Guaranteed minimum income: Permanent underclass or innovative way to share prosperity?

Niall Ferguson is one of the more interesting historians out there today.  He is a prolific writer and out there in a very public way espousing history as a tool to influence current public policy.  In the past few years I have read an impressive bio of Henry Kissinger (Kissinger: Volume I: 1923-1968: The Idealist), Empire: How Britain Made the Modern World, and, just finished, The Square and the Tower: Networks and Power, from the Freemasons to Facebook.

In that book, of which I will use for other blog and column content, Ferguson takes on the idea of a guaranteed annual income.  It is being pushed heavily by the new Silicon Valley plutocrats and he thinks it could just create a permanent underclass of citizens that don’t work and that earn a bare minimum to survive while the tech. and professional classes get ever richer.

I have talked with many economists about the guaranteed annual income idea.  I particularly think there may be something there that could replace EI and its labour market distortions in New Brunswick but I am sympathetic to Ferguson’s concerns.

The basis for society throughout history has been work.  I know the proponents of the guaranteed annual income idea don’t believe it will discourage work – many think it might have the opposite effect.

But in the end I think we have many examples were people decide that a relatively low income is ‘enough’ if it comes with 6 months off each year.  They assign ‘value’ to the 6 months off collecting EI.  Or take the issue of the 55+ workforce.  We have a very low rate of 55+ people employed in New Brunswick.  The participation rate is only 33% (Jan. 2018) meaning that only one in three over the age of 55 is working or looking for work in New Brunswick.  In Alberta it is 46.3%.  To put this into perspective, if 46% of NBers 55+ were working or looking for work – it would add another 34,000 people to the workforce.

Now you astute readers might remind me that we have more people over the age of 70 and 80 than Alberta – so am I suggesting that 80 year olds should work?   I hope to be working at 80 if my health holds. But even adjusting for the age difference, having a comparable participation rate with Alberta would add 30,000 to the provincial workforce in New Brunswick.

But lots of New Brunswickers – again with rational calculation – conclude that retirement with a lower income but with no work – is better for them than working part time and earning a little more income on top.  The low cost of living in New Brunswickers combined with relatively low expectations drives down employment among the 55+, IMO.

In short, I have written that New Brunswick probably has somewhere between 60,000-70,000 people that could be brought into the workforce in a more permanent way – similar to SK and AB – but the jobs, the incentives, the skills alignment – the lack of flexibility – culture – whatever is holding this group back.

Hence the need for a large boost in immigration but I don’t think we should completely forget about the 60,000-70,000.