WE NEED TO INNOVATE ECONOMIC POLICY, NOW

WE NEED TO INNOVATE ECONOMIC POLICY

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

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 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.

A universal basic income of $1,000–$2,000 a month 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 (98% of Canadians) will also add to disposable income. The extra income would allow individuals, families, and small businesses to make more meaningful investments in their futures. They could invest in raising a family, buy a home to start building equity, further 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 apply to employees and/or part-timers who attend 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!

by Jasper Chu

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 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

1. Hanson, Helena (May 25, 2021). Top earners in Canada: Here’s How Much The 1% Make. narcity.com 2. Kurzegesagt - In a Nutshell (December 7, 2017) Universal Basic Income Explained. 3. Free Income for Everyone? UBI 4. https://www.youtube.com/watch?v=kl39KHS07Xc 5. Innovation, Science and Economic Development Canada (2020). Key Small Business Statistics – 2020. Ic.gc.ca 6. BBC Ideas (July 13, 2019). Neoliberalism: the story of a big economic bust up | A-Z of 7. ISMs Episode 14-BBC Ideas. https://www.youtube. com/watch?v=DLtxUiwY6j8 8. Cloutier, Richard (June 30, 2021). How Tax Cuts Affect the Economy. Investopedia.com. JANUARY 2022