While Canada does not currently have a Universal Basic Income (UBI) program in place, many are contemplating it as a way to keep Canadians afloat during times of economic challenges and alleviate poverty in Canada.
Let’s get into more detail about UBI, what it is, and its perks and potential drawbacks.
Universal Basic Income (UBI) is a regular payment made by the government to all Canadians. Unlike other benefits that require certain conditions to be met — such as welfare or employment insurance (EI) — UBI comes with very few or no conditions.
Everyone in Canada, no matter their income level, will receive the same amount every month. By year-end, the government will balance out the funds distributed through the income tax system to recoup extra money from the higher earners who did not require the UBI funds.
The goal of UBI is to reduce poverty and ensure that everyone can afford to pay for life’s basic needs, such as food and shelter.
The concepts of ‘Universal Basic Income’ and ‘Guaranteed Basic Income’ may sound the same, and the terms are sometimes used interchangeably. However, they differ slightly.
As mentioned, Universal Basic Income pays out the same amount of money to every Canadian, no matter what their income level may be. So, people who live below the poverty line would receive the same payment as those who are considered affluent. However, people who earn over a specific income threshold may have to repay the benefit when they file their income taxes.
Otherwise known simply as ‘basic income’, Guaranteed Basic Income is a system in which the lowest-earning Canadians receive the highest payments. As one’s income increases, the amount of money received through this program decreases.
This strategy is meant to ensure that those who need financial assistance the most get it, while those who do not need any financial help will not.
While Canada does not have a Universal Basic Income program just yet, it does have certain benefits and programs in place that are designed to help low-income earners. For instance, Canada currently offers a variety of income assistance programs, such as the following:
| Employment Insurance | Learn More |
| Wage Earner Protection Program | Learn More |
| Canada Child Benefit | Learn More |
| Child Disability Benefit | Learn More |
| Canada Pension Plan | Learn More |
| Old Age Security Pension | Learn More |
| Immigration Loans Program | Learn More |
| Federal Disability Tax Credit | Learn More |
| Guaranteed Income Supplement (GIS) | Learn More |
| GST/HST Tax Credit | Learn More |
For each one of these programs, benefit recipients must meet certain criteria to be eligible. A UBI program, on the other hand, does not come with any conditions. It would be available to all.
No country currently has a fully operational UBI program in place. However, Mongolia and the Islamic Republic of Iran both had UBI for a brief time, though the programs were short-lived.
If UBI is implemented in Canada, it would work in one of two ways: the Demogrant Model or the Negative Income Tax (NIT) model.
The demogrant model involves making payments to every Canadian. While the payments are non-taxable, all additional income is taxable, usually at a higher rate compared to typical income tax rates. Higher-income earners would eventually end up paying back the benefit through their income taxes.
Since the benefit is universal, there are no conditions to be met to qualify for the payments via the demogrant model.
The Negative Income Tax (NIT) model involves a refundable tax credit. Only low-income earners with an income that falls under a specific level would qualify for the benefit, which contrasts the demogrant that is paid out to all citizens. The goal of the NIT model is to reduce poverty and offer an effective and realistic solution to Canadians living under the poverty line.
Canada has previously tested a couple of versions of basic income programs in the past on a provincial level. Including the Mincome experiment in Manitoba in the late 1970s, and the Ontario Basic Income Pilot Project in 2017. Neither project really took off, and no national UBI program has yet to be implemented on a more permanent basis.
There are a couple of reasons why Canada has yet to implement Universal Basic income:
Not every Canadian has the same challenges that impact their financial lives. The issue of poverty and the various hurdles that may get in the way of Canadians earning a decent living may be too complex to deal with via UBI. Resolving the diverse needs of Canadians through a standard government cheque may be unrealistic.
Arbitrarily sending people money may only serve as a bandaid to underlying issues causing financial difficulty. There’s also evidence to show that a UBI program would decrease the number of Canadians in the workforce.
In addition, a taxation system to collect benefit money back from high-income earners may not be effective, since 10% to 12% of Canadians don’t file their income taxes.
Instead, some opponents of UBI suggest that it may be best to focus on improving financial assistance programs that already exist.
Most governments have hesitated to implement UBI simply because of the exorbitant cost. Handing out enough money for every Canadian to be able to live a comfortable life is understandably expensive. According to Canada’s Parliamentary Budget Officer, the estimated cost for a national basic income program could be as high as $98 billion over a 6-month period.
Universal Basic Income may not be without its flaws, but there are some potential benefits that this type of program may have, both for individuals and the communities they live in:
A healthy diet can be expensive to pay for. Even just eating enough, regardless of the quality of food, can be too expensive for some households. With UBI in place, low-income Canadians can ensure they have enough to eat every day and make better choices on the types of foods they buy.
To some extent, money can support better health because it allows Canadians to afford the resources needed to maintain optimal wellness. In addition to better quality food, Canadians receiving UBI may be able to access additional sources to improve their health, such as vitamins or gym memberships.
Post-secondary education is incredibly expensive and can cause a lot of debt. However, it’s often the gateway to getting a better job. With some financial assistance offered through UBI, Canadians can gain better access to college or university education needed to get higher-paying jobs without going into debt.
For those who desire to own their own business someday, the funds received from UBI can help open the doors to the possibility of becoming self-employed.
Rather than using every single dime to cover the basic necessities of life. UBI payments can help give Canadians more disposable income that they can dedicate to creative hobbies and undertakings. Having more money can also mean having more time to devote to volunteering or caring for family.
There has long been a link between poverty and violence. People living below the poverty line are often more involved in criminal activity. By improving Canadians’ finances, violent activity within communities across the country can decrease.
Both local and broader economies stand to benefit when more citizens are in a better financial position. With more money to spend, consumers can inject life into their local economy, which has a ripple effect on the overall national economy.
Different economists in Canada have their own individual opinions about a national Universal Basic Income program, but where does each major party stand on the idea?
The Green Party is dedicated to supporting a guaranteed livable income program that is initially subsidized by the federal government, with supplemental amounts paid out by intergovernmental bodies.
Like the Green Party, the NDPs are committed to ensuring that all Canadians have access to a guaranteed livable basic income through the expansion of all income security programs.
The Liberal Party currently does not have a specific plan for establishing basic income, though many within the party support the concept.
The Conservatives are not currently involved in establishing a basic income program.
There is currently no formal commitment to basic income from the Bloc.
The PPC does not currently have a plan in place to establish a basic income program.
As the Canadian government mulls over the possibility of implementing UBI, there are other avenues Canadians can take when they’re struggling with financial matters:
If money is tight and you need to cover a large expense, a personal loan can help. These loans will provide you with a lump sum of money. You can repay a personal loan in installments to help spread out the costs.
Even if you have poor credit, there are plenty of online lenders that work specifically with Canadians in similar situations. While you may pay a higher rate because of your low credit score. You still stand a better chance of getting approved for a personal loan from an alternative lender than a traditional bank. You can then use the funds to pay for any large expense you can’t currently cover on your own.
Even if you’re not currently employed, you may still qualify for a loan without employment verification. Lenders who provide these loans look at other non-traditional forms of income, including government benefits.
For instance, if you’re collecting EI benefits or disability benefits, the lender may use that income to vet your loan application. As long as your income — even if it’s coming from the government and not a job — covers the loan payments, you may be eligible for the unique type of loan.
You won’t have to submit proof of employment, pay stubs, or other documentation. While taking out a loan with a low income may not necessarily be the best idea. It may be a last resort if you’re in urgent need of money.
Before applying for any loan, it’s a good idea to check your credit score first to see where you stand. With a higher credit score, you have a better chance of loan approval. A higher score will also help you secure a lower interest rate, which can make your loan much more affordable.
You can check your credit score for free using Loans Canada’s CompareHub.
Universal Basic Income may have been tested in the past in parts of Canada, but nothing has stuck. The recent health crisis may have incentivized the government to revisit the possibility of implementing UBI in Canada. In the meantime, there are several other government programs available to eligible Canadians, as well as loan programs for those who need a quick financial fix.
Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.
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