Widgets Magazine

OPINIONS

The promise of universal income

Two hours south of Toronto, my hometown, are cities that look nothing like the wealthy, coiffed streets of Ontario’s capital. Industrial areas like Hamilton, Oshawa and Windsor are painted with the scars of vanishing employment. Monstrous steel plants loom eerily over empty city centers, where the streets are no longer swept, potholes reign and two-by-fours bar the windows of forgotten buildings.

The province of Ontario is, in many ways, akin to Rust Belt states like Indiana, Michigan and Wisconsin just across the Great Lakes. Home to fuming steel mills and branch plants, Ontario has long been the steady rock of Canada’s economy, accounting for 40 percent of Canada’s GDP. However, as residents are beginning to realize, manufacturing is no longer the name of the game. And Ontario has gotten the message.

Despite the problems of the present, the provincial government has its eyes set firmly on the future. This vast northern province is working hard to reinvent itself as the Silicon Valley of the north. Its body of factory workers and plant operators now see themselves as the heralds of innovation. Residents envision themselves as engineers and entrepreneurs, building green and alternative energy industries or developing new financial or medical technologies. If Ontario’s vision can be realized, after years of dwindling manufacturing exports, the province could once again become an exporter of something extremely valuable — a model for economic survival.

Last week, the head of Ontario’s government, Kathleen Wynne, announced a pilot for a program she believes would help Ontario get closer to that vision. This spring, Ontario will pilot a Universal Basic Income (UBI) provision in a number of urban, rural and First Nations, or Indigenous, communities. Individuals between the ages of 18-65 will be guaranteed a minimum income of $16,989 CAD that they will be free to spend as they wish. Interestingly, unlike most other UBI programs that are seen as bandaid solutions to a post-scarcity society without work, by all accounts, Ontario is convinced that UBI will incentivize people to work harder and smarter than ever before.

The optimism, in large part, springs from a 1970s experiment conducted in Dauphin, a town in the province of Manitoba, which ran a test of guaranteed basic income. Selected citizens received checks which topped up their incomes and could be spent in any way they liked. Instead of using the extra money to afford themselves more leisure time, the residents that participated in Dauphin’s “Mincome” program did almost exactly the opposite. Employment rates stayed fixed and graduation rates rose as new mothers and teenagers stayed in school. On top of that, mental health issues declined and hospital visits fell by 8.5 percent. Unfortunately, the test was terminated at the end of the decade at the direction of a new government, and the findings were largely forgotten.

Today, the legend of the “Mincome” test is frequently cited among Ontario’s elected officials. Their hope is that the effects of “Mincome” can be spread to an entire province. If so, a province-wide guaranteed income could mean decreased spending on health care and public safety, and more money in the residents’ pockets could lead to greater spending in the economy. The financial freedom of such a guarantee could encourage some residents to spend time re-educating themselves or to stay in school longer. For others, it could mean the time and funds to start a business or pursue a new way of making a living. One way or another, Ontario’s UBI is not a policy designed to placate citizens with a quiet life at home; it’s a policy intended to agitate and excite with its possibilities. It’s a policy designed to re-build a lagging economy.

As of yet, talk of funding for the UBI remains taboo. But it’s quite clear that merely cutting existing social programs won’t cover the huge expenses a truly universal effort could incur. Though not explicit in its title, UBI, is at heart, also a policy of income redistribution. As a result, one doesn’t need to look into little-known Dauphin, Manitoba to observe the effects of a powerful redistributive program. The iconic, flourishing and now deeply missed middle class of the 1950s United States, is by many accounts, itself, a product of top marginal tax rates being maintained at an average 90 percent throughout the mid-1940s to 1960s. Economists, like Thomas Piketty, claim that without such a drastic measure, something as anomalous as the United States’ middle class could have never existed in a deregulated capitalist system. Increasingly, it seems that without similarly large revenues, Ontario’s dream of a UBI won’t ever exist either.

If the province is serious about an honest implementation of Universal Basic Income, it could be that its funding model wouldn’t veer too far from a solution Thomas Piketty proposed in his 2013 book, “Capital in the 21st Century.” His suggestion for an 80 percent tax on wealth, originally intended to alleviate income inequality, could become a close model for the steps a government would need to take to fully fund UBI.

If so, a fully fledged UBI could hit two birds with one stone. A universally guaranteed income wouldn’t only have the potential to spur innovation and renew a thirst for entrepreneurialism. It could also have the convenient side effect of finally curtailing severe income inequality. Four years ago, Piketty’s proposal was shrugged off as unfeasible. However, if pilot projects like Ontario’s prove UBI effective and necessary, Piketty’s “ludicrous” proposal could suddenly become a reality our society would have to accept.

 

Contact Anna-Sofia Lesiv at alesiv ‘at’ stanford.edu.