More Thoughts on a Better Income Support System for the Next Crisis

This post was written by Mike Veall of the Department of Economics at McMaster University.

I appreciated the comments on my earlier post, where I suggested that a small monthly Basic Income system would have the advantage of being able to be scaled-up in a crisis.

Incenting participation in the tax/transfer system is responsive to the work of Anna Cameron, Lindsay Tedds, Jennifer Robson and Saul Schwartz pointed out by Frances even though those authors seek a different, automatic-enrolment approach.

(Advertising: More on nonfiling by Robson and Schwartz is coming out in September’s Canadian Public Policy/Analyse de politiques; CPP/Adp is also currently working on expedited publishing/special issues for pandemic-related articles.)

The skepticism in the comments on my post is well-taken, and if we can get a better emergency benefit delivery system by other means, better is better.

But I would hope it would end up monthly. Especially during an emergency, “monthliness” is much superior to the quarterly delivery of the GST/HST credit and the CWB.

However it is obtained, there is a need for an improved starting point. While COVID policy so far has been the economics equivalent of meatball surgery, it already appears that CERB take-up was under-predicted. I fear overpayment will also prove an issue. While an automatic system with 100% coverage is unrealistic, the alternative has been 7 million CERB applications. With that many, CRA had to rubber stamp, and follow-up has to be at least questionable.

And a pure application system seems to require a lowest common denominator approach with consequent sharp edges. If someone’s 2019 income = $5K, CERB = $8K. If 2019 income = $4.9K, CERB =$0.

Finally, I have been thinking about whether emergency income support to a family could and should be conditioned on rent. Particularly in an emergency, rent looms large, and it varies a lot across the country. I’d be particularly interested in learning the thoughts of others.

A postscript: Privacy concerns sometimes come up, as mentioned in one comment. I think most taxpayers would accept this rather modest incremental risk to their privacy if it means better effectiveness for the substantial tax dollars being spent on programs like CERB.

Comments

[ROGER SPARKS]

"conditioned on rent"

Families are so different! Some young couples will live with parents to save money. A second young couple will put everything they earn into home purchase at some luxury level. Some young couples rent at different luxury levels.

Should government help all young couples or pick couples at most economic risk?

Is something different when we are thinking about older couples?

This covid-19 event has thrown the economy into painful disruption. I applaud trying to discern fair ways to redistribute the pain.