How Canada tried to eradicate poverty with guaranteed income

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Marco Werman: Big news this week for folks like the manager of the Dunkin Donuts across the street from our studio. We, in the office, see her every day and she may benefit in a big way from President Barack Obama’s plan to give some five million U.S. workers overtime pay. Mr. Obama is touring the country to promote it. We wanted to see how far some countries go with this idea. In the Dutch city of Utrecht, they’re launching what’s being called “a daring new experiment” to give poor citizens a basic income instead of welfare. Now, this is not unprecedented. One of the most famous experiments in basic income happened in Manitoba in Canada during the 1970s, in Dauphin and Winnipeg. Evelyn Forget is an economist and professor at the University of Manitoba.


Evelyn Forget: Well, it was actually a follow-up on experiments that were conducted in the U.S. between about 1968 and 1980 to find out what would happen if you offered everybody a guaranteed income.


Werman: This was already happening in the U.S.?


Forget: It absolutely was.


Werman: Where?


Forget: Seattle, Denver, New Jersey, Appalachia--there were several sites.


Werman: What did Manitoba specifically see in the U.S. experiments where they thought, “Oh, that’s a good idea. We should try that here”?


Forget: I think everybody in North America at the time was recognizing that the way we were delivering social programs wasn’t doing a very good job of eliminating persistent poverty. So in Canada, this was the same area that we introduced universal health insurance, we made more generous disability payments, and the guaranteed annual income, the income experiment, was part of that. I think when it was introduced, a lot of people believed that it would be rolled out  generally across the country by the end of the “˜70s.


Werman: So, this program was called “Mincome,” as in “minimum income.” What were critics saying when the program began?


Forget: People were very excited about it. People on the political right were excited by the prospect of less intrusion into people’s lives and smaller government. It’s administratively much simpler to run than a whole barrage of competing bureaucratic programs.


Werman: You know, I didn’t do real well in economics in college, but if I were getting a minimum income, even if I were unemployed, I would probably say, “Why should I go to work?”


Forget: Indeed, that was the reason all of these experiments were run in the first place. There was a fear that if you offered people a guaranteed income, people would reduce the numbers of hours they worked rather dramatically.


Werman: So, what happened?


Forget: Well, what happened in Manitoba was the same thing that happened in all of the U.S. experiments, and that is there was a reduction in the number of hours worked by around 9% or 10%, and that sounds like a lot. When we looked into the Dauphin sample in particular--


Werman: The town in Manitoba.


Forget: That’s right. We discovered that there were two groups of people who reduced the number of hours they worked, especially married women. When they left the workforce in order to give birth, they used the minimum income to buy themselves longer mat. leaves.


Werman: Maternity leaves, yeah.


Forget: So they stayed home with their infants for longer periods of time. But the group that really reacted by reducing the number of hours worked were young males, and in particular, teenage boys. When we interviewed people, we discovered that prior to the experiment a lot of people from low income families, a lot of boys in particular, were under a fair amount of family pressure to become self-supporting when they turned 16--leave school, at least pay your own way. When Mincome came along, those families decided that they could afford to keep their sons in high school just a little bit longer. One of the findings of the experiment was that there was a nice little increase in the high school completion rate during that period.


Werman: Yeah, so some positive results among those two groups that drew back their working hours. So you go back a few years later and interviewed some of those Mincome participants. In the long run, what happened? What kind of stories did you hear?


Forget: We heard some really great stories. I guess one that was really affecting--I spoke to a woman who had just retired from a long career as a librarian, and she told a story of being a single parent when this program was introduced, she was on welfare. But every time she went and asked for some job training, she was told to go home and take care of her kids and the system will take care of her. When Mincome came along, she thought, “Well, I’m going to transfer from the welfare system to Mincome and then I can do what I want with the money.” She registered in a college training course and got a part-time job in a library, and over time that became a full-time job and eventually she became head librarian. When I spoke to her, she just retired and she was extremely proud of both of her daughters completing college and becoming professionals, and she was very proud of having modeled for them a very different kind of a life.


Werman: So Utrecht in the Netherlands, it’s in the initial phases of this experiment with basic income. Where else in the world, aside from the U.S. years ago, have you seen this happen in a similar way?


Forget: I guess some of the most interesting experiments right now are taking place in low and middle income countries, in places like India and Malawi. People tend to call it something different now, “unconditional cash transfers,” but the impotence is very much the same: if you give people money with no strings attached, they pretty much spend it in ways you’d expect them to spend it; they send their kids to school, they buy better food for their families, they take their kids to the doctor and so on.


Werman: Evelyn Forget, economist and professor at the University of Manitoba. Thanks very much for telling us about this.


Forget: Well thank you.