When Canada’s Liberal government announced the Canada Emergency Response Benefit (CERB) on March 25, it was the early days of the pandemic. That month, Canada lost more than 1 million jobs, and no one knew when, or if, those jobs were coming back. The $500-per-week CERB became a lifeline to more than 8 million Canadians. (All figures in this article are in Canadian dollars; 500 Canadian dollars is equivalent to $382 in U.S. money.) Most people whose income dropped below $2,000 per month and who made at least $5,000 in 2019 are eligible for the benefit.
Many have since called for CERB to be transitioned into some kind of universal basic income (UBI) lasting beyond the pandemic. In August, Leah Gazan, a member of Parliament from the New Democratic Party, served a motion for the government to create a guaranteed livable basic income based on the CERB.
Gazan’s motion died when Prime Minister Justin Trudeau prorogued parliament on Aug. 18. She will have to serve it again during the next parliamentary session. But it sparked a new round of debates in Canada about whether a universal income should be a new social program.
In a period where wealth inequality has grown increasingly obvious, and as the pandemic has knocked the economy on its head, it’s no surprise that so many would look to a basic income as a solution. The problem is that a basic income cannot fix income inequality if it doesn’t address the underlying costs that drive poverty.
The most appealing part of a basic income program is linked to what makes it politically sticky: It is universal, but extremely expensive. CERB alone risks reaching $100 billion if extended to 2021 — and it’s not universal. Canadians who made less than $5,000 in 2019 were left out of the relief plan, and so, too, was everyone making more than $2,000 per month but who still live in poverty. With average rent in Toronto for a one-bedroom apartment at $2,300, a benefit of $2,000 per month doesn’t go very far.
As a comparison, health-care spending from all levels of government — provincial, territorial and federal — is just under $185 billion. A modest guaranteed income would likely cost more than all public health services spending combined.
Advocates argue that the money to fund any universal program must come from increased taxation, and that the combination of the two would be an important mechanism to rebalance wealth in Canada. Gazan’s colleague, NDP MP Peter Julian, served a motion this summer to create a new wealth tax, which would result in about $5.6 billion in new revenue for the federal government. During the 2019 election, the NDP also promised to increase corporate tax rates and go after money hidden in tax havens, measures that were estimated to generate $12.1 billion in the first year.
While these policies will help mitigate some of Canada’s income inequality, they don’t go far enough. Nor would they bring in enough revenue to fund a UBI while maintaining current levels of social services spending.
Income inequality in Canada was relatively stable in the post-World War II period but started to increase in the mid-1990s. At the same time, the Liberal government cut more than $18 billion in programs spending. Inequality peaked in 2006, where the top 1 percent of wealthiest Canadians represented 13.6 percent of market share. By 2017, it had fallen slightly to 11.3 percent. Income inequality is also deeply racialized, with White Canadians far more likely to be wealthy.
To effectively target these inequalities, society has to first ensure that public services are in place to sustainably meet people’s needs. Every Canadian is estimated to spend just over $1,000 annually on private drug costs and premiums. If these costs rise, a guaranteed income starts to evaporate. A national Pharmacare program, estimated to cost $15 billion, would eliminate these costs. Similarly, a national child-care program would make a big difference for families who pay $10,000 per child, per year on average. The same goes for elder care, as researchers Michel Grignon and Nicole F. Bernier estimate that each Canadian must save $7,500 per year for 40 years to be able to pay for expensive care in the final years of their lives.
Then there are private market costs, such as rents or mortgages, transit or car payments and the cost of food. Without market controls to keep these costs low, a basic income would be little more than a transfer of wealth from the public purse to private hands through an individual’s monthly stipend.
This is the critical problem with a universal basic income: It has become a silver-bullet solution to all of the problems that austerity and neoliberalism have created, but it would not address any core problems. The CERB makes good sense during the pandemic and should continue as long as we live with covid-19. But what we need far more than an annual basic income are free and accessible public services such as child care, health care, transit, elder care and higher education, paid for through increased taxes on Canada’s most wealthy.
Nora Loreto is a Canadian freelance writer and co-host of the podcast “Sandy and Nora Talk Politics.”