Update: Five-Year Cost Estimate of the Guaranteed Basic Income

On July 7, 2020, the Parliamentary Budget Officer (PBO) reported on costs arising from the implementation of a guaranteed income program for the last six months of 2020-21.  The program parameters were based on Ontario’s basic income pilot project. [i] PBO presented three estimates based on scenarios that phase out the benefit by $0.50, $0.25 and $0.15 for each dollar of employment income. Additionally, participants receiving Employment Insurance or Canada Pension Plan payments would have their basic income reduced dollar for dollar.

At the request of a parliamentarian, PBO has extended this cost estimate over the next five fiscal years. The updated estimates include the new employment insurance temporary benefit enhancements. In addition, these estimates also consider the latest LFS data of August 2020 and the income level characteristics of the people laid off because of COVID-19. [ii]

As can be seen in Table 1, PBO estimates that the basic gross cost of the Guaranteed Basic Income (GBI) would range between $30.5 billion and $71.4 billion based on the three scenarios for the period from November 2020 to March 2021 (inclusive). The supplemental guaranteed income for disability would be $1.4 billion. The basic gross costs will grow each year to reach values between $84.2 billion and $197.2 billion per year in 2024-25. The cost of a guaranteed income for disability would be $3.8 billion in 2024-25.

A lower phase-out rate will result in more eligible individuals and therefore higher overall costs. As shown in Table 1, for a phase-out rate of 50% (1^st scenario) more than 7.4 million people would benefit from the basic cost of GBI. The average benefit per person would be $4,099 in 2020-21. From 2021-22, the average benefit per recipient would be between $9,917 and $10,462.

For a phase-out rate of 15% (3^rd scenario), the number of beneficiaries will increase to almost 20 million people with an average per capita benefit of $3,757 in 2020-21 rising to $9,887 in 2024-25.

The provincial distributions of the GBI for different scenarios are presented in Appendix A. Overall, among provinces, Ontario obtains the highest share of the GBI benefit, representing a range between 41% and 44% of the total across all three phaseout rate options for the five fiscal years.

With respect to the average value per recipient, Ontario has the highest average GBI benefit per recipient within the 2^nd and 3^rd scenarios and the 2^nd highest value for the 1^st scenario. This variability of the average value by recipient across provinces is explained by the distribution of employment earnings among low-income Canadians and the distribution of persons that are eligible for the new EI benefits.

Appendix A – Provincial breakdown of the guaranteed basic income cost