‘Mincome’ is pro-health and against poverty

‘Mincome’ is pro-health and against poverty

Dr. Trevor Hancock

2 April 2017

702 words

Last week I wrote about the health, social and economic benefits of a poverty reduction plan for BC. Not unreasonably, a reader challenged me to explain how we could afford that. “Just what price tag would you set on the actions you propose?”, he wrote, “Then we could move on to that tricky part about how well — or if — the plan works.” Fair enough, so here goes.

I wrote about the costs in my column on January 7th 2015. As that is more than two years ago, I will repeat some of it here. In a 2011 report the Canadian Centre for Policy Alternatives looked at the total costs of poverty in BC. They estimated that overall, the annual direct costs to government from increased costs for health care, justice services and foregone tax revenues were $2.2 – 2.3 billion. Note that this is an understimate, because estimates of the costs of social services were not available.

The added health care costs alone related to poverty were estimated to be $1.2 billion, based on the potential savings in reduced health care utilisation if people in the lowest 20 percent of income had the same health status as those in the next 20 percent, which is only a modest change.

When they added up all the costs, including costs due to lost production, lost income and lost tax revenues attributable to poverty, they concluded that poverty costs between $8.1 and $9.2 billion per year. This is more than double the $3 – 4 billion they estimated it would take to markedly reduce poverty by investing in a poverty reduction strategy that would end homelessness and hunger, ensure access to affordable housing and child care, and improve pay and working conditions for people in low–wage jobs.

So on the face of it poverty is so expensive that we can’t afford it, and there might be an economically beneficial alternative. This seems like an idea that any fiscally responsible government would consider worth invesigating and testing, not just dismissing out of hand. Which is presumably why all the other provinces have developed some form of a poverty reduction plan.

One possible solution was tested in Canada 40 years ago – and seemed to work. Between 1974 and 1979 the federal and Manitoba governments collaborated on a project – Mincome – to provide a guaranteed annual income (GAI) to the residents of the town of Dauphin MB. The GAI is a form of negative income tax or refundable tax credit; its proponents claim it is particularly effective in aiding the working poor and is simpler and cheaper to administer than the many existing and overlapping programs. Regrettably, the research on Mincome was shelved – the data were collected but not analysed – amidst waning political support.

Mincome was available to all the roughly 10,000 people of the town and the 2,500 people in its rural municipality. However at any one time, “only about a third . . . of families qualified for support and many of the supplements would have been quite small”, according to Professor Evelyne Forget, an economist in the Department of Community Health Sciences at the University of Manitoba, who came across this forgotten study about a decade ago and analysed it.

In a report published in Canadian Public Policy she concluded “a relatively modest GAI can improve population health, suggesting significant health system savings”. Specifically, she found an “8.5 percent reduction in the hospitalization rate for participants relative to controls, particularly for accidents and injuries and mental health”, and she also found that “participant contacts with physicians declined, especially for mental health”. She noted that the reduction in hospitalisation would have amounted to savings of $4.6 billion annually in Canada in 2010.

Also important was the finding that people did not stop working – except for new mothers and teenagers. Given the health and social benefits of mothers spending more time at home with their infants and adolescents continuing on into grade 12, these are desirable outcomes.

Small wonder that Quebec has explored the idea, while Ontario is actively considering testing a basic income in several communities, based on a report commissioned from former Conservative Senator Hugh Segal. Would that the BC government were that forward-thinking and thoughtful.

© Trevor Hancock, 2017

 

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