Substitution Strategies

Guaranteed Annual Income (GAI)

Integrating Poverty Reduction Strategies

Guaranteed Annual Income (GAI)

The GAI approach (also known as Basic Income) has been under discussion in Canada since at least the 1970s (see Emery et al., 2013) and is in many ways the opposite of our current social assistance model because it does not have the same extensive set of conditions, requirements,  rules and employment disincentives. In other words, most assistance in Canada is based on conditional income supports. Canada has a basic GAI for seniors, through Old Age Security.  Established in the 1960s by the federal government, it is available to everyone but taxed back from higher income earners. The Guaranteed Income Supplement is available to seniors with the lowest incomes.  For working age adults, there are child benefit programs and the Working Income Tax Benefit that provide some dimensions of GAI.

There are many questions about the design and implementation of a GAI (cf. Green et al., 2020) and the instruments that can be used. GAI also needs to be considered in the context of other public services and supports, including many of the proposals in other change areas on this site. The fundamental objective is to help provide income for basic needs and participation in social processes. The Basic Income Canada Network proposes 6 principles for GAI that should, in theory, guide instrument choices:

  1. increase social justice,
  2. increase income security, in part by providing insurance against budget shocks,
  3. increase equality of opportunity,
  4. increase dignity,
  5. increase the standard of living of the lowest-income Canadians,
  6. restore social solidarity.

Within these principles, and among the many goals that have been proposed for GAI, the key goal here is to reduce income-related food insecurity.

According to Kennelly (2017), negative income tax, demogrants (or direct payments) and income top ups are the most common models. In a negative income tax approach, most commonly used in Canada, the target is lower income Canadians.  As a person's employment or investment income increases, the amount of the benefit decreases, as calculated through standard income tax rates.  In the demogrant model, all citizens receive the amount, regardless of income.  Canada's Old Age Security is an example for all individuals 65 years or older, although a recovery tax is activated once  income reaches approximately $73,000 per year,  Canadian seniors can also receive a top up, the third model, called the Guaranteed Income Supplement (GIS). This brings very low income seniors up to a basic income threshold.

Many experiments have been done in different countries, particularly with a negative income tax model, including Canada's Mincome pilot conducted in Winnipeg and Dauphin Manitoba in the 1970s. Mincome did, however, adjust payments based on both income and net worth (Mason, 2020). Mincome did result in fewer hospitalizations which could lead to higher work productivity, but also had embedded in the model a very small work disincentive (Emery et al., 2013; Kennelly, 2017).  Ontario started and then cancelled a pilot, and PEI and BC have had expert panels exploring the possibilities. Fifty members of the Senate proposed  that the Covid emergency  CERB program be a stepping-stone to a permanent basic income program (Green et al., 2020). The private Foundations for Social Change with UBC has run a pilot project with 50 recently homeless people using a direct cash transfer model ($7500).  They found compared to those who did not receive cash transfers in the randomized trial that recipients moved more quickly into stable housing, spent more money on food, had greater food security, and lower reliance on the shelter system (Zhao et al., 2020).  Although senior poverty remains because the support levels are not consistent with minimum cost of living requirements, the OAS has reduced the depth of senior poverty for some demographics.  It results in almost 50% lower levels of food insecurity (Emery et al., 2013). A private member's bill, C-273,  was before Parliament in June 2020 but will likely die on the order paper. If passed, it would "require  the Minister of Finance to develop a national strategy to assess implementation models for a guaranteed basic income program as part of Canada’s innovation and economic growth strategy."

Key design parameters include how universal is the eligibility, what conditions exist on the entitlement,  the benefit level, the relationship with work, and the degree of retention and integration with other social programs, both current ad future. Key design elements with significant expenditure implications include taxability (individual or family income) and clawback.  For example,  OAS is categorized as a flat amount payable to everyone that is taxable as income increases, with a 15% clawback (means-tested). GIS is categorized as a negative income tax and has a higher maximum, is not taxable, but has a 50% clawback. At what level the clawback is triggered and how quickly is a consideration.  For example, should the clawback start at the LICO at a low percentage and then increase as income rises?  An additional consideration when using the tax system is that a small but significant percentage of Canadians infrequently file income tax.  For example, 5% of Ontarians don't file (Young and Mulvale, 2009; Laidley, 2016), including 1/3 of social assistance recipients (Stapleton, 2018). First Nations registered under the Indian Act and receiving income from enterprises owned by First Nations do not pay tax on that income (Mason, 2020). MacEwen et al. (2020) have consequently proposed automatic tax assessments by CRA based on information already received.

Of the various design options, the one that has received the most attention with regard to food insecurity is that of Emery et al., (2013) (see also McIntyre et al., 2016). The basic income floor level for OAS/GIS for a single person exceeds welfare payments in every province. They propose that OAS/GIS be reconfigured so that age is not part of eligibility, using a phased-in approach.  As the age range is expanded to younger cohorts, it allows for analysis of labour market effects that can ultimately help determine the scope of eligibility and support levels.  If successful, the GAI approach can be gradually expanded to achieve one of the models outlined by Pasma and Regehr (2019).  There is  the possibility of using this system to replace the basic social assistance payment within each province to reduce overall program costs (see Redesign and  Financing the Transition).

There are, however, important unique considerations for First Nations.  In some provinces, provincial social assistance is integrated with many other supports and administered by First Nations administrators.. Funding for administration is provided by both the federal and provincial governments. This is especially valuable for remote communities. So, what happens to those supports and those who administer the programs if there's a shift to a centralized GAI model?  Will the GAI rates reflect the realities of many remote communities?  Given the history of program design and implementation, First Nations have reason to be skeptical about major policy changes. The National Child Tax Benefit has not been as helpful to First Nations as others (Broad and Nadjiwon-Smith, 2017).  What emerges from these concerns is that a GAI model should just replace social assistance income transfers but not all the associated programming. Consequently, should a GAI be introduced, it must be a coordinated federal - provincial - First Nations design and implementation.  ITK (2017) has called for a Basic Northern Income pilot to test suitable designs.

Integrating Poverty Reduction Strategies

The federal government, 8 provinces and many municipalities have official poverty reduction strategies.  The table below provides some details on the federal and provincial ones.

The strategies display different levels of comprehensivess and potential effectiveness, with those of BC, ON, QC, PE and NL demonstrating a better developed understanding of poverty alleviation than the federal government and the other provinces.  The territories are in challenging fiscal and infrastructural situations so their strategies are understandably less developed.

Most strategies bundle actions already taken or underway, one of their significant weaknesses.   Obviously existing initiatives, while important, are inadequate otherwise we'd have lower levels of poverty.

The municipal challenge is jurisdictional.  They rely on the provinces and federal government to improve direct income transfers to low income citizens, so they can mostly only provide enhancements to their services at lower costs and advocate for interventions with their senior government colleagues.

First Nations, Inuit and Metis have a broader conception, focused on supporting the "Good Life", living a life according to core values in the context of community well-being. For many First Nations, there is no word for "poverty" in their language.  Consequently, many strategies identified elsewhere on this site - reconciliation, treaty rights, access to services, reclaiming heritage and land - are all central to a "poverty reduction" strategy (Wien, 2017).  Although there are income transfers from the provincial and federal governments, First Nations have not necessarily had a significant role in their design and delivery.  Consequently, given all the dimensions named here, there are not any comprehensive strategies in place for First Nations, Inuit and Metis.

Regional differences in poverty speak to the need for an integrated approach, in part a result of the variability in the comprehensiveness, integration and funding levels of different poverty reduction strategies. Some provinces name certain federal provisions as touch stones on which to build but most are only synchronized in limited ways with others in their related jurisdictions. Similarly, municipal strategies can only be effective if they build off of robust provincial strategies and add elements that fit within their capacities, authorities and socio-economic circumstances.

The federal government will need to take the lead on this effort to align plans, through the FPT committee of ministers responsible for social services and the affiliated civil service FPT committee.  The other core instrument at its disposal is the Canada Social Transfer (CST).  In earlier periods, the federal government was more directive about how its dollars were to be allocated.  The recent agreement on the Canada Health Transfer had elements that returned the federal government to this more activist role and it must be applied to future CST agreements.  Once the outlines of provincial changes to strategies are established, then municipalities can better align their plans. For First Nations, in addition to other changes outlined on this site, social assistance design and implementation should continue to shift to First Nations governance and better co-ordination between federal and provincial contributions must be established in all provinces (only 2 currently, ISC, 2018).

Table: Federal and provincial poverty reduction strategies

Jurisdiction When and who Key elements Key improvements
Canada ESDC, 2018
Identified as a whole .of government approach

Sets official poverty measure (market basket)

Targets: 20% reduction by 2020 (relative to 2015; 50% reduction by 2030
Canada Child Benefit
Canada Workers Benefit
GIS increase
Poverty Reduction Advisory Council
Proposes Poverty Reduction Act

New programming needed (and expenditures), not just bundling existing initiatives.
Use both market basket measure of poverty and low-income measure (50% of median income)
BC Social Development and Poverty Reduction, 2019
Poverty Reduction Strategy Act, 2018
Identified as an across government approach
Target: 25% overall reduction (2016 baseline),  50% reduction in child poverty by 2024
Adopts federal poverty measure
Reconciliation and poverty reduction for First Nations
Child Opportunity Benefit
Minimum wage increases
Affordable Child Care Benefit
Disability Assistance Rate increases
Housing affordability
Strategy bundles together existing initiatives, but does not announce new programming and expenditures
AB No specified strategy, but many initiatives

An Act to Combat Poverty and Fight for Albertans with Disabilities

Alberta Child Benefit
Family Employment Tax Credit
Social assistance rate increases tied to inflation
Asset limits increased for some recipients
Minimum wage increases
More child care spaces
Low income transit pass
Affordable housing strategy
Create a strategy with targets and timelines
SK Social Services, 2016

Poverty Reduction Strategy

Target: reduce by 50% by 2025 those experiencing poverty for 2 years or more
Many pre-existing initiatives
Redesign income assistance, transitions to training
Increase earned income exemptions and Low income tax benefit if fiscal situation permits
Improved food security in the North
Make going forward provisions more specific and less tentative

Make government role in collaborative efforts stronger and more specific to relative resources of actors

MB Families; and Education and Training, 2019

Whole of government approach

Poverty Reduction Strategy

Target: reduce child poverty by 25% by 2025, relative to 2015 and support federal targets
More childcare spaces
Increasing Basic Personal Amount exemption
Minimum wage indexed to inflation
More transition to employment supports
Strategy bundles together existing initiatives, but does not announce many new programs and expenditures directly related to income supports
ON McGuinty government, 2008
First Poverty Reduction Strategy
Poverty Reduction Act, 2009
2nd Poverty Reduction Strategy
New consultations to renew strategy  under Ford government underway
Target: reduce children in poverty 25% by 2013
Ontario Child Benefit
Full day kindergarten
Youth Opportunities Fund
Rent Bank
Employment training
Children's dental benefits
Child Care subsidies
Expand Student Nutrition
Child poverty reduced in first five years, in concert with federal benefit

More supports for low income adults and First Nations communities

QC Landry PQ government, 2002

Act to Combat Poverty and Social Exclusion, 2002

Automatic annual indexation of social assistance, plus changes to asset accumulation
Tax deductions
Social economy investments
Subsidized day care
School dropout prevention
Skills development
Affordable housing
Relatively successful reductions in poverty compared to other provinces.

A need to rebuild an integrated approach

Action plans need reinvigoration, have gotten weaker over time

NB Economic and Social Inclusion Corporation, 2009

First plan, 2009-13

Second, Economic and Social Inclusion Plan, 2014-19

3rd plan, 2020-24

Economic and Social Inclusion Act, 2010

By 2015, reduced income poverty by 25% and deep income poverty by 50%; now reduce income poverty by 50% by 2030 from 2015 baseline
Minimum wage and social assistance rate increases
Amendments to Residential Tenancies Act
Community Inclusion Networks
Drug plan
Community asset mobilization and entrepreneurial spirit
Breakfast programs in all schools
Some poverty reduction over 10 years.

2nd plan needed more specificity, relied on cross-sectoral collaboration without clear leadership role from government. 3rd plan needs similar improvement.

PE Poverty Reduction Council, 2018

Poverty reduction action plan

Target: reduce poverty by 20% by 2020 and 50% by 2030 based on market basket measure
Increase social assistance rates
Change social assistance rules to support labour force attachment
New rent supplements
Increase minimum wage
Secure Income program for most vulnerable
Multi-year grant funding for community partners
School food initiative
Develop a Poverty Reduction Act
Rate increases need to be higher to achieve targets
NS No official poverty reduction strategy but some commitments through the Blueprint for Poverty Reduction (2017-22) and Dept. Community Services Short term grants

Improving outcomes of Income Assistance recipients

Needs targets and a comprehensive plan
NL Williams Government, 2006

Poverty  Reduction Strategy, 2006, and 2014 Progress Report

NL Market Basket Measure
Rent Supplement Program
Social assistance rate increases
Expanded Earned Income Supplement
Increases to Low-Income Tax Reduction threshold
Child care subsidies
Education Incentive Allowance
Poverty levels had fallen significantly, but weaker commitment since 2012, so that must be reinvigorated.
YU Department of Health and Social Services, 2012

Social Inclusion and Poverty Reduction Strategy

Housing projects

Child care subsidy program

Needs new initiatives and funding commitments.  Not really a strategy, more a set of guiding principles.
NWT NWT, 2014

Anti-Poverty Action Plan

Anti-Poverty Fund
Mental Health supports
Minimum wage increase
Shelter supports
Increase to food allowance in social assistance
Increases in funding and infrastructure are required.
NU

 

Nunavut Government and Nunavut Tunngavik Incorporated , 2012

The Makimaniq Plan: A Shared Approach to Poverty Reduction, 2012

Five Year Poverty Reduction Action Plan, 2015

Collaboration for Poverty Reduction Act, 2013

Poverty Reduction Fund
Housing and Homelessness Strategy
Food Security Strategy and Action Plan 2014-16
Nunavut Income Support Program
Child Benefit
Senior Citizen Supplementary Benefit
Territorial Workers Supplement
Increases in funding and infrastructure are required.