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Business Impact

Basic income could work—if you do it Canada-style

A Canadian province is giving people money with no strings attached—revealing both the appeal and the limitations of the idea.

Fresh produce

Dana Bowman, 56, expresses gratitude for fresh produce at least 10 times in the hour and a half we’re having coffee on a frigid spring day in Lindsay, Ontario. Over the many years she scraped by on government disability payments, she tended to stick to frozen vegetables. She’d also save by visiting a food bank or buying marked-down items near or past their sell-by date.

But since December, Bowman has felt secure enough to buy fresh fruit and vegetables. She’s freer, she says, to “do what nanas do” for her grandchildren, like having all four of them over for turkey on Easter. Now that she can afford the transportation, she might start taking classes in social work in a nearby city. She feels happier and healthier—and, she says, so do many other people in her subsidized apartment building and around town. “I’m seeing people smiling and seeing people friendlier, saying hi more,” she says.

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Jim Garbutt sees moods brightening, too, at A Buy & Sell Shop, a store he and his wife run on Lindsay’s main street. Sales are brisker for most of what they sell: used furniture, kitchen items, novelties. A Buy & Sell Shop is the kind of place where people come in just to chat—“we’re like Cheers, without the alcohol,” Garbutt says—and more and more people seem hopeful. “Spirits are up,” he says.

What changed? Lindsay, a compact rectangle amid the lakes northeast of Toronto, is at the heart of one of the world’s biggest tests of a guaranteed basic income. In a three-year pilot funded by the provincial government, about 4,000 people in Ontario are getting monthly stipends to boost them to at least 75 percent of the poverty line. That translates to a minimum annual income of $17,000 in Canadian dollars (about $13,000 US) for single people, $24,000 for married couples. Lindsay has about half the people in the pilot—some 10 percent of the town’s population.

Downtown Lindsay, Ontario.

The trial is expected to cost $50 million a year in Canadian dollars; expanding it to all of Canada would cost an estimated $43 billion annually. But Hugh Segal, the conservative former senator who designed the test, thinks it could save the government money in the long run. He expects it to streamline the benefits system, remove rules that discourage people from working, and reduce crime, bad health, and other costly problems that stem from poverty. Such improvements occurred during a basic-income test in Manitoba in the 1970s.

People far beyond Canada will be watching closely, too, because a basic income has become Silicon Valley’s favorite answer to the question of how society should deal with the massive automation of jobs. Tech investors such as Facebook cofounder Chris Hughes and Sam Altman, president of the startup incubator Y Combinator, are funding pilot projects to examine what people do when they get money with no strings attached. Hughes’s Economic Security Project will pay for 100 people in Stockton, California, to get $500 a month for 18 months. Y Combinator ran a small-scale test in Oakland, California, last year; beginning in 2019 it will give $1,000 a month to 1,000 people over three to five years, in locations still to be determined.

This momentum figures to keep building as AI and robotics make even more inroads. Legislators in Hawaii are beginning to study the prospects for a basic income. The lawmaker who has led the effort, Democrat Chris Lee, worries that self-driving cars and automated retail checkout could be the beginning of the end for a lot of human labor in Hawaii’s service-based economy. If machines can handle tasks in tourism and hospitality, Lee says, “there is no fallback industry for jobs to be created in.”

But there’s an important difference between that vision for a basic income and the experiment in Ontario. The Canadians are testing it as an efficient antipoverty mechanism, a way to give a relatively small segment of the population more flexibility to find work and to strengthen other strands of the safety net. That’s not what Silicon Valley seems to imagine, which is a universal basic income that placates broad swaths of the population. The most obvious problem with that idea? Math. Many economists concluded long ago that it would be too expensive, especially when compared with the cost of programs to create new jobs and train people for them. That’s why the idea didn’t take off after tests in the 1960s and ’70s. It’s largely why Finland decided not to extend a small basic income trial.

If any place can illuminate both the advantages of basic income and the problems it can’t solve, it will be Lindsay. The town is prosperous by some measures, with a median household income of $55,000 and a historic downtown district where new condos and a craft brewery are on the way. But that masks how tough it is for a lot of people to get by. Manufacturing in the surrounding area, known as the Kawartha Lakes, has declined since the 1980s. Many people juggle multiple jobs, including seasonal work tied to tourism in the summer and fall. Technology is part of the story too: robots milk cows now.

Basic income as a social equalizer

The Olde Gaol Museum is indeed an old jail, but it’s also a showcase for things that reveal the texture of Lindsay’s history—uniforms that nurses from town wore in France during World War I; tools and maps used by railway workers when this was a hub for eight railroad lines; 19th-century paintings by a local artist who depicted the timeless regional pastimes of canoeing and fishing. When curatorial assistant Ian McKechnie gives me a tour, he stops and plays a lovely tune on a foot-pumped organ called a harmonium that was made in Ontario more than a hundred years ago.

McKechnie, 27, has worked at the museum for seven years and is devoted to it. Unlike his previous job, when he was briefly a laborer at a goat cheese factory, it offers a chance to be creative and connect with many people in the community. He doesn’t just give tours: he researches and organizes exhibits and writes supporting materials. But on the day we meet, the museum is not paying him to be at work, and therein lies a story about why he and the Olde Gaol’s operations supervisor, Lisa Hart, both signed up for the basic income.

The Olde Gaol Museum keeps going thanks to the help its staff gets from the basic-income project.

The museum gets almost all its revenue from grants, and one just expired. The manager of the museum recently left, and so it falls largely to McKechnie and Hart to keep things going until another grant comes in. Even when it does, these won’t be lucrative jobs—perhaps $20,000 a year for McKechnie’s. They could find positions in the area that pay more, but both would much rather continue their labor of love at the museum. Leaving now might undercut its momentum toward a more sustainable future, which could include a new cultural center that would connect the museum with a local art gallery.

Thanks to the basic-income trial, both can afford to stay on with the museum. And in the meantime, Hart says, she will no longer put off buying new eyeglasses. The basic income “allows you to spend time on something that’s valuable,” she says. “It’s very sad to walk away from something where you’re valued and doing something meaningful for the community because it just can’t pay you a lot.”

This highlights an intriguing aspect of basic income: it functions in different ways for different people. The way Hart describes it, it’s fuel for cultural development. For Dana Bowman, who might now take classes in social work and regularly volunteers at a community garden, it’s a food subsidy, an educational grant, and a neighborhood improvement fund all in one. For a married couple who own a health-food restaurant that barely covers its costs, it’s a small-business booster. A man who hurt his back working in a warehouse told me he hoped it could augment his employer’s disability payments. A student who was about to graduate from a technical college and had a job lined up said he planned to use the extra income to pay down school loans and start saving for a house.

For McKechnie, the basic income is something broader: a social equalizer, a recognition that people who make little or no money are often doing things that are socially valuable. “It gives one the assurance that the work you’re doing is not in vain, even though you’re not working in a bank or doing other things that are considered part of a career,” he says.

Part of a safety net

A basic income has allowed Bowman to add fresh vegetables to her diet.

Even if a basic income turns out to be a flexible and efficient government program, it’s not clear that it would be a great way to respond to technological unemployment. Over and over again, people in Lindsay told me it won’t reduce people’s demand for jobs.

As a practical matter, the Ontario trial doesn’t pay enough to eliminate most people’s need to work or to rely on family for support. But even if a richer payout were feasible, that wouldn’t change the philosophy of the program. Basic-income supporters want to improve the odds that people will take better care of themselves and their families. They want a humane and dignifying way of helping people who simply can’t work. But they also argue that most people generally want and expect to work. “It’s not supposed to be welfare for people displaced by technology,” says one of the basic-income advocates, Mike Perry, who runs a medical practice in Kawartha Lakes.

Visits to the community gardens have become part of Bowman’s routine.

Moreover, while giving poor people money helps them, it still leaves urgent and difficult questions unanswered about the impacts of automation and globalization. What will it take to ensure that entire regions aren’t left far behind economically? What can be done to boost the supply of good, steady jobs? Basic income “is only the beginning,” says Roderick Benns, former vice chair of the Ontario Basic Income Network. “It’s not just ‘cut a check and get on with building the corporatocracy.’ We have to ask what else we are doing as a society to get people to reimagine what they can do with their lives.”

Benns, the author of several books, grew up in Lindsay. Until recently, he and his wife, Joli Scheidler-Benns, lived three hours away, but the pilot is so important to them that they moved back so he can chronicle it in a new publication called the Lindsay Advocate and she can do research for her PhD on the subject at York University. After Benns describes how basic income should augment job training and other social programs, Scheidler-Benns, who is originally from Michigan, nods and then adds: “I don’t see how it could work in the US.”

The apartment complex where Bowman lives.

After all, she says, Canada does many other things to strengthen its safety net and reduce inequality. For one, it has universal health care. School funding in Ontario is primarily allocated at the province level rather than being heavily dependent on local property taxes, as it is in the US. Canada also traditionally spends about 1 percent of its GDP on workforce-development programs, according to the Organization for Economic Cooperation and Development. That’s about half of the proportion in other advanced countries, but it still dwarfs the US figure, which is about 0.3 percent.

Funding a different mind-set

Tony Tilly is the outgoing president of Fleming College, which specializes in preparing people in Kawartha Lakes for careers in both white-collar work and trades. About half the students don’t come right from high school; they’ve already been in the workforce and hope to learn a new skill.

He supports a basic income because he thinks it could help people break out of poverty that has beset their families for generations. But even if the program continues past the three-year trial period, Fleming’s essential challenge would remain: how to prepare students for a world in which more and more tasks are being automated.

Fleming is still priming its graduates to work in traditional strongholds of the regional economy: jobs tied to the environment and natural resources, infrastructure development, mining, construction, and government. But the school is trying to instill a different mind-set from the one students had when Tilly became its president 14 years ago. They now get more emphasis on so-called soft skills: teamwork, problem-solving, personal interaction. Above all, he says, they need to know “not only how to do some particular job but how to contribute overall to the success of an organization, whether it’s a manufacturer or a provider of social services.”

If the basic-income plan works as expected, Fleming might get even more students than it otherwise would. Dana Bowman could be one of them.

Bowman's living room.

It’s been years since she last had a paying job, as a receptionist. She has been on disability for a variety of ailments, including skin cancer and arthritis. But she feels she is up to doing some part-time work. In 2015, two years before the basic-income trial, Bowman asked a case worker if she could get help paying for transportation to a Fleming campus that offers classes in social work. The official said that would lead to cuts in other benefits Bowman relied on. The message Bowman says she got was: “You’re unemployable. You’re not worth investing in.”

In contrast, the basic-income plan ensures a minimum for her without micromanaging how she spends it. For every dollar that recipients earn above the minimum, their payout from the province will be cut by 50 cents, but no one is made worse off by working.

Even being able to consider that prospect, Bowman says, has been good for her. “I don’t feel ‘less than.’ I feel ‘equal to.’ Not feeling guilty walking down the street, thinking, ‘I didn’t do enough today,’” she says. “People want to do something. People aren’t inclined to do nothing.”

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Downtown Lindsay, Ontario.
The Olde Gaol Museum keeps going thanks to the help its staff gets from the basic-income project.
A basic income has allowed Bowman to add fresh vegetables to her diet.
Visits to the community gardens have become part of Bowman’s routine.
The apartment complex where Bowman lives.
Bowman's living room.
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