A Guaranteed Income would be great for the economy.

A Guaranteed Income program is a recognition that each person in our society should have at least a basic level of financial security and should be protected from poverty.

My recent article on the merits of a Guaranteed Income (AKA Basic Income, Mincome, etc.) created some discussion. Some commenters thought a Guaranteed Income would lead to increased unemployment, others asked how we would pay for it, another said “There’s no such thing as a free lunch.”

Those comments represent the concerns that are often brought up when a Guaranteed Income is discussed. Now, I will address those concerns and show that a Guaranteed Income could be both affordable and great for the economy.

First, there is the concern that a Guaranteed Income would just pay people not to work. The problem with this criticism is that we already pay tons of people who aren’t working, and for good reason. While welfare programs and programs to top up the finances of low-income seniors are expensive, the cost of increased poverty if those problems didn’t exist would be far worse.

Canada Without Poverty provides a great breakdown of how expensive poverty is:

“It seems counterintuitive to think about the fact that poverty, which is typically thought of as economic deprivation, could be seen as expensive. In reality, poverty is one of the biggest burdens on the economic, healthcare, and criminal justice systems in Canada. It is challenging to know how much poverty costs Canadians precisely, although there are estimates available. In 2011, the federal government spent $19.9 billion on Employment Insurance benefits alone. The same year, almost $4 billion was transferred to low-income families from the federal government.”

A Guaranteed Income – set at the right level – would reduce poverty and therefore reduce the costs associated with poverty, making it affordable.

Second, giving money to low-income people does more to boost the economy than trickle-down policies. As reported in the Guardian, “A report by five IMF economists dismissed “trickle-down” economics, and said that if governments wanted to increase the pace of growth they should concentrate on helping the poorest 20% of citizens.”

The report goes on to say, “If the income share of the top 20% increases, then GDP growth actually declines over the medium term, suggesting that the benefits do not trickle down. In contrast, an increase in the income share of the bottom 20% is associated with higher GDP growth.”

Clearly, if you want to boost growth you should put more money in the hands of low-income people – exactly what a Guaranteed Income does. It would redirect money from social programs with big overhead costs, towards providing direct financial support for low-income people, money that would quickly circulate through the economy – increasing demand and job growth.

Beyond the facts in favor of a Guaranteed Income, there is the seeming “moral” opposition. For some people, it just feels wrong to have a system that pays people even if they don’t work. Shouldn’t we all start from scratch and pull ourselves up by the bootstraps? That sounds nice, but it’s not how things really work. As Branko Milanovic, Senior Scholar at the Luxembourg Income Study Centre makes clear, the most important predictor of somebody’s income is what country they were born in.

This concept – called the citizen premium – means that somebody born in the United States will make 93 times, or 9,300 per cent more than somebody born in the Congo.

So, to be truly self-made try starting in the Congo with nothing, otherwise you are benefiting from a system that precedes you. With that in mind, paying taxes and supporting a Guaranteed Income program is a recognition that each person in our society should have at least a basic level of financial security and should be protected from poverty.

Looking at the facts, we can see that a guaranteed income would bring savings from poverty reduction and boost consumption. That is why it would be great for our economy and would be an important step in building a more fair and equitable society.

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Photo credit: mmmmay lee (Flickr) https://creativecommons.org/licenses/by-nc-nd/2.0/

(Photo cropped)

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