure in this chart is for females. The heading ``2'' refers to females in double-headed families, where there is another person — in this case, male, generally — who is also in the labour force. Their labour supply dropped 19 per cent. The column headed ``1'' refers to female-headed households. That would be a female who is a single-head, a mother. Their labour supply drops 15 per cent. This is what you would expect from an economist who would say that if someone is the sole source of earning, then their labour supply response will be less. As I said, we can talk about these numbers later.
I am summarizing a lot in these two little pictures here. I believe the Canadian numbers are smaller than the American numbers and I would hope that the research was not done less professionally. However, you do have a larger work reduction with respect to females rather than males. I do not want to leave this picture as it stands because I know I will intrude a little more into the design issues.
The problem of a guaranteed annual income as a means for reducing poverty is that it is laudable but partial and very poorly specified in terms of what we should do.
When looking at some of the large labour force withdrawals among some of these groups, you may or may not want to reconsider the behavioural effect. For example, in many self-employed and farm households, when given a guaranteed annual income, one of the persons, usually the wife, would draw from the paid labour force for other things such as child care or work on the farm, and so on. Others went back to school and pursued education and training. From a pure work disincentive point of view, that was measured as a reduction in work supply. On the other hand, a more nuanced interpretation of what was going on may put some doubt in what I call this partially specified issue.
That was mainly for women and youth; prime-age males did not withdraw from the labour force in great numbers. Although I think the numbers are accurate and the pictures are reasonably nicely drawn, the interpretation is deeper than this. That is all I will say.
Ms. Goar: Thank you very much. To tell us the American half of the story, I would ask Professor Robins to speak.
Philip Robins, Professor, Department of Economics, University of Miami: Thank you, senator, for inviting me. I am very happy to be here.
Yesterday, Mr. Rainer called me up and asked me if I could provide a five-minute statement, so I put something together, which I would like to read. Before I do so, I would like to say that obviously my perspective is from the United States because that is where I have been doing my research. Recently, however, I have been working with Canada, and I will mention that briefly.
I have been involved in the evaluation of ``negative income tax'' programs for almost 30 years now. As Mr. Hum mentioned, I was involved with the largest negative income tax experiment in the United States in the early 1970s. I was also involved with a variant of the negative income tax evaluation recently.
Let me read my statement to you, and I will be happy to elaborate on any of the points. I have very specific views about what I think a maintenance income system should look like. I will be happy to share those with you after my statement.
Ending poverty has been an explicit policy goal in North America for over four decades. One of the earliest proposals to eliminate poverty was the negative income tax or NIT, which was first proposed by economists Milton Friedman, James Tobin, James Meade and Robert J. Lampman.
An NIT provides a guaranteed annual income through an income guarantee that is gradually reduced through what we term in the U.S. a benefit reduction rate or you call a tax-back rate. NIT experiments were conducted in the U.S. and Canada during the 1970s and 1980s. In the U.S., there were actually four experiments: The New Jersey income experiment, the Gary income maintenance experiment, the rural income maintenance experiment and a Seattle-Denver income maintenance experiment. The Seattle-Denver experiment was the largest. In fact, it was larger than the others combined, and it tested 11 different NIT programs. I think the general consensus in the research community is that it provided the most reliable results.
In designing an NIT, both an income guarantee and a benefit reduction rate must be specified. This is not an easy task because of what has become known as the ``iron triangle'' of program design. From society's perspective, the ideal social program should satisfy three goals: reduce or eliminate poverty, provide an incentive or minimize disincentives to work, and keep program costs reasonably low.
Over the years, each of these goals has received varying amounts of emphasis, depending on the political and economic climate at the time. During the 1960s and the 1970s, the first goal, reducing or eliminating poverty, was the most important and there was less concern for the other two goals. During the 1980s and mid-1990s, the third goal, keeping costs low, was the most important. Since the mid-1990s, the second goal, providing work incentives, has been the most important.
Experience has shown that the three goals of program design are often in conflict with one another. To completely eliminate poverty, of course, one could set the NIT income guarantee equal to the poverty level, but this would be very costly and could cause significant work disincentives.
I looked back at some work I had done a number of years ago and tried to put the data into today's dollars. I do not want to scare you with this number, but an NIT enacted in the United States back in the late 1970s that would guarantee a poverty-level income to everyone in society would cost, by my estimate, in today's dollars, U.S. dollars, between $150 and $200 billion. On the other hand, costs can be lowered by reducing the income guarantee to perhaps 70 per cent, as was mentioned before, but such a program is likely to have only modest effects on reducing poverty.
Regardless of what income guarantee and benefit reduction rate is chosen, however, most reasonable NIT programs or guaranteed annual income programs create significant work disincentives that range anywhere from 5 per cent to over 30 per cent, at least based on my evaluation, mainly from the Seattle and Denver experiments. The inevitability of work disincentives from a pure NIT is one of the reasons, I believe, why a pure NIT has never been enacted into law, although several versions have been proposed by various administrations.
As I have indicated, anti-poverty policy in recent years has emphasized the importance of work incentives. In the United States, the largest anti-poverty program currently is the Earned Income Tax Credit, or EITC, which actually combines elements of a wage subsidy program at low incomes with a negative income tax program. Under the EITC, work incentives are provided through wage subsidies at low income levels and costs are kept down through a phase-out of the subsidies at higher income levels using an NIT formula.
The EITC has raised the income and work effort of millions of Americans, but its effect on poverty has been modest, primarily because the subsidy is modest. The maximum subsidy under the EITC in the U.S. is currently under $5,000, and it is not given to persons unable or unwilling to work.
An alternative approach, which I mention, tested in two provinces in Canada during the 1990s, British Columbia and New Brunswick, was the Self-Sufficiency Project, or SSP. SSP was essentially a negative income tax but with a work requirement.
SSP provided significant benefits for persons who worked more than 30 hours per week, in some cases doubling their income, and the costs were reasonable. However, because it denied benefits to persons working less than full time, SSP had only modest effects on reducing poverty, although the effects on poverty were substantial for those who took up the program, the working poor. SSP was a voluntary alternative to income assistance and not a replacement, so an income guarantee still existed for persons unable to work full time.
I believe that the ideal system would basically make a distinction between a system that deals with people who are unable to work — and I would make that a dynamic concept, because I believe that virtually everyone at some point is able to work — and a system that addresses the needs of the working poor. A combination of an EITC or SSP-type program for the working poor, coupled perhaps with a large income guarantee negative income tax program for people unable to work, and temporary, might help solve this iron triangle that I mentioned before.
Chandra Pasma, Policy Analyst, Citizens for Public Justice: I have some questions regarding both studies.
Was there any work done or any attempt made to look at what people were doing if they were not working, or was it just a recognition that people were not in the paid labour force and that was the only thing that was being studied?
Was there any attempt to look at whether unmarried women did or did not have children?
Did people know, when the program started, that the program would be of short duration?
Mr. Hum: I will answer the first two questions and let Mr. Robins answer the third.
We did look at a wide range of behavioural responses. I am giving privilege to the work disincentive effect because that is what I was asked to do. Thank you very much for the question, because this is a surreptitious way for me to say what I was going to say later on, that there are all kinds of behavioural responses to a guaranteed annual income that are not on this particular agenda today.
For example, in SIME/DIME, there was a tremendous interest in the United States and Canada on the effect of the guaranteed annual income on marital stability, or what we would call marital dissolution. Basically, was it the idea that I do not have to stay with you anymore because if I leave you, I have a guaranteed annual income; or, we were doing well and struggling, and now the guaranteed annual income makes our family life much more solid? I have done some research and have published on that issue.
We also looked at the educational attainment of youth and others under the rather sterile label used by economists: human capital accumulation. As well, there were a whole host of what we call consumption studies. It might have been James Tobin who said the work disincentive issue in the minds of the congressmen who spoke to the issue was: Will those people work less?
The consumption studies spoke to those in Congress who wanted to know, would those people would take the guaranteed annual income and spend it in socially unproductive ways. I will let your imagination run with that. There were studies about their consumption behaviour. My one-sentence summary of it was that people spent their guaranteed annual income receipts in pretty much the same way that other people spent their income receipts, with one exception: housing.
The general view on housing was that the guaranteed annual income experiments, except SIME/DIME, were sufficiently short, so that this may have simply had the effect of people now being able to qualify for a mortgage or have a greater degree of security, which essentially accelerated the time at which they would normally have bought a house if they were going to buy a house anyway. It was not: I have a guaranteed annual income and now I can buy a house.
We also looked at mobility. With a guaranteed annual income, would you feel more secure about going somewhere else to look for a job?
We found that a major issue in the social security review with respect to the family allowance was whether a guaranteed annual income would be excessively pronatalist. Someone had the idea that it would encourage women to have lots of children because it would increase their guaranteed annual income. We felt a three-year project was probably too short a period.
The aspect that I am serendipitously researching now is whether a guaranteed annual income affects health consumption. Particularly, 25 years after the fact, which is what I am looking at now, has the guaranteed annual income affected fertility rates of women? The original American experiments were mainly focused on whether a guaranteed annual income would sufficiently increase nutrition so that newborn babies would be healthier, as measured by birth weight and circumference and all the other medically approved measures at the time.
There was a wide range of studies. In the time that I have, I cannot give you the full flavour of what we studied. I always get asked about work incentives, so that is all I talk about.
As for the last question, SIME/DIME had a unique design. The issue was: You cannot study this, because people given a temporary guaranteed annual income will not behave the same way as those given a guaranteed annual income for life. No one thought that a program would be introduced in Canada just for a little while and taken away.
I will let SIME/DIME talk about that. However, Canada did one unique thing. All the other experiments, including SIME/DIME, had a design in which, to use Robert Putnam's metaphor, there was curling alone. No one likes to curl alone. Why should I increase my leisure and how can I curl if all my other friends are working full-time? That will not be a true measure, but if all my friends are also on the Guaranteed Annual Income, we can have a curling league.
The idea is that an individual in isolation behaves very differently from an individual located in a community. In Canada, it is not widely known, but we gave a guaranteed annual income not just to individuals. We gave it to an entire municipality to see what would happen.
Anyway, I will let you talk about the temporary versus permanent aspects because SIME/DIME was a pioneer in addressing that question.
Mr. Robins: I would be happy to supply references. Just about every behavioural outcome you can imagine was examined.
Interestingly, the effects on marital dissolution in SIME/DIME are really what sealed its fate in U.S. policy.
Ms. Goar: We are having trouble with the term ``SIME/DIME.''
Mr. Robins: It is the Seattle-Denver experiment.
There were significant effects on breaking up marriages, but I would not apply those to today's environment. I do not think those results are really relevant.
The temporary nature of the experiment was studied. Unfortunately, I would say that the results were inconclusive from a scientific standpoint. They tested a sample and they gave them the income guarantee for 20 years. The sample was so small that it was almost impossible to determine whether the differences between their behaviour and the behaviour of people who had the much shorter three and five year time periods were very different. I would say it was inconclusive, although I do not think a permanent program would have effects that were drastically different from the ones observed for the shorter period ones.
The key term is self-sufficiency. I think someone mentioned before that labour market income is needed to eradicate poverty.
You cannot have a social policy system that does not address the labour market aspects. You will never be successful unless that is in tandem with a policy of guaranteeing income for people who cannot work.
Ms. Pasma: I wanted to express what my motivation was in asking these questions. I see a danger in just looking at the question of work participation without any kind of context. You end up with two assumptions. One is that if people are not in the paid labour force 40 hours a week, 50 weeks of the year, they are not doing anything good or useful either for themselves or their family or community at large.
The second is that people only work for money. They will only be in a job if they will take home more money than they would with the guaranteed income rather than that people work for the opportunity to participate in a larger project, or to use skills and talents that they have, or to have a very particular type of social interaction, or even be able to express a form of identity.
Just asking the question about whether people will ``work'' if they have a guaranteed income really ignores the much larger context that these decisions get made in.
Ms. Goar: You have helped us widen the context.
Mr. Osberg: I have just a few quick comments.
When we think about these potential implications, for example, the household dissolution case, we must remember that there are a number of ways you can think about that in terms of welfare. For example, if it enables people in abusive relationships to leave them, we might count that as a good thing. Many of the behaviours that Mr. Hum was talking about have positive impacts down the line.
It is also important when we look at the experimental evidence to think about the extent to which we can generalize from the experiment to a program that is administered for the wider society.
The issue is, compared to what? There is the general impact of scaling up the project. We know if we take a single project and look at its impacts, it will not have much impact on labour demand because it is just a small part of the economy. However, if we have an economy-wide project, then it will have an impact. If it is having an impact on everyone's supply of labour, it will have an impact on wage rates, and that in itself will have an impact on household well-being.
One of the real reasons disquiet was expressed earlier about scaling up experiments was that there is the idea that somehow we will not spend any more money in aggregate. The worry is that there will be many other programs cut, and what programs will be cut?
As it is, in the experiments we are holding constant in the background all those other social programs such as on training and on counselling, that help to get people able to work and have the choice, because incentives are irrelevant if you do not have choices. If you do not have the choice because you do not have the training programs to help you surmount your disability to get into the labour market, or if you do not have the choice because you are in a labour market where there are no jobs on offer, then the withdrawal of those sorts of services will have a disastrous consequence.
I am absolutely in agreement with all those people who have been saying that you need labour market policies in order to have an effective impact on poverty.
I do not know who believes the idea that you could have a magic single silver bullet that will replace everything.
The issue for the poverty gap is the base level of income support that is going on in the background, increasing the well-being of people at the bottom of the income distribution, irrespective of disability or ability status and irrespective of labour market status, that also tries to decrease that poverty gap over time.
I do not think we should see these as substitutes.
The problem with evaluating the experimental evidence is that we are looking at things very much devoid of context. Many of the policy problems revolve around just what exactly is replaced when you institute an income program, rather than using it, as I would argue, as a supplement to these other programs that do fulfill social needs.
Human rights are an absolutely key dimension to our problem. You talked about changing the behaviour of Canadian governments. One of the ways we might want to change the behaviour of Canadian governments is honouring some of the rhetoric in the human rights treaties we have been signing since 1948. We want income for poor people because it enables them to have some of those basic human rights that we have, at least rhetorically, signed up to for 60 years now. That is all partly about income, but it is also partly about these other services that we do not want to have on the chopping block as the result of a guaranteed annual income.
Ms. Goar: Thank you very much. We will get into the design features of a guaranteed annual income very shortly. Maybe we will come back to many of those issues you have raised.
Jim Mulvale, Associate Professor, Department of Justice Studies, University of Regina: In a sense, this is a design question, but it relates directly to what was said a little while ago by Mr. Robins on the question of defining who is able and unable to enter the labour market.
From our experience in Saskatchewan, that is a very problematic question. In Saskatchewan, we have had a differentiation which follows very much the Caledon three-tier model of adult support. I have great respect for our colleagues at Caledon, but they recommend this approach and, frankly, it is not working in Saskatchewan.
It is based on the idea that we can readily differentiate who, at any given point in time, is ready to enter the labour force and who is not. We have had two streams of income support: social assistance for those who are thought to be not able to work, and a transitional employment allowance for those who are thought to be ready to work. We have had all kinds of problems with people getting put in the wrong program, getting deprived of necessary supports, being considered to be work ready when perhaps they are not or, in some cases, the opposite.
There is this question of work readiness, where we will give the people who are thought not to be able to work this so-called unconditional allowance. On the other hand, we force those people who we think are ready to work into the labour market. From our experience in Saskatchewan, it is hard to implement and it does not work.
I think this is one of the key points that a guaranteed income or basic income model has to recommend itself. It is unconditional. It does provide that base. It does speak to economic security as a human right. In fact, I think in a non- experimental, real world situation, it can give people much greater opportunities. It can also recognize changes in their life circumstances over time — the advent of disability, the arrival of children, all kinds of different individual factors.
In short, I am arguing for — we will pick up on this in program design — the need for simplicity and the need, in principle, for an unconditional income guarantee. That will help people into the labour market and will perhaps have some good effects on what is happening in the labour market — to pay people living wages and to provide people with decent working conditions.
Mr. Northcott: I appreciate your comments. I wanted to put on the table that I think the labour market issue is critical. The food bank in Winnipeg is a member of the Manitoba Chamber of Commerce policy committee, so we are keen on having good economic engines run well. For us, the language of labour must include voluntary labour
To have work and the work ethic on the table we have to recognize that there are two journeys to get to a paid job and one of the journeys is through the voluntary sector. Most of the volunteers at the food bank are clients of Winnipeg Harvest. They are afraid to tell their welfare worker that they are working because they are only volunteering and it is dismissed; so the work ethic is punished.
We can walk with people several years as they prepare in their spirit, self-esteem, et cetera, all the softer pieces we do not talk or measure too easily. I will get on to the administration of that in a little while. That is the piece the not-for- profit sector can take on and move to work readiness as well.
On the transition piece, we were caught in the same trap in Manitoba. If you miss the slice of that piece and you get the wrong program, you are in real trouble. That is where the guaranteed annual income concept, for me, is so delicious. It provides that basic threshold.
Once you get to that threshold, your ability to step into the workforce — into better training, education, et cetera — is significantly better. You are not worrying about where you will get money to pay rent, or about taking your Child Tax Benefit money to pay for food; you are not worrying about paying for bus fare for your child in the middle of winter because you do not have any money for bus fare.
From my perception, it is not about fluff. It is about the hardcore entitlement of the citizen in Canada. Whether they are rich or poor, that basic entitlement needs to be water, food, fuel and shelter. That guaranteed annual income sets the threshold strongly.
The challenge for the incentive is to be able to value the incentive of the person that wants to work. Taking the voluntary step to get there is huge.
About 60 per cent of the poverty base of people in Manitoba are already working. What, then, is this message to this group? I appreciate your comments. I will take some of the information — I found it very helpful — about some of that transition-of-threshold language to move people into the workforce.
The other thing we need to take off the table is red herring language like ``minimum wages.'' It does not play well in Manitoba in the business community or in the not-for-profit community. It is an ongoing fight that neither side wins.
For me, the guaranteed annual income changes the role of this entitlement language; a citizen has far more influence on what the policies they could be dealing with. This lets us change government. That whole mental piece is not just worrying about adjusting low-income people to fit; it is adjusting government to fit to low-income people, as Ms. White said so well. I am saying that again on the labour market side of things because it is just as important there as on the other side.
Mr. Mendelson: I think the question is being asked the wrong way; we have to turn it on its head.
The question to be asked is: How can a program that is providing economic assistance to people of working age, who could be reasonably expected to earn a living from working, assist them to do so? How can it be designed to provide not passive incentives — which, in my view and in the literature, are not all that important — but rather to provide opportunities such as education and apprenticeships. Sometimes volunteering is the entry. Even more fundamental is employment preparation like literacy training.
By the way, the correctional institutes are a great source of permanent poverty as well, where there is almost no education going on. If the federal government, while I have senators here, wants to do something, they could put in more aggressive opportunities for education in the federal penal system. That is just a tangent.
From my perspective, the question is not what labour market disincentives there are. The question is, what labour market opportunities can be provided? I would much rather see the income side of the equation for working-age people who could be expected to earn a living from working be thought of as a bursary or a wage rather than an income transfer, which accompanies a program designed to get people into a situation where they can earn a living, even if it is sometimes quite long term. It has to start at a basic level.
Having said that, I will say a few things that are contentious. I have been working on this issue since I was quite young, well over three decades. I came to the conclusion some time ago that our society in Canada will not accept a program where someone who is 21 or 22 years old can sit around at home and get $8,000 or $9,000 a year by virtue of entitlement.
I am not talking about rights or wrongs. Let us just be politically realistic. It will not happen. You can beat your head against the door all you want, it will not be acceptable. The party that tried to put it into place would get defeated so they will not do it.
Beating our heads against that door and trying endlessly to get that right into place is futile. Whether it should be futile or not, I will leave for another point of discussion. However, I believe it is futile because it will not be politically acceptable.
I also think it is wrong, which is the contentious part. I was a kid who spent high school in the pool hall, literally, in the north end of Winnipeg. If I had that program, I am not sure I would have gone to university. It was the crappy jobs I had that made me go to university. I am not sure you are doing a 20-year-old or a 22-year old a favour by offering them a program where they would not have to go to school or work.
Unfortunately, it can be attractive and kids make stupid decisions. We know that. I know that because I made enough of them myself. I am not sure it is a good thing to do that.
I use this phrase: can a person reasonably be expected to earn an adequate living from employment? That is the full way of putting it, although it is long. I accept it is difficult to distinguish between those who can and those who cannot. Unfortunately, if we want a realistic opportunity to implement a program that will get people who cannot be expected to earn an adequate living from employment out of poverty, we will have to accept the level of distinction. The only way that society will accept an adequate income for people who are severely disabled, is if there is a test. We do have the administrative capacity. We have a well developed, thought-through, implementable proposal that can do that.
Senator Keon: I have the greatest respect for your professional career, but you are dead wrong. If you subject any 20-year-old person who will not work and who will not try to achieve along the road of life to psychological testing, cognitive skills, et cetera, they will fail. These people need appropriate medical attention, and then they can be put back on the road of life. They may be hooked on their psychologist for 30 years; I do not know. Many of them are. They can be put back on the road of life and become productive citizens.
It is like the drug addicts. It is like this crazy program we have of ever growing war on drugs, which is an exercise of underwhelming stupidity. Drug abuse is an illness. Treat the illness. Forget about locking people up and criminalizing youngsters. This is the same thing. I have said enough. I feel as strongly about this as you do on the other side of the equation.
Senator Trenholme Counsell: I have to say amen to what Senator Keon just said. I have been listening and I felt that I should bring a little of my mentorship experience to the table.
I was privileged to work with Frank McKenna for 12 years. I think you all know of whom I speak. He believed in giving people a hand up in a different way, not a handout but a hand up. He instituted a program called ``New Brunswick Works.'' This was a three year program for selected people on social assistance. They received at least the benefits they had been receiving — in many cases they received more. They received a great deal of hope. The first year was all education; the second year was a combination of education and work; and, the third year would be developed according to the needs of the particular person, if they needed the third year. It was not just education. It was all sorts of preparation for the workforce in terms of their life conditions, and medical help such as Dr. Keon has suggested.
The success rate was 30 to 40 per cent, but I am not sure about that. Certainly, it was not totally successful with every person, as you can imagine, for many reasons. Unfortunately, when he left office, that program was not continued.
I wanted to put that on the table because it is an important example. I am not talking about people with physical and mental challenges, although we have learned that many people who are challenged and disabled can indeed do what we are talking about. I am talking about lifting people up, giving them hope and making a long-term difference.
Ms. Regehr: I hesitated for a long time over whether I wanted to tell this story or not. I will cast it, starting off with Ms. White's comment earlier about not designing programs that distinguish between ``us'' and ``them.'' I am one of ``us'' and ``them.'' I realize that, in some ways, I was part of my own guaranteed income program. I want to share a bit of that and get back to Mr. Mendelson's point.
I lived on welfare for about a year and a half. I did it deliberately. It turned out to be like having a guaranteed income. It was quite a different experience than yours, but it was back in the days when Ontario had a separate family benefits program that lone mothers could get into, and that was my situation. As well, you could get student loans, both provincial and federal. I basically went on welfare to go to grad school. In hindsight, you tend to forget that experience. I am trying to minimize that now because I do not think there was a day that went by when I questioned my sanity and wondered what I was doing to my children. We had no money, and I had no sleep during that period of time, either. After that year and a half, I have probably paid for the rest of my life in income tax enough to support two or three other families on welfare every year.
The other point I want to make about that story goes back to Mr. Hum's comments as well. For a period of time, I withdrew from the workforce deliberately. I had a reasonable job, but not a job that would have supported my children and given them what they needed during that period of time. We did short-term sacrifice for a much longer term gain.
I also want to make the point that Senator Munson raised about gender equality. My getting into the lone parent situation in the beginning would probably never have happened if I had had some of my own income and some control over things. My marriage might have lasted in the first place. Most people, especially young people with new families, fight about money.
The other point is about complexity. I was in particular circumstances, like Mr. Northcott's low-income parent example. No government or welfare administrator or anybody will be able to help you cope with your individual day- to-day complex realities. It is silly to think you can design a system with all of these complex eligibility things that will meet peoples' real day-to-day needs.
I was fortunate, as I realize in hindsight, that the reason it was a guaranteed annual income rather than social assistance, is that I had a worker who, on the first day, arrived, and basically decided she was going to give me my cheques and get out of my life. That does not happen very often. That is what made it a guaranteed income rather than being subjected to the horrendous stigma and monitoring, et cetera. I was also able to move cities, which is another mobility issue that a guaranteed income versus a strictly monitored welfare situation enabled.
Mr. Hum: I will give two references for the senators' staff. One is that economists never thought in the experiments that giving these people money would solve everything. As testimony to the fact that we were not as limited as some people would like to think we are, in one of the experiments, we had a treatment where we gave them income plus a range of social services because we wanted to test whether the granting of income in itself would be better or have a double effect that was more cumulative than merely additive if they got services as well as income. I believe it was in SIME/DIME they also gave them training as well as income to see if that would also help in the labour market. The notion is that, if you take someone who cannot read or write, you do not say, ``You are great for the labour market because we will give you the cash equivalent.''
We should not be characterizing that experiment as thinking that is all we thought.
I do not want to talk more about the detailed designs. However, on the work tests, I think the senators' staff, who are much younger than I am, should be hustling off to the archives to look at the documents of the first social security review. In particular, if you remember the recommendation of the Castonguay Commission, which in the context of Canadian public policy history, I thought it was a very innovative approach to tackle what Mr. Robins calls the ``iron triangle.''
My own reading of that is that the implementation of the workability test — or some sort of work test — in the first social security review ran aground because of the inability of federal-provincial governments to agree to how it should be implemented. That is a perennial theme throughout Canadian history so I will not elaborate on that.
If you return to the original documents of the Castonguay Commission, I think you will find a very thorough articulation of the issues. Their particular solution may be somewhat of their time and inapplicable holus-bolus today. It is very reminiscent of all the difficulties we are struggling with today. It is not something we discovered just this morning.
Ms. Goar: Thank you. We have been anticipating the ``how do you make it work'' or ``can it work'' segment of the program for a long time. I will ask Mr. Mendelson to kick that off, please.
Mr. Mendelson: Thank you. The discussion about a guaranteed annual income is often accompanied by a great deal of ambiguity about the subject: What is it we are talking about?
I believe there are two core variables in defining what a guaranteed annual income is or could be. First: By guaranteed annual income, do we mean a singular program that replaces all or almost all other programs, thereby greatly simplifying what is seen as a complex income security system? Second: By guaranteed annual income, do we mean a guaranteed annual income for anyone who is resident or a citizen of a certain age in the country; or do we mean a categorical program where people of a certain type or characteristic, either with a disability, bald like me or whatever the characteristic or category is, are enabled to enroll on a guaranteed annual income but others are not?
With those addressed, we would narrow the topic and make it somewhat less ambiguous. I will speak briefly to both of those topics and, also, briefly address a third, which is a question of the administrative apparatus and cost.
With respect to the first, by way of example, we love to talk about our old age security system and how successful it has been in reducing poverty. Indeed it has been, at least until recently. However, it is important to remember that the system we have does not consist of the OAS/GIS. It is a multi-layered system and consists of the OAS/GIS as providing a base guarantee. There is also the Canada Pension Plan and the Quebec Pension Plan, which provide an almost universal mandated social insurance benefit. On top of that are the various tax-assisted retirement savings plans, retirement funds provided through a company, an employer or RRSPs. On top of that, as well, are private individual savings.
The system we have to support the elderly has more than one objective. One objective is to ensure that persons who are elderly are not impoverished. However, it is also to try to ensure a continuity of living standards upon retirement for ordinary Canadians.
Much of the ``superstructure'' — the top two layers — of the program are about continuity of living standards as well as reducing the possible of impoverishment. The CPP certainly plays a role above and beyond the OAS/GIS with respect to the poverty objective.
Returning to the issue of the design of a GAI, the analogous question for the elderly would be: What happens if we replace the entire structure we have now with the social insurance and tax assisted savings plans with a more generous OAS/GIS? The answer is that we would have a higher level of income among those who are most poor, or least well off — those who have the least sources of alternative private savings. However, we would have significant losers mainly among lower-income and middle-income families who are reliant upon the CPP and, to a certain extent, employer benefits — not so much RRSPs. By the way, RRSPs are almost entirely upper income as will be tax-free savings accounts. That is another story.
We are confronted with other similar questions. If we contemplate, for example, a single simple GAI, does that mean eliminating Employment Insurance? Employment Insurance has a variety of functions. Admittedly, it has been changing but the concept of employment insurance was to provide, not necessarily continuity of living standard, but a sufficient standard for ordinary workers who have a period of temporary unemployment where they will be able to collect a non-stigmatized amount of income related to their previous earnings because the premiums are related to what they have been earning. That allows them without a great diminution of living standards, to survive a shorter period of unemployment and go on. Eliminating that program means eliminating that objective.
It reminds me, the first paper I ever wrote for publication was called ``Many Programs for Many Purposes.'' It occurred to me that I asked myself this very question therein: Why do we have a complicated system? The answer is: We have a complicated system today because we have a number of different purposes, not just a complicated system of income security or anti-poverty objectives.
The essence of a single comprehensive GAI to replace everything is that it would mean we would be sacrificing the other objectives for a single objective, which may or may not be seen as the right thing to do. I suppose I reveal my biases in thinking it is not the right thing to do. I accept that others could disagree.
The second variable is whether GAI would be categorical. Would everyone be entitled or would there be entry requirements? The most significant entry requirement that anyone could consider is whether there would be some kind of employability test. I would like to think of an employability test as an economic test and not one of a person's physical standards; that is, could that person reasonably be expected, given the current and expected conditions of the labour market, to earn an adequate living from work? If they cannot, is it because someone is a 62-year-old fisherman and all the fish have gone or because someone is severely disabled — such as a mental handicap — and it is not reasonable to expect him or her to earn a living?
That would be an example of a categorical program where you could say that we have a guaranteed annual income, but only if you pass a test of employability. At the Caledon Institute we have a proposal for such a program, which we have been calling ``basic income.'' Many academics are upset with us for calling it that, but we think it is a good name.
Some say that the Caledon does have a proposal for a guaranteed income, and I presented that proposal for people with severe disabilities to this committee a few months ago. You can call that a guaranteed annual income if you want, and I do not mind if you do, but it is probably not what most people refer to as a guaranteed annual income. There is a question of whether a program is categorical.
I will make a final point on the concept of a sweeping, comprehensive guaranteed annual income and its simplification. One argument in favour of simplification has been that, by replacing all these complicated programs, it would save an incredible amount of administrative costs, which are deadweight, and those costs could go into paying the additional costs, if any, of a guaranteed annual income or to increase the benefits.
In fact, this possibility was touted by Milton Friedman when he first advocated the program in Capitalism and Freedom in 1962. When I was starting my working life at the Ontario Economic Council many years ago, I read this and wondered whether it was true. I looked into it and saw that Milton Friedman did not cite anyone on what the savings would be. I looked at all the literature and found that no one had empirically investigated what the costs were. In fact, I found only one study, which was not all that good, done in the U.S.
So I did my first major project on the administrative costs of income security programs. The most expensive administrative costs were in municipal welfare in Ontario. This was at the time when there was a general welfare assistance (GWA) program as well as a family benefits program, and the cost was a little over 10 per cent. Programs such as family allowance, which are universal grants, were incredibly cheap. The administrative costs were less than 1 percentage point. I would assume that programs like the Canada Child Tax Benefit would be very cheap as well.
A program generally administrated through the income tax system will be very inexpensive but, given that the expense of even a complicated program like the GWA is not that high, we are not talking about making a huge amount of savings available through simplification.
On the one hand, there are possibilities of administrating a program less expensively, and that is important. On the other hand, the amount of savings available is not that great, although we might not be looking in the right place to find those savings.
EI, if I recall correctly, was about 5 per cent. If we are talking about savings in the vicinity of 5 per cent of existing programs, that will not make a substantive difference in terms of raising benefits.
Unfortunately, there does not seem to be a tappable source of wealth. It is more like the promise that every party makes to find the source for their new programs in savings from waste and mismanagement.
Ms. White: I will do the people reality check. My opening statement around administration is that we cannot create a floor that becomes a ceiling. I go back to the ``us'' and the ``them.''
When I acquired my disability 20 years ago, I had two options; poverty and institutionalization. I sat paralyzed for two years. If we had had a guaranteed annual income, it would have been my third option. My question is: Would I have ever been able to get out of any of them? We can never lose sight of that.
I am fond of saying that disability does not discriminate. As you design a program, a benefit or an initiative to address poverty, question whether you would want to participate. If you would not want to participate because it would disenfranchise or marginalize you, then it is not any good for ``us'' or ``them.''
Any program or initiative that is designed cannot be another complex bureaucratic system with a myriad of federal- provincial-territorial discussions, negotiations and complications. It has to address things like episodic disabilities. I have multiple sclerosis and I can work for three years and suddenly I cannot work for three weeks. Who helps me if I have no private insurance, as someone like I do not because, as I said at the previous hearing, I might die. I understand that all of you might die too, but apparently it is different for me.
On youth with disabilities, this goes back to something Michael said and that we have talked about at the council. They are a particular group. I feel strongly that this is an example of a group that is most at risk. Many of them graduate without the skills and abilities that most of us expect to have when we finish Grade 11 or Grade 12. They are in a transition to adult systems. If suddenly the guaranteed annual income is available, is it the system for them? Do we then create another generation of isolated individuals who never get off a system?
Any initiative must recognize more than just disincentives to employment. Let us start with disincentives to education. Many of the youth I just talked about do not enter the post-secondary education system because the disincentives are magnified to an unbelievable level.
What about the population of people who cannot work? This is a very complicated issue within disability, because there are those who say that everyone can work. I beg to differ. I can assure you that when I was paralyzed for two years I was working for nobody, for no cost, for nothing. I could not work. If that had been my state in life, I would have expected someone to provide me a reasonable living, because I had been teaching and was a middle-income earner, so why did disability suddenly make me poor?
Finally, we heard earlier about the human rights, the conventions and the charters that surround us, and I was very pleased to hear it. I was at a meeting on the weekend in Winnipeg where someone suggested that we should stop talking about stakeholders and start talking about rights holders. That is what we must think about when we think of people who live in poverty. If I am a citizen, then I am a citizen.
Senator Munson: Getting back to the subject of why we are here, the question at the very beginning was: Has its time come? I am more confused than ever after two and a half hours of discussion.
We talked about the transitional allowance, and I would like to hear more from the esteemed economists here about the idea of subsidizing wages and helping young people to get into society.
For example, I have a son who just graduated from university. He is out looking for work and will take any kind of job. Does this mean that we top up a salary of $12,000 with a transitional allowance so this person can reach the level of a guaranteed annual income? How does someone of that age without a university education reach a guaranteed annual income?
Would a transitional allowance, which I think is interesting, work in favour of those people whom I call the lost generation, those people whom we have not discussed between the ages of 45 and 60 who are lost?
Is there a transitional aspect to a guaranteed annual income so that such a person can live with the basic human right of dignity, living in this country, and get to that point where we go to the other social services that are there from age 60 and on?
Sorry, Carol. It is the reporter in me, I keep asking more questions, but maybe there will be a few more answers before the morning is done.
[Translation]
Mr. Blais: I would like to go back to Michael Mendelson's presentation and the single system he described.
First, I believe that a single system is not an end in itself. If we can do more to fight poverty and exclusion with a variety of programs, I agree with him. But it has its advantages: simplicity and transparency among them.
Second, there are double the sources of funding for non-guaranteed income. That is, eventually and gradually, there are explicit transfers — those paid directly to people — like Old Age Security, you are right. But there are also a number of implicit transfers, those made through the tax system, that is. The financial capacity is enormous. Of course, right from the beginning, the intellectual essence of the guaranteed minimum income has been to try to bring together the implicit tax transfers that have become very significant in Canada and the explicit transfers in cash.
As to social assistance programs, I do not believe that a guaranteed minimum income program should affect assistance programs that workers, for example, have established. But it is true that a non-guaranteed income program could lead the state to stop funding those assistance programs and leaving them to workers and their organizations to fund themselves, which has not always been the case in Canadian history. For everyone, yes, it could take the form of an old age security supplement for the elderly, or perhaps universal family allowances.
You mentioned the guaranteed income supplement; I remind you that there have been major holes in that program for a number of years, because thousands of elderly Canadians have no access to it or do not apply for what they are presently entitled to. This problem comes up every two or three years.
As to administrative costs, of course, there are savings to be made, but you are right to stress that they are still quite minor. But there can be savings. Why? Because the guaranteed minimum income is controlled through the tax system rather than though various kinds of transfers. So we can conceive of cost savings, but, once again, those savings, like a single system of guaranteed minimum income, are not ends in themselves. They must, of course, be the means to an end: for us to be able to see positive changes in inequality and poverty.
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Mr. Rainer: I want to underscore the message that Jim relayed earlier about the importance of unconditionality in a design consideration. That is really fundamental for us. We are very uncomfortable with the phrase ``people expected to work,'' with all due respect to the Caledon Institute. The idea of someone behind a Plexiglas panel making a decision about someone's life — on what basis would they decide?
When we think about mental health issues, for example, who behind that panel is qualified to make a determination as to whether or not that person is prepared for work? Many mental health issues are in fact almost invisible to an unqualified observer. My daughter has Asperger's syndrome. It is a condition that was clinically diagnosed about 15 years ago. If my daughter were to walk into this room, everyone would see a normal looking kid. However, in fact, she has a fairly significant disability that will pose a major challenge for her efforts to earn a decent living. Were it not for my wife and me, my daughter would be at high risk of living in poverty.
Who would be qualified to make a determination as to whether or not my daughter is prepared for work or not? It is problematic. Therefore, in terms of a fundamental design consideration around any type of guaranteed income, whether or not it is a demogrant or a negative income tax, it really must be, from our point of view, unconditional. As a matter of a person's human right, as a matter of their citizenship, they are entitled to a basic income that allows them to meet their basic needs and live a life of dignity.
Those of us who live in Ottawa and walk through the Byward Market can see a fellow in a wheelchair who has no legs and hands are gnarled down to stumps. He is out there almost every day in good weather, someone pushes him to a street corner, where he panhandles. I have to ask myself: Where is the fundamental, basic income for this individual? Why is he doing this? There are many other examples like that.
The unconditional aspect is really important when we get into talking about disabilities and the grey area of who is to be considered disabled or not. If a person is on the wrong side of that line, what is that forcing them into by the choices that some other people have made, which may not be founded on any kind of understanding of their condition but they are paid to do that behind a Plexiglas panel?
We have to get away from means testing and either the demi-grant or the negative income tax, in theory, could do that. That is a take-away message I hope this subcommittee hears and takes into strong consideration.
We would very much oppose proposals that have conditionality built into them.
Senator Keon: We have such an enormous wealth of expertise around here. I want each one of you to answer this question: What is the matter with the system in Norway? Everyone is paid a livable salary and when they start to do better, it is taxed back.
Ms. Goar: Anybody willing to take that on?
Mr. Mendelson: I do not want to take it on, I just want to say it is one of the points I was making earlier, which is that the fundamental premise of anything should be that a non-poverty economy is an economy where people who are working are paid a living wage. The expectation would be that someone who is working full-time is able to support a family in reasonable circumstances that are acceptable given the living standards of society. The Nordic countries do that. They do it for cultural and other reasons that are hard to duplicate. I am not sure we could ever holus-bolus import that to Canada.
Looking at their welfare systems, a lot of it is hard to understand because it is quite organic. A lot of it is municipal. It is not quite the equivalent of the welfare system. It is not quite what we would anticipate in the Anglo-American world.
I would agree with the senator in that it is a living wage that is the fundamental basis. If you have an economy that does not produce poverty then you will have less poverty to deal with through government.
Mr. Osberg: Coming back to some of the points you were making about the layers of policies and the multiple objectives that a policy has: if we think about the layers of policy that have to work right in a country like Norway, there is a layer of policy which is all about the aggregate demand for workers in the economy as a whole.
There are fiscal and monetary policies that generate full employment and the availability of some sort of jobs. There is a whole layer of policies about the labour market institutions that encourage non-discrimination by employers and make it a welcoming workplace for all types of workers that enable collective bargaining and push up those bottom- level wages to reasonably decent levels.
There is a layer of long-run policies, which can be called human capital or education or training policies. Often people lose sight of the time dimension. You can educate and train people now, but that takes a long time before it pays off. We have a stock of people right now who are educated and trained in the past, or not educated and not trained sometime in the past. We need to deal with them now as well, but there is this long-run idea of investment in policy.
What we have been talking about today is after all those policies kick through. We have been talking about the income transfers that need to be there when there is a breakdown in macroeconomic policies so there are not jobs; or when there has been a breakdown in institution policies so minimum wages have fallen to terrible levels; or when you have not had good education in the past and therefore people do not have the skills today. There's what is happening in people's lives.
The point was made, who, sitting in Ottawa, can forecast what will be happening to individuals all through this huge country?
What we have been talking about today is this need for some sort of basic framework that catches people after all these other policies have done their work or not. We have not been talking about a replacement for all those policies, not at all.
You need all those other layers in the system, not just for poverty, but for many other reasons as well.
I would come back to the unconditional nature. I would also come back to the point that we already have that architecture in place. We already have it in a meaningful way for senior citizens, but not in a very meaningful way for the non-aged population. That is where we can — with improvements to what is already in place, to the GST credit, to the child tax benefit — make a significant difference and do something about the rising poverty gap for the most disadvantaged in Canada.
Mr. Mulvale: I wanted to go back to Mr. Mendelson's point about cost. Those were interesting figures you cited about the costs of administering welfare versus family benefits versus other approaches.
We ran a series of focus groups in Saskatchewan canvassing people who are poor as well as people who work in organizations representing poor people, about their thoughts on the feasibility of a guaranteed income, basic income, et cetera.
They came up with a really interesting series of observations, one of which was about the costs of trying to negotiate the anti-poverty program, or non-system, if you will. Others have made this point, so I am just reinforcing it. The amount of work it takes to see if you qualify, to get benefits, and to talk to workers. Mr. Rainer talked about talking to people behind Plexiglas about people who make decisions about disabilities they do not realize you have.
In Saskatchewan people often phone up the call centre that administers and is supposed to differentiate those ready to work from those not ready to work, and you talk to someone who used to work at Wal-Mart on a 1-800 telephone line.
Getting into categorical programs and whether you qualify for this or that, these are tremendous opportunity costs for people who live in poverty who could be better expending their time looking after their children, perhaps changing their life circumstances, getting an education, or what have you.
We need to cost out what it costs to employ people to run the programs — which is important — but we also need to cost the opportunity costs to people who are supposed to be benefiting from the programs.
Ms. Freiler: I want to respond to a couple of questions that have been asked. First, Senator Keon's question about Norway, which I think is a fascinating way of presenting it.
One issue we have not spoken about is that of preventing poverty. If we look at the Nordic countries like Norway, Sweden, and others mentioned, one of the reasons they have such low poverty rates is not because they do a good job on poverty reduction; they do a very good job at poverty prevention.
The way they prevent poverty is by doing better some of the things we are doing in Canada. Namely, they have really decent child benefits, they have decent benefits that take into consideration people's life situations, and they ensure that people do not fall into the cracks in the first place.
As UNICEF and other international organizations have shown in the last few years, it used to be that unemployment was the single most common or serious reason for child and family poverty. Over the years, it has been low wages. It is no longer unemployment; it is low wages that account for poverty in those countries that have high poverty.
What we need to talk about is how a guaranteed income can prevent poverty as well as reduce both its incidence and its depth. Prevention should be a goal. Otherwise, we will continue to have these meetings, as we have done. Every 30, 10, 20 years or so, we talk about a guaranteed income.
The second point I want to make is some of you may remember that it was 20 years ago this year that the Ontario Social Assistance Review Committee came out with its report, in September of 1988.
It explicitly rejected a guaranteed income as a single program. It focused on many of the same shortcomings: the lack of dignity in social assistance, the issues around means testing, and the issues around complexity. It came up with a blueprint for social assistance that was never implemented, but it also called for a national child benefit, which was implemented to a large extent. It called for a national disability program. It did not shy away from complexity and recommend a single program because it knew that it would not work. However, it did recognize some of the same issues that people are raising here.
When you hear the heart-wrenching stories of demeaning programs and the Plexiglas and who gets to choose, mainly we are talking about social assistance or some sort of disability benefit. To think that a guaranteed income as a single program would necessarily address those is unrealistic. They need to be addressed, but they need to be addressed in ways that take into account — as Mr. Mendelson and others have said — that people are poor for a whole bunch of different reasons. We need to address the reasons in addition to having to prevent it in the first place.
I probably made my initial statements too early, as Ms. Goar suggested.
I do think the focus should at some point be on how we guarantee a decent income to people. That is the first question. As a society are we prepared to guarantee a decent income so that no one falls into poverty in the first place rather than looking at a single program, necessarily, as the solution?
Ms. Goar: Thank you very much. I realize there are people whose comments I have not yet recognized. I assure you that absolutely everything will fit into the segment after Senator Segal speaks. To bring this session back to where it belongs, Parliament Hill, I will ask Senator Segal to take the floor. He is, at the moment, the prime proponent of the guaranteed annual income.
Senator Segal: I will be very brief, simply because I have benefited, I think as we all have, from the broad range of discussion. I am not a member of this committee of the Senate, so I am a supplicant before it. I am also very hopeful for what they will choose to do with what we have.
I would hope the committee will take a serious look at design issues, because if I take what everyone has said around the table, you really cannot address the underlying premises successfully unless you look at the details of design. Every design change you make obviously has an implication.
I would hope the committee will find a way to be driven by a few principles which I have heard enunciated around the table.
The first one was not enunciated, but it is my conclusion. Sure this is complex; everything worthwhile usually is. Let us not allow the priesthood of inertia use the gospel of complexity to keep us from making progress. Because they having doing it to us for 35 years.
The charts are clear. The number of poor and disadvantaged is the same as a percentage of our society. They have not made a jot of progress. Some people have fallen in, some people have progressed beyond, some people are temporary, some people are there longer, some people have intergenerational problems, but as a society we are not making the progress that people would expect. The committee has a right to be concerned about that in its assessment.
Given the broad nature of what the committee is looking at both in population health and cities, I do not think there is a risk that anyone will decide that the guaranteed annual income or the negative income tax or whatever instrumentality you choose is a single silver bullet to resolve all other problems. No one is suggesting that.
Proponents are suggesting starting with no one being poor and see how far that gets us. Let us try that. We have tried everything else. We have not tried the notion that people between the ages of 45 and 60, who did nothing in their lives but work hard and then hit some economic lack of luck, have a right to live with some measure of self-respect. We have not tried that. We have not tried the notion that the disabled who fall into disabilities for reasons completely beyond their control might be guaranteed a basic income floor so they do not have to roll out in the ByWard Market and panhandle. We have not tried that.
We have tried everything else. We have tried to get at the causality and to ensure early childhood education is perfect. I am for all that. It simply is not changing the numbers. That is the critical question I think the committee wants to look at.
It relates to Professor Osberg's reference that this is not about shutting down everything else. It is about asking ourselves what we can do that would be an incremental, but meaningful, revenue guarantee for every Canadian beneath which they would not fall.
Professor Robins said that some of the early numbers in the 1970s appeared to suggest that with the NIT proposition in 1970 dollars, every American who fell beneath the poverty line could be brought up to that line for about $150 billion to $200 billion dollars. Divide that by 10 for Canada and you have $20 billion. They spill more in OHIP in a month than that, insuring Viagra and other vital instruments of our society.
Let us get a grip and let us not be overwhelmed. I hope the way ahead would be focused, perhaps, on those who are poor now. It is they that I would argue we have a moral obligation to engage.
I do not want to reduce what we are putting into early childhood education. I would like to see us put much more into it. I would like to work on prenatal and postnatal baby weights. I would like to work on the issue of basic nutrition. We probably have to deal with heating and other oil costs.
Let us start with the premise that the people who are poor now also have the right to choices and dignity in their life. What we are doing by moving away from that and looking at a whole group of other causal questions is not addressing the people who are poor now. We are basically saying that they do not have any choices now and we are okay with that because we do not think we can break through the paper walls, the Plexiglas and the other constraints that stand in the way of that.
Mr. Mendelson and I have agreed on many things over the years and disagreed on a few. However, the bottom line is, if it was presented to Canadians in the context of fairness for those who through no fault of their own fall beneath a certain income line, I think Canadians would respond to that. It will take some courage and leadership, but it is possible.
Let us remember, Employment Insurance now covers about 25 per cent of our fellow Canadians who are out of work. There are American states abutting our borders that treat their unemployed substantially better than we do. Where do those people end up, aside from food banks? They are in provincial and municipal welfare systems, which are picky, dehumanizing, ineffectual and all we have left. If we had Bryce Mackasey's unemployment insurance program, it would be a different issue. We have not had it for 15 years and a large group of people are falling through the cracks.
I am hopeful that the way ahead is sensitive to the complexity, understands the importance of other critical props in our system of social civility, our architecture of humanity, but also understands that there is a gap here and that there is an affordable way to fix it.
In considering its work down the road, I hope the committee will think about how we create that design structure, who should be involved and how it can move ahead. My own sense is that there is more receptivity for this now than may have been the case 10 or 15 years ago.
Mr. Hum: What Senator Segal has said is a nice place to stop. My comments would have been simply on some of the administrative complexities.
I noticed when the package was sent out, there were biographies of everyone that stated their position on the guaranteed annual income, but no one asked for mine. I will give you my answer. I am in favour, under two conditions. First, I get to design it and, second, Senator Segal gives me all the money that I need.
On the big issue, the complexities will be solved brilliantly by the public service in a wash. However, there is one I think politicians will have a difficult time with. I wrote once in a little-read article — I think only members of my family read it — that when Canada was negotiating with the United States on the North American Free Trade Agreement, there was a great deal of difficulty with how that would affect delivery of our social programs. One of the things I said was that while health programs and other programs were specifically on the table and exempted, there was not the same broad blanket exemption for social programs.
I speculated that if a national guaranteed annual income were to be implemented by Canada which led to macro long-term effects such as employers being absolved from the confines of meeting minimum wage requirements — I am not saying the economics are correct — politically, the Americans may attempt to challenge this on the grounds that it represented an unfair subsidy. I am not saying the argument would have legal merit. It may be argued that it is an inadvertent back door subsidy to Canada's labour market and they may challenge this.
This is not so farfetched when you understand the American position on our stumpage fees. This is also déjà vu because while we do not know who the next American President will be, there is a hint that they want this agreement opened.
I may have to dig out that old article if Mr. Mendelson digs out his and try to recycle that. That is something beyond our borders that I do not think anyone would worry about as administrative problems. However, it is one.
Mr. Rainer: It has been great to have this discussion this morning. We are pleased to have been part of it. Hopefully it will continue with the Subcommittee on Cities going forward.
The subcommittee reports to the Social Affairs Committee. There is also the Standing Senate Committee on Agriculture and Forestry on which Senator Segal sits that has been looking into rural poverty. Then we have the House of Commons Standing Committee on Human Resources, Social Development and the Status of Persons with Disabilities holding hearings on poverty and examining the possibility of a national strategy on poverty, which is also very encouraging. These are all signs to us that the issue of poverty is rising higher on the political radar screen.
Might the Social Affairs Committee soon be talking to the Agriculture and Forestry Committee and/or the Committee on Human Resources, Social Development and the Status of Persons with Disabilities at some point and bring their heads together? Each of them will be coming out with reports with their ideas around issues and options. It would be nice to see some harmonization of the thinking.
The Chair: Absolutely. A lot of good work is done in the Senate in terms of policy development. I would not want to see it diminished by not having our act together in terms of coordinating these different pieces. There are different time frames for these reports. The Agriculture Committee is about to come out with its on poverty. We will keep that in mind as we prepare our report and as the report is prepared on Population Health. We will take all of that into consideration. I cannot provide you the details of how that will be done, but we are very mindful of that.
Senator Segal: Just to follow up with respect to that, everyone is hoping the rural poverty report will be tabled in the Senate on Monday night. There is nothing in it that will in any way constrain the activities of Senator Eggleton and Senator Keon in this committee, quite the contrary. They will have the full benefit of all the recommendations, and it is a wide range of recommendations on a broad set of inputs that produce poverty in rural Canada, and there is some discussion of the matter we have been discussing today. It is a wide range, and we have been at it for two years now, in essence. That will be available to the members of this committee and to the public. The public response will be very much encouraged so as to keep the debate going. There will be a debate in the Senate when approval for that report is sought by the chair and that will hopefully produce more discussion on this. We have quite a momentum building around this issue. None of us knows where it ends, except we know that to stop pushing is a fundamental mistake.
Ms. Pasma: I thank Senator Segal for bringing it back to basic principles. I appreciated what you said, and I wholeheartedly agree with what you reminded us of and the importance of the people at the centre of everything. I do not want to sound ageist, but it has not escaped me that I am the youngest person at the table here. I do not want to speak on behalf of every young Canadian, but I can speak from my personal perspective.
We spoke a bit earlier today about the growing income gap and the worry about growing inequality in Canada. My generation is the first generation that cannot expect to do as well or better than our parents. We are also in a situation now where one in three jobs is precarious or non-standard, so even those of us lucky enough to have jobs do not escape that fear and anxiety and uncertainty surrounding our future. That includes a deep concern over the future of the country we are inheriting with its deeply entrenched poverty and growing inequality. In many respects, we are a generation without hope and a lot of anxiety and fear.
What we have been doing for the past 30 years is tinkering, and that tinkering has not changed anything. Maybe it is time to step out with a radical new approach that can actually deliver hope to millions of Canadians, whether they are living in poverty or fear that poverty might lie in their future.
Mr. Osberg: There are not many advantages to getting older, but there is one, at least, and that is that you get to see how people's stories turn out. When you are only 22 or 23, you are in the first chapter of a book that has all sorts of chapters that you have not read yet, and you do not know where they are going. People's chapters all turn out in different ways.
One of the things you observe is that many people who are 22 or 23 think the world is their oyster, but things happen to them. They jump off a wharf and break their neck. Suddenly, your best friend could be in a wheel chair. These things happen to people. If we are all in a community together, we all benefit from having the assurance that this can be a place where you can have a decent life, no matter what just happens to happen to you. In that sense, there is a fundamental aspect to social policy, which is all about giving us some assurance in a risky and uncertain world where you could break your neck tomorrow.
Mr. Gray: I will return to a question that Senator Keon asked a while ago. I do not know much about the situation in Norway in particular, although it is just about the richest country in the world and they have 4 million people. I think there are more people in the greater Toronto area than there are in Norway. I do not really know about the institutions of their social protection and their social insurance network, but I would be surprised if the wage structure were such that a totally unskilled worker in Norway could earn enough to support a family of four. I do not think there is any country in the world that pays a wage of maybe $35 Canadian an hour to someone who does not have much education and is totally unskilled. I am not certain about that, however.
Mr. Mendelson: I will be quick, because I know I spoke a lot. I do not know if anyone else noticed, but Senator Segal, in his impassioned speech, which was very much appreciated, sotto voce, said, ``I am sure that Canadians would support a program that would guarantee an income to people who, through no fault of their own'' — did everyone notice that phrase? I do not know if Senator Segal noticed it himself. That is a critical phrase. The assurance is great, and the passion is great, but adding in ``through no fault of your own'' as a categorical limitation on the guarantee of an income is contrary to the proposition of a non-conditional kind of program that Mr. Rainer or Mr. Mulvale were talking about. There is a difference there, and that difference has to be considered, and it has to be brought out into the open, which is what I am doing.
Having said that, I would just like to explain that I and the institute do not have positions. We are not a cult. Each of us has different positions. I do believe we should be addressing poverty so that no Canadians are in poverty. That would be the ideal. The question is, how do you get there? What kind of programs do you design? How do you get not just elimination of poverty but, equally importantly, participation in society? How do we have a society where people have an opportunity to fulfill their own human potential? How do you get a society where people feel good about themselves and what they are doing? Those are the types of questions I am hoping to be able to pursue.
We have a practical and implementable program design for basic income for people with severe disabilities, which would take about 500,000 Canadians who are now almost all poor out of poverty through a national disability program. Ms. Freiler reminded me it was one of the SARC (Saskatchewan Association for Rehabilitation Centres) recommendations. I would urge the committee to look at what we can practically do. We have a practical program that can be implemented using the administrative apparatus that exists today in the CPP/QPP. We can chase after notions that might be idealistic, and I am all for that, but we should also look at what we can actually accomplish.
Senator Segal: Mr. Mendelson, I do not think that poor people are guilty of anything. You and I may differ on that. I do not think a welfare system, which is what we now have, which has Her Majesty's agents inquiring into people's lives, determining whether they are motivated, whether they could be working and might be working, should be working and like working and whether the spouse is in the house, is reflective of the values you and I share. The issue is, how do we get beyond that?
Senator Munson: I have one small observation on the disabilities issue. This committee had a report on autism. We had called for a national strategy. We have people on the ground on every one of these issues who come before us. At the end of the day, they talk about national leadership and national strategy. I think that autism has no borders. We look at this issue from a provincial microscope. We seem to have blinders on. We do not seem to pay enough attention to what those who work with these groups, people with disabilities or any other group, are telling us, that at the end of the day. This is a country called Canada. This is not a political statement, but there must be national leadership when dealing with these things. We can learn from each other.
I find it rather distressing that we listen to testimony, we echo it and we push it, but we do not take it much further. I wanted to mention that because we are living in provincial cocoons across this country. It is about learning from each other. We talk about the affluent Albertas and the programs that they have dealing with incomes, whether it is for people with disabilities or whatever and then we go to other provinces and people are crying out for more. It is the same with the guaranteed annual income. We paid attention to it on this Friday morning, and I certainly learned a lot, but I encourage having more of these. There should be provincial representation at this table as well to see what they have to say so that we can get the perspectives from what we can learn from Quebec, which has immense social programs dealing with this. I do not think we are listening to each other enough.
Ms. Goar: Thank you very much. Let me thank each of the contributors. You have engaged our brains and our hearts. This Senate committee has a tough job.
With that, I will hand the floor back to the chair.
The Chair: Thank you very much, Ms. Goar. Thank you for moderating today's round table. It has given everyone the opportunity to weigh in on the subject. I appreciate all the information that you have all given us and your thoughts on the way ahead. That will form part of the material we put together and will help us to guide us towards, ultimately, a way forward that we want to recommend to the Government of Canada and to other governments in the country, if we want to get to the point of crossing the provincial municipal lines as well.
I have an open mind on guaranteed annual income, particularly as it is possibly implemented through a negative income tax. I appreciate the motivation, the good intents and the basic principles behind Senator Segal's thrust toward that action through his motion on the Order Paper in the Senate.
I am not convinced that there is a simple all-in-one solution or a singular income security program or a big bang or a silver bullet to do the job of poverty reduction and poverty prevention. However, there are many elements of it that I think we need to explore further.
Picking up on what Senator Munson has said, I do believe that we need a national poverty reduction strategy — indeed, a poverty prevention strategy — and that we need to work with the different orders of government to help accomplish that.
To go back to the Caledon Institute, I like one of their phrases. If we do not have the big bang or silver bullet kind of approach to this, their idea of an approach is called ``relentless incrementalism,'' which is incrementalism with a passion. That is the least we can do if we do not find that there is one simple all-in-one solution.
There is another phrase I want to mention. Ms. White said, ``We cannot create a floor that becomes a ceiling.'' We must be careful about how we examine poverty and take into consideration all of the aspects of the things we need to pay attention to, such as housing, homelessness, early learning and child care, health and so many other aspects that must be part of the equation. I am open minded on it and the committee will take into consideration what you have said towards helping it come to its decision.
With that, I officially adjourn the round table on guaranteed annual income. Thank you very much.
The committee adjourned.