What to do with our emotionally charged income security system
To many, a GAI or basic income looks like a bauble or a confection. It’s up there with solving gridlock, reducing global warming and curing cancer. Easy to want and easy to say – wicked hard to do!
The problem with a GAI is not unlike the problem of unicorns – they are beautiful but don’t exist. Bringing a GAI or BI into existence would be extremely difficult as a horrendous load of problems face designers within the first minute of study.
Growing a horn on a horse might well be easier.
More than anything, the GAI suffers the same problem as ‘world peace’ in that it is an absolutely pure idea that would, in one fell swoop, make us all better off. A GAI sounds like it should be very easy to do in lay terms just as ‘world peace’ seems eminently implementable to many ( lay down your arms).
To me, this is why the GAI gains momentum in the same way as ideas to establish world peace, end gridlock or to cure cancer.
That said, the concept of a GAI is very useful because it gives us all a goal to strive for – an outcome and an ‘end state’ for income security in a poverty free world. Without goals and without aspirations, reform falls flat because we don’t know where we are going.
But for heaven’s sake, we have been positing the idea of a GAI on and off for the last 50 years and we haven’t even started to take the baby steps to get us there.
The huge importance of emotion, morality and biography in benefit design
One of those important first steps will be to deal with the issue of emotion, our moral palette[1] and the personal biographies of Canadians.
In A young person’s guide to a guaranteed annual or basic income – Part 2[2], I drew a sharp distinction between the public benefits paid to my father and those paid to a low income senior named Linda Chamberlain. My father is not poor by virtue of his defined benefit pension and would not be poor even if he received nothing from Canada’s income security system. Linda receives five income security payments and still lives below the poverty line.
My father can easily meet his expenses out of his pension because his pension is adequate and he lives in a mortgage free home. Linda lives in a subsidized apartment but because she has sky-high utility bills and has unsubsidized medical bills, she lives in constant poverty.
The dilemma remains that my Father receives 83% more in income security payments (on top of his pension) than Linda receives from hers. No one is looking to take any of my father’s benefits away from him and although there are reasons to believe that the single Guaranteed Income Supplement (GIS) may be raised[3] by $1,000 a year, this would result in my father still receiving 74% more than Linda.
So let’s look at what’s going on; and what’s going on is all about emotion, morality, and personal biography.
First of all, my father gets his $33,000 from our retirement income security system: OAS, CPP and Veterans’ Affairs benefits. He gets full OAS because he lived in Canada for 40 years beyond his 18th birthday. He gets CPP because he worked full time for 36 years between 1946 and 1982 and contributed part of his salary into the CPP. His pension benefits were reduced at age 65 because he became eligible for OAS and CPP.
He served in World War II and as a result, he receives benefits from the Veterans Independence Program (VIP) as he still lives in his own home.
Few Canadians would agree that his $33,000 in total benefits should be cut. They would agree that he should get his OAS because he met the OAS residency requirements. They would concur that he should be able to get CPP benefits because he contributed to the plan during his working years. I also believe that Canadians would agree that he should remain eligible for Veterans’ benefits because of his sacrifices as a teenager and as a young man.
Linda Chamberlain gets OAS on the same basis as my father and in this area, they are equals. But Linda has a very low CPP entitlement that is not worth applying for because it would be confiscated through the rules in place in the GIS and GAINS-A programs. Besides, she did not work for most of her life as she had severe mental health issues that kept her from holding down a paid job. For a considerable portion of her working years, she was homeless.
Linda also receives refundable tax credits (money that you get from governments even when you don’t pay taxes) that my father is ineligible to receive. In this case, as with GIS, the principle of need as it relates to low income prevails.
Few Canadians would see Linda’s income as adequate to meet her necessary medical expenses and utility costs along with basic needs just as most Canadians – I believe – would see my father’s pension income as adequate to meet his needs.
What is staring us in the face is that our income security system is not about adequacy or providing a floor income – it’s about emotions, morality, and personal biography.
My father is paid veterans’ affairs benefits because he served his country. This is about duty and sacrifice and placing oneself in harm’s way for God and country. He gets CPP because he paid into it. He gets full OAS because he lived his long life in Canada. None of this is about need or adequacy at all. If it was, he would get nothing from any of these sources.
Linda receives OAS because she lives in Canada. She gets the Guaranteed Income Supplement (GIS) and GAINS because she has no other outside income. And she also gets refundable tax credits because her income is low.
Linda receives most of the benefits she gets because she is poor and my father receives most of his because of his contributions. These are entirely different bedrocks.
A GAI could change all that. If a GAI observes the first principles of keeping people out of poverty and maintaining a floor income, the values of fairness, duty, sacrifice, liberty, loyalty and service to country may not figure at all into Canada’s income security equation. Similarly, it may not lift Linda out of poverty because her utilities and non-covered medical bills are so high.
Even the human values of fairness and caring would be founded on different bedrocks. Is it not fair that my Father receives money from a pensions plan (CPP) to which he contributed? Is it not a caring society that provides benefits to its aging veterans?
In contrast, is it not a caring society that provides Linda with a near poverty line income even though she had very little paid employment, contributed nothing to a workplace pension plan and little into the CPP?
A lot of emotion will be tied up in the design of a Guaranteed Annual or Basic Income: sanctity, loyalty, duty, sacrifice, personal contribution, liberty, caring, fairness, and service to country. They cannot be overlooked as they relentlessly permeate the design of our present system.
That’s why I favour a basic income that adds to the present system as opposed to any form of GAI that will dismantle it. It’s just too hard to say loyalty, duty, sacrifice, service etc. do not matter. They do matter.
But a Basic Income is not out of the woods just because it avoids dismantling an emotionally charged income security system. Its main problem is evident in what happens with my father’s benefits vs Linda’s benefits other than OAS.
If Linda’s income rises in the present system, that income is deducted at 100% from her income security benefits, her rent starts to go up and her refundable credits, depending on how much money comes in, start to be reduced.
If my father’s income rises, he keeps his CPP, he keeps his veterans’ benefits, he keeps his pension and he keeps most if not all of his OAS[4].
Under most versions of a basic income (BI), outside income would reduce after a beneficiary moves out of poverty. This means that Linda’s benefits would be somewhat like they are today. (Let’s hope they are less harsh.) If she realizes income from an outside source, a BI would reduce her income if she realized other resources.
But since many versions of a BI leave the rest of the income security system alone, my father’s income security benefits won’t be reduced and they are likely still to be 74% higher than Linda’s as she is close to the poverty line.
The bottom line is that the contribution-based income security benefits in Canada remain unreduced based on a variety of emotional values contained in our moral palettes (loyalty, duty, sacrifice service etc.). Yet the same system is quick to reduce benefits when caring and fairness are the only elements of the moral palette under consideration.
The emotions put in play like loyalty, duty, sacrifice, service and contribution lead to unreduced benefits when income rises. They become a matter of rights regardless of income. But the logic of need leads to swift reductions in benefits as income rises. When my father speaks to young people, his honorarium is untouched. When Linda speaks to young people, her honorarium is taxed back in its entirety.
In conclusion, most people think that income benefit design is about arithmetic, money, and adequacy. But that’s just a part of it. Benefit design is also all about fairness, liberty, caring, loyalty, duty and sacrifice, sanctity, service to country, contribution, and biography.
The arithmetic is not hard.
The money is just what we choose to afford.
And adequacy is already defined.
It’s the emotions, morality and personal biography parts that are the hardest of all to include in benefit design.
Js/Feb15/16
[1] http://moralfoundations.org/
[2] https://openpolicyontario.com/a-young-persons-guide-to-a-guaranteed-annual-or-basic-income-part-2/
[3] http://www.theglobeandmail.com/report-on-business/rob-commentary/what-the-liberal-victory-could-mean-for-your-pension-plan/article26954584/
[4] http://www.taxplanningguide.ca/tax-planning-guide/section-2-individuals/old-age-security-oas-clawback/