A guaranteed annual income in Alberta is a longshot
The old idea of a guaranteed annual income (GAI) recently received renewed attention thanks to Calgary mayor Naheed Nenshi and Edmonton mayor Don Iveson. Both mayors hope the new provincial government is sympathetic to the idea, prompting several pundits to muse about a GAI program for Alberta. Largely missing in these discussions is the arguably insurmountable practical challenges involved in creating a GAI that lives up to its potential.
A GAI—also referred to as a “negative income tax”—is a cash-transfer to individuals or families that ensures a minimum level of income, without conditions such as requiring recipients to work or look for work. It’s generally conceived as a single program that would replace all (or at least a significant portion) of the existing income support system (broadly defined as the complex web of programs and tax measures that increase a recipient’s income through cash or in-kind transfers).
Being a replacement rather than an additional program is a critical feature of any serious GAI proposal. After all, the GAI’s main conceptual appeal largely rests on the potential to reduce government administrative costs by simplifying the income support system, which consists of numerous, often-overlapping programs at the federal, provincial, and local government levels.
According to our calculations, the total cost of the income support system in Canada was $185 billion in 2013 or roughly 10 per cent of the economy. This figure includes spending and tax measures by all levels of government targeting people with low income, the disabled, the elderly, and parents with young children. A single program, providing an unconditional transfer, could do away with the administrative duplication and expensive monitoring apparatus that ensures recipients comply with all the different rules.
While proponents differ on what a GAI should replace, the wider the scope, the greater the potential for administrative savings.
In theory, the potential for administrative savings is substantial. A non-trivial portion of spending on income support currently goes to administration rather than directly on transfers to people. Who would argue against making government more efficient?
In practice, implementing a GAI that maintains its conceptual simplicity and produces administrative savings is unlikely to happen in Alberta—or anywhere else in Canada.
Here’s why. The Alberta government cannot unilaterally decide to replace the entire income support system with a GAI. It would require agreement across levels of government because income support is provided by the federal and provincial governments—and to a lesser extent local governments.
If the Alberta government administered the GAI, Ottawa would presumably have to stop providing income support through programs such as Employment Insurance, Old Age Security, the GST/HST Credit, to name a few. At the same time, the provincial government would have to integrate roughly $5 billion worth of social services programs, including welfare, into the new GAI initiative. Local governments would also have to eliminate in-kind support through social/subsidized housing.
But it’s unlikely that the federal government would abdicate its role in providing income support to Albertans. Since building sufficient agreement among Canadian governments for much more modest reforms has encountered major difficulties (think: a national securities regulator), it seems doubtful that agreement could be achieved for a reform as wide-ranging as a GAI, even bilaterally.
There would also be strong internal political opposition to the large-scale lay off of bureaucrats, which is required to achieve substantial administrative savings.
The risk is that Alberta’s GAI would become just another program (with extra costs) within a larger web of existing government programs. Some programs that target specific groups, particularly groups less able to work—such as the severely disabled and elderly—may be especially difficult to consolidate into a single “one-size-fits-all” universal program like the GAI.
But if some programs are preserved, this raises the possibility of further exceptions and diminishes the potential for greater simplicity and administrative savings, undermining the main advantage of a GAI.
Regardless of the support from Alberta’s big city mayors and some pundits, a GAI reform in Alberta or anywhere else in Canada, although an appealing idea in theory, is a longshot in practice.
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