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Canada currently spends about $140 billion every year on income transfer programs. As a researcher, I don’t think we should turn down an opportunity to learn about better ways to deliver this big packet of benefits. In particular, I see two key areas where the Ontario pilot study could help move research forward.

Canada spends $140 billion every year on income transfer programs. We shouldn’t turn down an opportunity to learn about better ways to deliver this big packet of benefits.

First, we will learn more about how incentives affect work decisions. The Ontario plan stacks a 50 per cent phase out rate on top of the existing 20 per cent income tax rate on low earners. If you add in CPP and EI payroll taxes and the phase out of income-tested child benefits, we could see Basic Income recipients retain only 10 cents on a dollar of earnings. Decades of research show that 90 per cent tax rates lessen individuals’ motivation to keep working at full speed. The Ontario Basic Income pilot study may shed new light on how much these disincentive effects matter.

Second, we will learn more about the spending habits of low-income recipients. My research has shown that low-income parents who receive an income boost spend more on food and shelter and suffer less from depression. These kinds of targeted interventions can do a lot of good and set children on a better trajectory—which could also benefit the public treasury in the long run.

However, the Basic Income scheme targets a wide range of adults who may not actually require the benefit. An analysis of Statistics Canada income data tells me that if you implemented the proposed Basic Income scheme across Ontario, most of the money would likely go to young childless adults living with their parents. Ontario already offers free tuition to most lower-income students, so the extra money wouldn’t improve access to higher education. It’s not clear that giving money to young adults who live at home is a high social priority—but it sure will be interesting to see how they spend the extra cash!