One hot topic that seems to be on everyone’s social policy radar these days is the idea of a “basic income guarantee”, or a “mincome”, or a “guaranteed annual income” (GAI – the term I will use in this post). A recently-announced pilot project in Finland got quite a bit of press; the federal Minister of Families, Children and Social Development, Jean-Yves Duclos – who examined the idea thoroughly in his previous career as an economist at Laval – says the idea is “worth studying”; and, the ever-seeking-to-expand-public-
It’s hard to make judgements about possible GAIs because they come in so many different forms (this CCPA paper on Guaranteed Income is quite a good guide for the un-initiated). Some are universal in that monthly cheques get sent to everyone, and others are simply income top-ups for the poor. The size of the benefit may vary significantly, as may its integration with/replacement of other benefits, such as pensions. At the high end, giving everyone over the age of 18 $800/month in a guaranteed income payment works out to about $268 billion, or 14.7% of GDP (that would be offset by reductions in spending OAP, social assistance, and unemployment insurance, but those three programs don’t come close to covering that amount, so it would require a whacking great tax increase). At the other end, there are much more moderate and targeted systems, which I’ve seen costed in the $30-40 billion range. Projected clawback and tax rates matter a lot here, and there’s simply not enough information to even speculate reasonably.
But one thing that seems certain is that there will have to be some major policy discussions around students and student assistance during the design phase of a GAI. Would students be excluded because student financial aid programs already constitute a targeted form of assistance? Or would they be included because the whole point of a GAI is that it is universal? If students were included, what would happen to their student aid?
This would be an interesting challenge. Student aid for dependent students is based on the idea that families should contribute something to their children’s education. But what if everyone over 18 were getting some “income” of their own, or at least given an income floor? Would we still keep these rules? Would the grants we currently distribute disappear, in part to pay for the cost of the GAI?
One could imagine a very simple system in which the GAI is presumed to take care of living expenses, and student aid is left simply to take care of tuition costs. However, a GAI would have to be very high for that to make sense: student aid living maxima average around $1,000/month in Canada. If it were set lower, such a scheme might make students worse off.
Another question: if GAI *were* set sufficiently high so as to take care of living expenses, what would be the continued argument for any kind of student grants? At that point, why not just ditch need assessment altogether and make loans available to all to cover 100% of tuition? It would certainly make loan administration easier.
As you can see, the adoption of a GAI would have significant knock-on effects for student aid, which would need to be carefully thought through. And this is not just a concern for a distant horizon: it’s also important in the near term for anyone doing a serious pilot project. One of the serious problems with GAI pilots is that they provide participants with a set of new benefits, without making the adjustments to taxes and “other” benefits that a real GAI would require. Results thus tend to reflect less the specific effects of a certain GAI design, and more the effects of giving people a bunch of free stuff paid for by outsiders. This indeed was the principal critique of the well-known Manitoba “mincome” experiment in the 1970s.
A serious GAI pilot would almost certainly have to deny any student participants a part of their student aid entitlement, which politically might be quite difficult. These are considerations well worth pondering as this social policy field moves forward.