Exploring the Outcomes of Basic Income

As global interest in Basic Income grows, Ontario's brief pilot offers insights and raises questions about the potential for more sustainable social assistance models.

This week on the VOB we are discussing Basic Income (BI) - a concept that proposes providing people with a livable income that helps improve housing and health outcomes. The brief pilot project in Ontario did not provide enough data to get a good idea of its impact. It’s time to look at alternatives to the current social assistance status quo and see if there are better models.

Basic income would be set at 75% of the median income in Canada. BI operates through a negative income tax (NIT), by assessing an individual’s tax return where their earned income would be reduced by 50 cents per dollar.  This would then determine the BI amount they could receive.

Ontario started its BI pilot project in the fall of 2017. BI aims to test how a livable income for couples and individuals would provide sustainability and how sustainability impacts employment, education, life, health, and financial security outcomes. An individual could receive up to $16,989 with an extra $500 monthly and couples could receive up to $24,000. Notably, BI would be a substitute for people on ODSP and OW.

The BI pilot project recruited 4,000 participants across three cities: Thunder Bay, Hamilton, and Lindsay. The pilot project was meant to last 3 years, but only lasted 18 months. The gross cost for the three years was $150 million.
Unfortunately, the pilot project was short-lived, and we could not fully analyze the impacts of the BI. These impacts could demonstrate labor market participation and healthcare use on BI.  Additionally, no data collection was done on the control group that did not receive BI, limiting our ability to compare and observe whether economic and life conditions improved without BI.

After the shutdown of the BI pilot project, recipients went back to our current social assistance, which are Ontario Works (OW) and the Ontario Disability Support Program (ODSP). OW currently supplies up to $733 monthly and ODSP supplies up to $1368 a month. For someone trying to re-enter the labor market, $733 is extremely difficult to live on when a rental for a one-bedroom apartment in Peterborough is $1,173. ODSP can cover rent but with very little left over.

As taxpayers, we are concerned with the costs of these projects. If these projects come to fruition, will the cost increase taxes? Will we see a decrease in labor market participation? These are valid concerns from both business owners and taxpayers.

For context, the Ontario Government is currently spending $3.7 billion less than required to fund existing programs and announced commitments on social assistance until 2026, and as of this year, our budget is short $0.7 billion. The 2024-2025 budget stands at $214.5 billion with social assistance covering 9.3% of the budget.

From a sample of 200 participants in Hamilton, there was 24% of people who were unemployed before and during the pilot. 11% were employed but became unemployed during the pilot. 6% were employed before the pilot but became unemployed to pursue a post-secondary education. 5% of participants found work while on the pilot project. In total, there were almost two-thirds of people worked with 54% of people working before and during the pilot excluding the 5% who found work while on the pilot. 35% of people in total did not work during or before the pilot. What is noteworthy is the 11% who were employed but became unemployed during the pilot.

The Ontario government spends $85 billion on healthcare annually. In the same survey, 33% of respondents reported a reduction in hospital emergency room visits, and 83% noted increased access to over-the-counter medications. With a third of participants reducing their hospital visits, this could alleviate the strain on our healthcare system and improve people’s standard of living by decreasing the frequency of visits from lower-income individuals. Such a shift could potentially lead to cost savings for taxpayers by reducing the need to service a higher volume of patients.

​Short-term results from the BI pilot project indicate potential cost savings for our healthcare system and the reduced effects from the rising cost of living. It’s time to look at all the options when it comes to assisting those living on the margins.