Last Updated: July 12, 2021
When people discuss basic income, they usually refer to two different schemes often seen as exclusive of each other.
A Universal Basic Income (UBI) as a flat amount paid to all vs. an income-tested basic income most commonly called a Guaranteed Minimum Income (GMI), which goes to those most in need and phases out as income from work increases. A GMI tends to go under many names, such as Guaranteed Livable Income (GLI), Guaranteed Livable Basic Income (GLBI), Guaranteed Basic Income (GBI), Guaranteed Annual Income (GAI), Basic Income Guarantee (BIG), Negative Income Tax (NIT).
UBI Works’ Recovery UBI proposal – signed by nearly 30,000 Canadians across all federal ridings – delivers both in a way that works together to achieve different goals. We hope this article helps to explain the differences between what these two schemes accomplish as well as how they can also work together.
Recovery UBI: $500 monthly non-taxable UBI payment to all adults (blue in the graph below), which increases to guarantee each individual an income of $2,000/month ($3,000 per couple, and $1,500 per additional adult in the family) will speed up our economic recovery and leave Canadians stronger (red in the graph below):
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Recovery UBI delivers two complementary components that each solve different problems:
1. The universal dividend (UBI) recognizes that jobs aren't working for most people.
Incomes are not keeping pace with rising costs of living because technology is cheaper than workers. UBI gives each of us a share of our economy, providing a raise for all Canadians and a basis for shared prosperity as we go through a period of rapid and disruptive technological automation of jobs. Without UBI it is unlikely that western countries will be able to maintain a middle class.
2. The guaranteed minimum income (GMI) buys us time by keeping us out of poverty.
GMI ends poverty and restores pathways into the middle class. It defends against declining job quality by ensuring all Canadians, including seniors and those living with disabilities, will make more than $24,000/year. It could replace low-income support programs with a more efficient, lower cost system that treats people with dignity.
Both of these programs are often individually referred to as basic income, but are generally considered to be implemented exclusive of one another.
Neither GMI nor UBI alone are sufficient to address the structural changes that have made our economic system stop working for most people, or the forces that will continue to worsen these trends. Combined, they will ensure that all Canadian adults have an income of at least $24,000/per year ($36,000 per couple), including seniors and those living with disabilities.
Programs like a guaranteed minimum income would move people just above poverty — a great social achievement on its own—but this solution falls short of addressing the challenges in our 21st century economy, where wage growth is disconnected from productivity and economic growth.
A guaranteed minimum income (GMI), also called a basic income guarantee (BIG), is an income supplement that gradually phases out with employment income, so that Canadians always make more when working—ending working poverty.
An effective income guarantee should be set at a level that would virtually end poverty. Recovery UBI builds a guaranteed minimum income on top of the $500/month dividend, government cash supports, and other non-employment income, so that every Canadian makes at least $24,000/year ($36,000 per couple).
Built on top of the $500/month universal dividend, the guaranteed minimum income provides substantial raises for people working in low income jobs.
This guaranteed income gives Canadians a bonus when they go back to work by gradually phasing out by 50 cents per $1 of work income. This is identical to what was tested in the Ontario Basic Income Pilot, as well as the “Back to Work Bonus” proposal by the Conservative Party and the Bloc Québécois to modify the Canada Emergency Response Benefit (CERB), in order to preserve work incentives for Canadians as our economy emerged from lockdown.
The two components together — an equal universal dividend and a needs-based payment — can bring the 21st century upgrade our economy needs, funded through realistic tax reforms. (See our accompanying article: How to Pay for a Universal Basic Income.)
We can both solve poverty with a guaranteed minimum income and expand the middle class—by making the economy pay everyone a dividend.
UBI Works’ Recovery UBI proposal combines these approaches to form a basis of a fairer and faster post-pandemic economic recovery that would leave Canadians far better off.
There is precedent for two programs working together. In Canada, our seniors have the Guaranteed Income Supplement (GIS), a needs-based, basic income guarantee providing up to $11,229 annually to singles, and even more to couples. The other part of the program is Old Age Security, a rights-based program providing monthly payments totalling up to $7,518 annually to seniors for their years of working in Canada. Seniors do not rely on just one of these programs — instead, they enjoy a hybrid model. This approach has been proven to work for seniors and could work for all Canadians if Recovery UBI were implemented.
The best thing for Canada right now is to start with both programs. A $500/month dividend and a $2,000/month guaranteed minimum income will help millions of Canadians through a long and jobless recovery, which could be enacted today with enough political pressure.
However, a universal dividend could achieve the same outcomes as a guaranteed minimum income if it were increased to a range of $1,500-$2,000/month. It would further streamline government services and increase the work incentive, since the dividend is kept in full regardless of income. Given the gross cost ($720B/year), such a change would be extremely challenging in the context of a post-pandemic recovery.
Recovery UBI does however allow for this possibility, laying the groundwork for the gradual expansion of the dividend to the point where it subsumes the guaranteed minimum income entirely. In pursuing this goal, we can build an economy where every Canadian has the right to benefit from our current abundance and reject the notion that scarcity is required for a productive society.
To shift the conversation about basic income to recognize it as an economic need and economic opportunity, with the goal of seeing UBI implemented in Canada.
We want a Canada where everyone can pursue their potential and not be held back by basic material constraints or unsafe environments.
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