Guaranteed annual income implausible for Canada

Despite the appeal of a guaranteed annual income, it’s unlikely to become a reality in Canada, finds a study by the Fraser Institute.

“The practical obstacles to implementing such a program are likely insurmountable,” says Charles Lammam, the Fraser Institute’s associate director of tax and fiscal policy and co-author of The Practical Challenges of Creating a Guaranteed Annual Income in Canada.

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A guaranteed annual income program would provide individuals or families an unconditional cash transfer to ensure a minimum annual income. It would replace several, often-overlapping programs at all three levels of government with a single program administered by one level of government, likely federal.

In theory, this single program would increase government efficiency and reduce administrative costs.

Canada’s income support system, including all government spending and tax measures, cost an estimated $185 billion in 2013—or roughly 10% of the economy. Social benefits, such as cash transfers and food subsidies, account for 22% of program spending by all levels of government. If implemented, a guaranteed annual income would spark reform of about one-quarter of all government activity.

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

For this to happen, federal, provincial and local governments would have to agree on a single approach. Some levels would have to abdicate their responsibilities in the existing income support system. For example, if the federal government administered the plan, every provincial government would have to stop providing welfare assistance. At the same time, federal programs (Employment Insurance, for example) would have to be integrated into the program.

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

And of course, if governments don’t abolish existing niche programs (Old Age Security, for example), there’s a risk guaranteed income would be just another income support program.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.