The way we deal with adults living in poverty is a mess. Whether you believe in a handout or a hand-up approach, what those in need tend to get these days is the back of the hand. The social-welfare system is parsimonious, judgmental, demeaning, complex and bureaucratic. Worst of all, it tends to perpetuate, rather than alleviate, poverty.

So is there a better way? That is the basic question that Ontario hopes to answer with its much-anticipated pilot project, testing a "basic income" approach. That research has taken a big step forward with the release of a discussion paper by special adviser Hugh Segal entitled Finding a Better Way: A Basic Income Pilot Project for Ontario.

On the surface, basic income (or guaranteed annual income) is a concept that is attractive across the political spectrum. But the devil is in the details: Where do you set the basic income level? Does it supplement or replace existing social programs? Can recipients supplement their basic income, or will it be clawed back? Should it be cost-neutral? Is the goal to boost income or improve health?

Story continues below advertisement

Mr. Segal answers some of those questions – at least for the pilot project and, in his 101-page report, sets out some all-important parameters for testing the concept. He recommends that the basic income be set at a minimum of $1,320 a month (plus an additional $500 if the recipient has a disability), non-taxable and that it replace two large programs, Ontario Works and the Ontario Disability Support Program. Those two cornerstone social-welfare programs cost the Ontario treasury about $9-billion a year. That's because almost 16 per cent of Ontarians between the ages of 18 and 64 live in poverty. Currently, a single man gets as little as $700 a month in social assistance from Ontario Works, while the ODSP floor is about $1,130.

The big difference between the current welfare payments and a basic income – at least for the recipient – would be that basic income would be paid automatically, rather than requiring a whole bunch of paperwork and constant monitoring to prove eligibility.

Over all, what the proposed basic income study would do is provide individuals and families with the equivalent of 75 per cent of the income that would place them at the poverty line. (A technical calculation known as the low-income measure, or LIM.) The LIM is about $22,000 for a single individual and $44,000 for a family of four. The big unknown about basic income is whether it discourages workforce participation. In other words, will people not bother trying to find work if they're going to get a monthly cheque, no questions asked?

What a pilot project needs to test is if the ability to keep a part of income is an incentive to work, or whether a better approach is a "negative income tax" – providing workers with a top-up to their pay to ensure they get to the LIM (or 75 per cent of the LIM). Some think of basic income as a carrot, others as a stick.

But basic income is not just an employment issue, it's about health. Will a guaranteed income improve the health of the poor or lessen use of the health-care system? To answer these questions, you need pretty sophisticated research and it has to be done over a long period – and Mr. Segal recommends a minimum of three years.

There are also some really important and thoughtful cautions in the report. A "Big Bang" approach, in which you replace all social supports with a single cheque, is not the way to go. While a basic income will likely be helpful, it does not obviate the need for housing support, job training, education, subsidies for prescription drugs and so on.

One of the unstated assumptions is that a basic-income approach would be revenue-neutral. But that is delusional. If benefit levels are too low – and all the evidence suggests they are – we need to raise them. If the system is too bureaucratic, then we need to make it less so. If too many people are falling through the cracks – such as fiftysomethings who lose their jobs and need a bridge to seniors' benefits – then we have to patch the cracks. We should not presume that basic income is the way to go without waiting for the evidence.

Story continues below advertisement

The ultimate goal of this exercise should be to make the social-welfare system more just and fair for the poor and ensure that "fair" is not a four-letter word.