Queens Policy Review Volume 2, No.

1 (Winter 2011)

International Perspectives on
Guaranteed Annual Income Programs

Melissa Martin
Queens University
Osgoode Hall Law School/Schulich School of Business

ABSRACT
Addressing the issue of poverty in Canada is an important challenge to
policymakers. Establishing an income floor below which no citizen falls is a
critical public policy goal for the Canadian welfare state. In responding to this
policy issue, recent debate has revolved around a guaranteed annual income
(GAI), defined as a basic income paid by the government to all citizens on an
individual basis, without means test or work requirement. The purpose of this
paper is to analyze past and present GAI programs to inform the public policy
debate on the implementation of a GAI in Canada. Among the factors under
consideration are the programs efficiency in targeting payments, as well as its
effect on family structure and labour force participation. On an implementation
level, the paper also explores the potential for introducing a GAI through a
negative income tax. It is also important to note, however, that relatively few
GAI programs exist currently, and those that do, often are not sufficient alone in
providing income maintenance to citizens.

The Challenge of Addressing Poverty

Addressing the issue of poverty in Canada is an important challenge to

policymakers. One problem is agreeing on a single definition, since
poverty is a relative term. While most poor Canadians would be
considered rich by the dollar-a-day definition that is used widely in the
developing world, relative poverty is still prevalent in Canada. According

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to UNESCO, marginalization occurs when individuals are systematically

excluded from meaningful participation in economic, social, political,
cultural, and other forms of human activity in their communities and thus
are denied the opportunity to fulfill themselves as human beings.1 In
2007, in the province of Ontario, a couple with two children would receive
$21,058 on welfare.2 This figure is $19,201 less, or 52 percent less, than
the before-tax low-income cut-off (LICO) income of $40,259 that is
considered to be adequate for a family of four by Statistics Canada.3 In
terms of the market basket measure (MBM), the same family would be
expected to survive on their welfare of $21,058, which is still $11,854 less
than the MBM poverty line of $32,912.4 Although these measures provide
quite different definitions of poverty, in either case, these individuals are
living in relative poverty and face marginalization in terms of their inability
to fully participate in society.5
There is a wealth of academic research on the issue of poverty;
however, there has been little consensus on ways in which to eliminate this
public policy issue. This lack of consensus has led to a championing of
incrementalism as a result of the view that poverty is a complex issue that
cannot be solved by one single policy.6 In a recent speech at Queens
University, Hugh Segal (2009) forcefully articulated that:

[p]overty is not a result. Poverty is not an outcome. Poverty

is a cause. And, unlike the other [policy] challenges
substance abuse, low health status, low birth weight we
actually have the policy instrument within the federal
jurisdiction to solve poverty: not dilute it, mitigate it,
improve upon it, but actually solve it.7

This solution that Segal eloquently discusses is a guaranteed annual income

(GAI), defined as a basic income paid by the government to all citizens on
an individual basis, without means test or work requirement.8 According
to Van Parijs, a GAI would be paid in cash, on a regular basis at the nation
state level to all citizens of a country, essentially ensuring that no Canadian
would fall below this basic income threshold.9
Recent debate surrounding a GAI in Canada has been widespread.
Establishing an income floor below which no citizen falls is a critical public
policy goal for the Canadian welfare state.10 While a GAI theoretically
seems like a worthy policy goal to pursue, it is important to look to GAI
(and other similar) programs that have already been established. During
the 1970s, in Manitoba, the Manitoba Basic Annual Income Experiment
(Mincome) proved to be a useful experiment to test the effects of a GAI.11

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Although this provides a relevant Canadian example it is also useful to

look to the international community to inform our policy discussion
surrounding the relative strengths and weaknesses of GAI programs in
other countries and to provide valuable lessons to the Canadian context. It
is also important to note, however, that relatively few GAI programs exist
currently, and those that do, often are not sufficient alone in providing
income maintenance to citizens. Despite the relatively few examples, there
are still lessons that can be applied to Canada when considering the merits
and drawbacks of a GAI.
The purpose of this paper is to analyze the main benefits and
weaknesses of past and present examples of GAI programs to provide
insight into a Canadian GAI policy. Supporters of the GAI note the
following benefits, including its objectivity in determining eligibility for the
GAI, the avoidance of stigma associated with traditional welfare programs,
the programs efficiency in targeting payments to low-income individuals
and the possibility of introducing the GAI through a negative income tax
into the already existing income tax system, as well as downstreaming
benefits, in the form of improved social outcomes. The main weaknesses
of the program are its potential costs, its reduction in labour force
participation and its effect on family structure. These benefits and
weaknesses will be discussed first through the Mincome experiment, which
outlines the GAI experiment conducted in Canada. Second, the results of
four GAI experiments conducted in the United States will be examined.
Finally, several lessons from current GAI initiatives in the developing world
will be analyzed.

Manitoba Basic Annual Income Experiment (Mincome)

In the late 1970s, a GAI experiment titled the Manitoba Basic

Annual Income Experiment (Mincome) was piloted through a joint federal-
provincial initiative in low-income households in Winnipeg and a rural
saturation site in Dauphin. The experiment was part of a systematic
review of social security programs in the country.12 Although few results
of the experiment were published at the end of the project in 1979, Hum
and Simpson briefly address Mincome in their review of five income-
maintenance experiments conducted in Canada and the United States and
later revisit the research on Mincome in a more receptive political and
economic climate in 2001.13
Advocates of the Mincome experiment emphasize the following
benefits: its objectivity in determining eligibility for the GAI, the avoidance
of stigma associated with welfare, the programs efficiency in targeting

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payments to low-income individuals, and the possibility of introducing the

GAI through a negative income tax into the already existing income tax
system.14 The two main weaknesses of the program are its potential costs
and its potential effects on work incentives. The more generous the GAI,
the more it will cost the government to administer, since non-workers
receive larger payments, low-income earners keep a larger fraction of their
earnings and a larger proportion of the population receives money from
the scheme.15 However, this cost does not take into consideration
potential future benefits of fewer individuals in poverty, including
increased education and meaningful future employment, lower healthcare
expenditures, cost savings for existing welfare systems and a lesser burden
on the federal and provincial penal system.16 With respect to the effect of
a GAI on work incentives, Hum and Simpson concluded that,

[o]n the whole the research results were encouraging to

those who favour a GAI. The reduction in work effort was
modest: about one per cent for men, three per cent for wives
and five per cent for unmarried women. These are small
effects in absolute terms and they are also smaller than the
effects observed in the four US experiments [discussed
below][G]iven the small effect on work incentives, the
onus of proof is shifted to those who argue that a GAI
would lead to an excessive work disincentive response.17

Additionally, family structure emerged as an issue in the experiment.

While it was initially reported that the GAI tended to encourage marriage
dissolution among families receiving the benefit, the research is still
undecided in this area.18 This suggests that future debate surrounding the
GAI may focus on the family structure issue and become more politically
charged.19

Four GAI Experiments in the United States

The guaranteed annual income debate originated in the United

States with President Lyndon Johnsons call for a war on poverty in
1964.20 In that year, the United States Congress developed the Office of
Economic Opportunity (OEO) that comprised public employment
strategies, community action programs, and income maintenance.
Although income maintenance was a readily accepted concept, the idea of
a guaranteed annual income or a negative income tax was met with serious
opposition.21 Eventually, four negative income tax experiments were

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developed due, in large part, to the policy analysis that showed that the
GAI represented the most bang for a billion bucks.22 At this point, the
main opposition was the potential effects of a GAI on labour supply of
working aged individuals. Economists entered the debate concerning the
wage price and income elasticity pertinent to labour-leisure choice. They
agreed, however, that the existing data could not provide a clear answer to
the work incentive question.23 As a result, it became necessary to design
experiments to test these assumptions.
The New Jersey experiment was the first to test the idea of a
guaranteed annual income. Haveman and Watts observed that the
tension between the motivations of those who supported the experiment
for general-political-demonstration reasons and those who desired it for
technical-economic-experimental reasons persisted through the [New
Jersey] experiment.24 It affected all of its primary characteristics from
technical design to duration, to selection of sites, and finally to the
interpretation of results.25 The New Jersey experiment served to set the
precedent for controlled social experiments surrounding GAI in the United
States and Canada. Following the New Jersey experiment, others
experiments followed including one performed by the Institute for
Research on Poverty to study a GAI in rural areas. Additionally the
Department of Health, Education and Welfare (HEW) funded an
experiment in Gary, Indiana and others in Seattle, Washington, and
Denver.26
Each of these income-maintenance experiments served the purpose
of illuminating the policy debate on the effects of implementing a GAI.
Specifically, work incentives were determined by measuring labour-supply
responses, more simply calculated by looking at the change in hours
worked during the duration of the experiment.27 In addition, each of the
experiments was framed on a common study design and assignment model,
which was first developed in the New Jersey experiment.28 Each
experiment focused on low income household units; however, the selection
of income cutoffs varied from 150% of the official poverty line in the New
Jersey, Rural and Seattle-Denver experiments to 240% in the Gary
experiment.29 Further, the duration of the experiments was three years,
the exception being the Seattle-Denver experiment where some households
were enrolled in 5- and 20- year plans to determine the effect of
experimental duration on study results. Most importantly, each of the
experiments focused on different areas in the United States and targeted
different populations an important feature to consider if the lessons
learned are to be generalized to other jurisdictions. While New Jersey
focused on inner-city households, the Rural experiment focused on rural

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poverty in North Carolina and rural poverty amidst wealth in Iowa. The
Seattle-Denver experiment focused on a Western city with employment
instability and Gary examined black households in the ghetto.30 Given the
diverse regionalism that exists in Canada, this may give a better picture of
how the effects of a GAI might differ throughout the country.
In the view of Hum and Simpson, the experiments were designed to
provide reliable and credible analysis of the response to a guaranteed
annual income program to inform policy development.31 The results of
the experiment indicate that as expected, hours worked will decline with
the introduction of a GAI. The reduction in hours worked was smallest for
husbands, ranging from 1% to 8% and larger for wives, ranging from 3%
to 33%.32 For single female-headed households the reduction was between
7% and 30%.33 As noted above, these reductions in hours worked were
significantly higher than what was observed in the Mincome experiment.
Hum and Simpson also analyze the elasticity of labour-supply response and
conclude that, in contrast to non-experimental literature, there is a fairly
uniform and low elasticity of labour-supply response.34 Particularly, this
low elasticity was seen across all categories of individuals, husbands, wives
and single female-headed families. One important factor that was found in
labour supply response of married men and women was the presence of
preschool children in the home. Preschool children increased the labour
supply of husbands, while reducing the labour supply of wives by
approximately the same amount. Thus, changes in family composition
may have a greater impact on labour supply than a GAI program itself. If
the GAI were to be applied in a Canadian context, it is important to
consider the effect on labour-supply the GAI might have, as well as the
potential positive impacts resulting from the ability of individuals to stay
home to care for children and elderly relatives.
The non-labour supply response that is the most problematic is the
impact of a GAI on marital disruption. Research indicated that GAI
payments might influence some degree of family breakup. However, these
conclusions have been challenged and no clear consensus has arisen. What
is uncertain is whether or not some of these marital breakups may actually
be positive if, for instance, a woman becomes financially able to separate
from an abusive husband. In such a case, it could be argued that the GAI
actually has a positive effect for these individuals and any children the
couple may have. The potential impact on family composition is an
important area to consider in the implementation of such a program in
Canada.
Hum and Simpson conclude that [f]ew adverse effects have been
found to date. Those adverse effects found, such as work response, are

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smaller than would have been expected without experimentation.35

Conversely, Anderson and Block disagree with the attempt to portray the
GAI experiments as a case for the implementation of a GAI.36 Instead,
they view the labour-supply reductions as being significant and argue that
by stating that work response was smaller than expected actually
minimizes the figures. Although Anderson and Block make the point that
it depends on what labour supply was expected to be in order to determine
if in fact, the results were smaller than expected, their main concern is not
actual labour supply decrease, but increased leisure time when receiving a
GAI.37
Anderson and Block assert that individuals were not undertaking
additional education during this time, and were choosing leisure as
opposed to work.38 Their analysis fails to consider the time frame effect
on participation in education had the experiment lasted longer than three
years, more individuals may have decided to undertake this option. As
well, they do not take into account other non-work activities, such as
childcare or caring for an elderly relative, that most would not characterize
as leisure activities per se. Finally, Anderson and Brock are of the opinion
that the poor are in poverty because they do not work and that a
national GAI would only exacerbate an already serious problem: able-
bodied adults who rationally prefer leisure and receive government subsidy
for this preference.39 Further, they view poverty as an individual choice
where one makes the conscious choice not to work and therefore does not
have the income to support the basic necessities of life. This opinion is a
very simplistic approach to the issue of poverty that negates the socio-
environmental factors that may play a role in individual circumstances.
On the whole, the experiments from the United States provide very
relevant data for the implementation of a GAI in Canada. The evidence
found in these experiments though is limited, given that these experiments
were conducted for a relatively short period of time. The long-term impact
of a GAI potentially positive or negative is yet to be seen. Despite this
limitation, these experiments provide useful insight into the effect of a
public policy decision in Canada with respect to a GAI. Given the
similarities of the countries, one might expect the results of a Canadian
GAI program to be similar to the experience in the United States.
Comparison with the Mincome experiment indicates that the strengths and
weaknesses of the GAI were similar in both countries. Further, the
increased regional diversity in the United States experiments is important
when considering the diverse regionalism in Canada.

Perspectives from the Developing World

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In Brazil, the debate surrounding a GAI was introduced in the

1970s, but only gained serious attention during the 1990s. A GAI
program, titled the Bolsa-Escola (School Scholarship Program) was created
to direct funds to poor families with school-aged children. The funds were
tied to compulsory school attendance in an attempt to stop the cycle of
poverty resulting from lack of education in Brazil.40 The Bolsa-Escola
Program was implemented in the Greater Metropolitan Campinas to test
the program. In the 10,000 families receiving the GAI, the school dropout
rate was lowered to zero after two years.41
Although this model was very successful at increasing years of
education in children, it did little to address the other aspects of poverty in
Brazil. In 2003, President Lula announced the Hunger Zero Program
under which the Bolsa-Familia program fell. This program stated that
families with a per capita income below a certain level would have the
right to an income supplement.42 Supplements were determined based on
the number and age of children in the household. This expanded program
spread to 11.2 million families in Brazil by July 2006.43
Since then, a law has been approved by the National Congress to
establish a Citizens Basic Income (CBI). The CBI provides a level
sufficient to cover individuals basic needs, taking into account the degree
of development and possibilities in Brazil.44 Clearly, the lesson to be
learned for Canada is that a progressive implementation of a basic income
has been successful elsewhere. Given that Canada already has income
supplements, such as the Child Tax Benefit and the Guaranteed Income
Supplement for seniors, the next logical step would be the implementation
of a GAI program. It is also important to note that specific targeted plans,
such as the Bolsa-Escola program, were not effective on their own in
dramatically reducing poverty.
GAI programs are also being advocated for in Argentina,45
Namibia,46 and South Africa.47 Although these three countries, as well as
Brazil, constitute members of the developing world, they all view income as
a citizens right.48 Haarmann and Haarmann see a GAI scheme as the only
public policy proposal that has the potential to curb the devastating effects
of poverty in Namibia.49 It is important to recognize the viewpoint that
these developing countries have, that of income constituting a basic human
right. While these countries have yet to implement a full GAI scheme,
Canada has the opportunity to act as a leader in the developed world and
take a huge positive step towards the elimination of poverty.
Conclusion
Eliminating poverty by establishing a basic income for all Canadians
is an important policy goal. Given the current debate surrounding

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implementation of a GAI in Canada, it is relevant to look to our past,

specifically the Manitoba Basic Income Annual Income Experiment, as well
as to the international community, for lessons regarding the
implementation of a GAI program. By reviewing the experiments in
Manitoba, four experiments in the United States and the experience of
Brazil, Argentina, Namibia and South Africa, several critical lessons can be
learned to provide insight for Canada.
While there are relatively few current examples of current GAI
programs, there are a number of countries in the developing world and
past experiments that can used to inform the policy debate in Canada.
These experiments do have limitations in assessing the long-term impacts
of a GAI. However, they still provide credible data to the policy debate
data that is often lacking when making policy decisions. In providing
insight to the Canadian policy debate, the following should be considered.
First, the work disincentive issue that was predicted to be excessive was
in fact much smaller than expected. Although work-supply will decrease
with a GAI, implicit societal benefits may be associated with individuals
choosing not to work, including a lower burden on the health care system,
fewer children in childcare and individual benefits associated with being
able to stay home and pursue family-related care. Second, family
composition may be affected by the implementation of a GAI, as evidenced
in Manitoba and the United States. Although there is no consensus on this
issue, further research may look into the specific reasons for changes in
family composition. Third, a targeted program to specific segments of the
population is not enough to eliminate poverty. An overarching GAI must
be guaranteed to every citizen in Canada in order to make a significant
difference in the issue of poverty. Fourth, the stigma associated with
poverty was reduced through a GAI. This is critical in reducing the
marginalization of individuals that experience income collapse. Finally, it
was found that a GAI was an efficient way of targeting payments. Given
that Canada already has an income system, a GAI could easily be
implemented through a negative income tax. These lessons from the
international arena should be used to inform the public policy debate on
the implementation of a GAI in Canada.

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NOTES
1
Canadian Policy Research Networks. Backgrounder: Thinking about marginalization:
What, who and why? Ottawa, Canada (2000): 1.
2
Hugh Segal, The Last Public Policy Frontier, Eliminating Poverty. Proceedings from
the Annual Gow Lecture, Queens University, Kingston: Canada, April 24, 2009.
3
Ibid.
4
Ibid.
5
Ibid.
6
Ibid.
7
Ibid.
8
Philippe Van Parijs, Basic income: a simple and powerful idea for the twenty-first
century. Politics & Society, 32.1 (2004).
9
Ibid.
10
James P. Mulvale, Basic income and the Canadian welfare state: Exploring the realms
of possibility. Basic Income Studies: An International Journal of Basic Income Research,
3, no. 1 (2008): Accessed September 20, 2010
http://www.bepress.com/cgi/viewcontent.cgi?article=1084&context=bis.
11
Derek Hum and Wayne Simpson, Economic response to a guaranteed annual income:
experience from Canada and the United States. Journal of Labour Economics, 11, no.1
(1993); Derek Hum and Wayne Simpson, A guaranteed annual income? From Mincome
to the millennium. Policy Options, January-February, (2001); Mulvale.
12
Hum and Simpson (2001).
13
Hum and Simpson (1993); Hum and Simpson (2001): 80.
14
Hum and Simpson (2001).
15
Ibid.
16
Segal.
17
Hum and Simpson (2001): 80-81.
18
Ibid.
19
Mulvale.
20
Hum and Simpson (1993).
21
Ibid.
22
Ibid, 5.
23
Ibid.
24
Robert H. Haveman and Harold W. Watts, Social experimentation as policy research:
A review of negative income tax experiments. Evaluation Studies, 1 (1976): 427.
25
Ibid.
26
Hum and Simpson (1993).
27
Ibid.
28
Ibid.
29
Ibid.
30
Ibid.
31
Ibid, 276.
32
Gary M. Anderson and Walter Block, Comment on Hum and Simpson. Journal of
Labour Economics, 11, no. 1 (1993).

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33
Ibid.
34
Hum and Simpson (1993).
35
Ibid, 287.
36
Anderson and Block.
37
Ibid.
38
Ibid.
39
Ibid, 352-353.
40
Eduardo Matarazzo Suplicy, Basic income and employment in Brazil. An
International Journal of Basic Income Research, 2, no. 1 (2007): Accessed September 20,
2010 http://www.bepress.com/cgi/viewcontent.cgi?article=1067&context=bis
41
Ibid.
42
Ibid.
43
Ibid.
44
Ibid.
45
Corina Rodriguez Enriquez, Basic income and labour market conditions: Insights from
Argentina. Basic Income Studies: An International Journal of Basic Income Research, 3,
no. 1 (2007). Accessed September 20, 2010.
http://www.bepress.com/cgi/viewcontent.cgi?article=1063&context=bis.
46
Claudia Haarmann and Dirk Haarmann, From survival to decent employment: Basic
income
security in Namibia. An International Journal of Basic Income Research, 3, no. 1 (2007).
Retrieved from http://www.bepress.com/cgi/viewcontent.cgi?article=1066&context=bis.
47
Jeremy Seekings, The inconsequentiality of employment disincentives: Basic income in
South
Africa. Basic Income Studies: An International Journal of Basic Income Research, 2, no.
1 (2007): Accessed September 20, 2010
http://www.bepress.com/cgi/viewcontent.cgi?article=1064&context=bis
48
Enriquez; Haarmann and Haarmann; Seekings, The inconsequentiality of employment
disincentives: Basic income in South Africa. Basic Income Studies: An International
Journal of Basic Income Research, 2, no. 1 (2007): Accessed September 20, 2010
http://www.bepress.com/cgi/viewcontent.cgi?article=1064&context=bis; Seekings, The
inconsequentiality of employment disincentives: Basic income in South Africa. Basic
Income Studies: An International Journal of Basic Income Research, 2, no. 1 (2007):
Accessed September 20, 2010
http://www.bepress.com/cgi/viewcontent.cgi?article=1064&context=bis; Suplicy.
49
Haarmann and Haarmann, From survival to decent employment: Basic income
security in Namibia. Basic Income Studies: An International Journal of Basic Income
Research, 3, no. 1 (2007). Retrieved from
http://www.bepress.com/cgi/viewcontent.cgi?article=1066&context=bis.

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Queens Policy Review Volume 2, No. 1 (Winter 2011)

REFERENCES

Anderson, Gary M., and Walter Block. Comment on Hum and Simpson.
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Canadian Policy Research Networks. Backgrounder: Thinking about

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Enriquez, Corina Rodriguez. Basic income and labour market conditions:

Insights from Argentina. Basic Income Studies: An International
Journal of Basic Income Research, 3, no. 1 (2007). Accessed
September 20, 2010.
http://www.bepress.com/cgi/viewcontent.cgi?article=1063&context=b
is.

Haarmann, Claudia, and Dirk Haarmann. From survival to decent

employment: Basic income security in Namibia. Basic Income
Studies: An International Journal of Basic Income Research, 3, no. 1
(2007). Retrieved from
http://www.bepress.com/cgi/viewcontent.cgi?article=1066
&context=bis.

Haveman, Robert H., and Harold W. Watts. Social experimentation as

policy research: A review of negative income tax experiments.
Evaluation Studies, 1 (1976): 406-431.

Hum, Derek and Wayne Simpson. Economic response to a guaranteed

annual income: experience from Canada and the United States.
Journal of Labour Economics, 11, no. 1 (1993): 263-296.

_____________________________. A guaranteed annual income? From

Mincome to the millennium. Policy Options, January- February
(2001): 78-82.

Mulvale, James P. Basic income and the Canadian welfare state:

Exploring the realms of possibility. Basic Income Studies: An
International Journal of Basic Income Research, 3, no. 1 (2008):
Accessed September 20, 2010. http://www.bepress.com/cgo
/viewcontent.cgi?artcile+1084&context+bis

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Queens Policy Review Volume 2, No. 1 (Winter 2011)

Segal, Hugh. The Last Public Policy Frontier, Eliminating Poverty.

Proceedings from the Annual Gow Lecture, Queens University,
Kingston: Canada, April 24, 2009.

__________. Relative poverty: It cant be erased, but it must be addressed,

at home and abroad. Policy Options, August, (2004): 37-41.

Seekings, Jeremy. The inconsequentiality of employment disincentives:

Basic income in South Africa. Basic Income Studies: An
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Accessed September 20, 2010. http://www.bepress.com/cg
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Suplicy, Eduardo Matarazzo. Basic income and employment in Brazil.

Basic Income Studies: An International Journal of Basic Income
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http://www.bepress.com/cgo/viewcontent.cgi?artcile+1084&context+
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Van Parijs, Philippe. Basic income: a simple and powerful idea for the
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61