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Innovating our Economics

For the past 30 years, economic policies have led to growing financial insecurity for the middle class. It’s naturally an anxiety-provoking concern to many and for good reason. People are worried they won’t be able to afford utilities, basic needs, or pay taxes.

How did North America get into this mess?
The philosophy that has been the go-to of policymakers for the last three decades was neoliberalism. Neoliberalism is the idea that markets should be minimally taxed and regulated. Proponents and adherents believed that minimal interference would increase commercial and public services efficiency. In the 80s and 90s, governments made substantial cuts to public spending and tax rates. The policy spurred growth but was buoyed by to low interest rates.4

Corporate and income tax spending cuts for the highest earners, the top 1%, and public services respectively worsened income inequality. Public services, particularly welfare, were weakened as a result. This left individuals with no social safety net to fall on if left financially vulnerable or even in poverty or deprivation. Meanwhile, the tax burden shifted mainly to smaller businesses, middle, and lower-income earners to pay for the cuts.

Someone who earns around $500,000 can easily afford basic living needs and utilities but you have to work eight hours a day, five days a week, four weeks of the month just to pay a month’s worth of basic necessities.1

What’s the solution?
There are two simple, yet equally transformative, solutions to fix this issue: a universal basic income and lower taxes for the middle class. The first is a universal basic income for all low-income earners throughout Canada. The second is reducing personal and business income taxes for middle-income earners and small businesses.

A universal basic income of $1,000 to $2,000 a month, on top of what one already makes, would significantly increase an individual’s or family’s spending ability. Universal basic income would allow them to afford their needs including food, rent and utilities. While an additional $12,000 to $24,000 a year is still considered low income, the money would typically not be taxed and would recirculate into the economy, boosting the overall GDP. It would also give low-income families and individuals a secure financial foundation, so they can gradually make investments for education or have the resources to join the workforce.2

Reductions in personal and corporate income taxes for middle and lower-income earners, and businesses, who are 98% of Canadians, will also add to an individual’s disposable income. The extra income would allow individuals, families, and small businesses to make more meaningful investments in their future. They could invest in finally being able to raise a family, buy a home to start building equity, further build their education, or establish and expand their own business.5 Because small businesses and the middle class make up most of Canada’s economy, their personal and business income growth would significantly boost the overall economy nationally.3

The same would also apply to those who are employees and/or part-timers who also go to school. Increased amounts of disposable income would benefit them in numerous ways; for example, paying off student debt, paying rent and/or utilities, contributing more to personal savings, pensions, or investments in their home.

Now what?
Within the province of British Columbia, we are in possibly the best time politically to petition and lobby for such a system. The BC NDP has expressed support for the idea of a minimum or universal basic income that would work similarly to CERB in practice (although CERB wasn’t a long-term program). Even the federal Liberal Party, which has previously embraced neoliberal policies, has party members who endorse this idea.

Start this conversation with your peers, colleagues, and friends and be willing to understand the premise for their ideas and concerns. Discuss the concept but also how it relates to your everyday living situation, like the cost of utilities, rent, or even overall financial security.

In the end, a universal basic income of $1000 to $2000 per month would lift millions out of poverty and improve the financial security of millions more. It would be one of the largest if not the most transformative steps in ending income inequality and improving economic security.


References
Hanson, Helena (May 25, 2021). Top earners in Canada: Here’s How Much The 1%
Make. narcity.com

Kurzegesagt – In a Nutshell (December 7, 2017) Universal Basic Income Explained.
Free Income for Everyone? UBI
https://www.youtube.com/watch?v=kl39KHS07Xc

Innovation, Science and Economic Development Canada (2020). Key Small Business
Statistics – 2020. Ic.gc.ca

BBC Ideas (July 13, 2019). Neoliberalism: the story of a big economic bust up | A-Z of
ISMs Episode 14-BBC Ideas. https://www.youtube.com/watch?v=DLtxUiwY6j8

Cloutier, Richard (June 30, 2021). How Tax Cuts Affect the Economy.
Investopedia.com.