Basic income and healthy minimum wage go together: retired professor

Roderick Benns recently interviewed Toni Pickard about basic income policy. Pickard was a law professor at Queen’s University before she retired and is now the co-founder of the Kingston Action Group for a Basic Income Guarantee. 

Benns: We hear often that basic income could replace the need for higher minimum wages. Many point out that with the scarcity of jobs, a better minimum wage will only reach a minority of people anyway. What do you believe?

Pickard: For me, minimum wages and basic income go together like bread and butter. Together they are wonderful. Each alone serves a purpose, but only one leaves a lot to be desired. Some recent media discussion seems premised on the view that the two are an either-or proposition. I don’t see why. They have different conceptual bases, different beneficiaries and different payers. There’s no need to choose between them.

Minimum wages are for those who have jobs, obviously. They’re about decent pay for work, and an end to the false assumption that working people and their employers have equal bargaining power. That might be true for highly sought individuals at high salaried levels but it’s not true for most of us. The wages are paid for by employers.

Basic income is for those without sufficient income to live decently, without regard to their job status and is paid collectively. At the very least, it’s about an end to hunger, homelessness and other forms of destitution and alleviation from income insecurity in face of potential job loss. Basic income is paid for by all of us.

From self-interest, employers seeking profits want to keep wage rates as low as is consistent with getting the necessary work done. Our collective self-interest is to ensure basic income levels sufficient to lift people out of poverty and to provide an income floor for everyone else to arrest a free fall into poverty should financial calamity hit. Once these differences are understood clearly, it seems obvious to me why we need both.

Working together, the two will put an adequate income into the hands of all those who didn’t before have enough to live decently. Together they provide the greatest nourishment for the economy. People living on low incomes need to spend all the money they have so the money paid out will continue to circulate in the economy (unlike the $684 billion of ‘dead money’ said to be stored in corporate bank accounts, doing the economy no good whatsoever). And the money will be spent close to home, supporting local businesses, increasing local employment opportunities, building up local economies and increasing tax revenues.

It’s true that the number of job holders is dwindling. Canada’s rate of labour participation hit a 13 year low in December of 2014.  It will almost certainly continue to drop given globalization, austerity policies and, most worrisome, rapidly developing technology which is affecting almost all job categories. I’m not at all sure, however, that the absolute number of minimum wage jobs is decreasing. For the moment, their proportion of all jobs is increasing. According to Stats Canada, almost half the 59,000 new jobs created in May 2015 were part-time jobs.

I know some people believe that if done properly and paid at adequate levels, basic income will obviate the need for minimum wage legislation. I think the idea is that individuals with an adequate basic income will no longer be forced to accept whatever job can be had in order to live. While that’s true, I can’t agree that therefore minimum wage legislation won’t be needed.

First, even if smaller numbers of people will be working for minimum wages in the future, almost certainly there will be millions who still do. Happily, basic income will prevent hunger and homelessness, but basic is basic and not very satisfying. Most people able to work in the job market will want to improve their lives and prospects if possible. I don’t believe that those who can find work will all have the wherewithal to stand up to employers by insisting on a decent wage. Nor are such people likely to be unionized. Without minimum wage legislation employers will be able to exploit vulnerable job seekers and then basic income, paid through taxes, will end up subsidizing private businesses.

I believe that taxpayers should not be called on to subsidize private businesses through provision of a basic income. Both a fair distribution of the cost of doing business and market efficiency are best served by having a legislated minimum wage as well. Fairness argues that those who profit personally and directly from the work of others, not the taxpayers at large, should pay the expenses of producing their profits. If owners who had been skimping on wages choose to close up shop in face of minimum wage legislation, that shouldn’t be an economic concern. If market theory works at all, they’ll be replaced by more efficient competitors.

To my mind, ending minimum wage laws leaves those most in need of the law’s protection without it, valuing profit making over human well-being. That some basic income recipients might be willing to accept very low wages does not justify abandoning minimum wage protection for working people at large. Basic income is a good thing but it gets nowhere near equalizing bargaining power between job seekers and employers.

Benns: Will a basic income shrink the pool of people willing to do work? Will it ‘hollow out’ our labour force, as some fear?

Pickard: No, I don’t believe it will be what’s usually called a ‘work disincentive’. That’s a widespread concern, but the evidence from basic income trials of all kinds in many different places and in different time periods simply doesn’t bear the prediction out. In the Dauphin experiment in Manitoba in the 1970’s, the impact of basic income on primary wage earners was negligible. With respect to secondary and tertiary earners in a family, there was a small impact due to high school students completing their degrees rather than leaving to help support the family and, in a period before maternity leaves were commonplace, young mothers staying home longer with infants and young children.

A pilot in a very different culture and different historical period – within the last 5 years in India — showed even more positive results. Those receiving the income actually increased their paid labour participation and engaged in some entrepreneurial activities. Similar results can be found in almost all studies wherever and whenever the experiment has been tried. Since basic income provides relief from stress resulting in better health, more energy, time freed up from scrambling to make ends meet, etc., it’s understandable that people who receive it are more able to work or start up small businesses. And since it furnishes what’s basic only, it’s understandable that people want to do what they can to improve their living standard.

But the more important point is that even if basic income were to ‘hollow out’ the labour force, that shouldn’t worry anyone. We all know the labour market is shrinking. There won’t be enough jobs for all the people who are willing and able to work. So ‘hollowing out’ the ‘work force’ is not a problem. The real problem is what to do about the forces beyond our control. Even the Canadian government’s power is limited. No government, no matter how creative and caring its policies, can stop the progress of globalization and automation. What’s needed is for them all, federal, provincial and municipal, to take a clear-eyed look at the impact of those forces in order to find ways to buffer us against the damage they will continue to inflict.

Basic income isn’t part of the problem, it’s part of the solution.

-- This article originally ran on Leaders and Legacies here.