We know that Basic Income works. There’s decades of evidence showing that it benefits our health, our economy, and our communities.
But among some newcomers to Basic Income, there’s a false concern that it could cause inflation – a mistaken belief that building a guaranteed income floor for those who need it could somehow reduce the purchasing power of our dollars.
There are many things that can cause inflation, but there is no evidence that Basic Income is one of them. In fact, the data shows quite the opposite.
Basic Income would ease the pain of inflation – lessening its impacts on Canadian households – by ensuring everyone has the money they need to meet rising costs, at a time when wages are barely keeping up.
Basic Income would put billions of dollars already in our economy to better and more productive use, rather than introduce new money into the market. It redirects money to help those in need and who will spend it on basic necessities, which stimulates our economy, creates jobs, and supports local businesses.
As Basic Income advocate Reverend Chris Butler wrote in the Chicago Tribune: “Contrary to what misinformed fearmongers might suggest, a basic income could ease inflation. Most economists agree that inflation is caused by introducing new money into the market, not by redistributing it… A basic income would not cause inflation; it would help families facing rising costs.”
We’ve shown how to pay for Basic Income without taxing the vast majority of Canadians or printing new money: by funding it with contributions from our financial sector, fewer tax breaks for large companies, and fewer subsidies for the wealthiest. This is how we can build a ‘trickle-up’ economy that encourages economic growth while lifting millions of Canadians out of poverty.
We already have a Basic Income in Canada that works and has not made life more costly for Canadians: the Canada Child Benefit (CCB), a Basic Income for families, contributes over $46 billion a year to our economy, creating more than 450,000 jobs, while lifting over 250,000 families out of poverty. For every $1 given to Canadian families, $2 is generated in economic activity.
There’s no indication that the CCB has caused inflation. Instead, it has reduced the number of households facing severe food insecurity by 1/3 and has been hailed as "overwhelmingly" responsible for reduced poverty and income inequality in Canada.
In the US, 132 economists signed an open letter in 2022 calling for the extension of the Child Tax Credit (CTC) – their version of the CCB – saying it would not “meaningfully increase inflation”, but would help families “keep up with the everyday costs of keeping a family afloat”. Basic Income expert Scott Santens noted that the CTC has functioned “as a protective shield against inflation.”
Seniors benefits like Old Age Security and Guaranteed Income Supplement have been instrumental in drastically reducing poverty among our elderly (although there is still much work to be done to eliminate it entirely), with no evidence that this has caused inflation. Similarly, data shows that CERB and other emergency benefits contributed to the largest one-year reduction in poverty in nearly 50 years.
In Alaska, where there is universal dividend for every resident, funded by their natural resources, it’s common for businesses to offer discounts when the cheques roll out to capture this extra spending capacity. That’s right – prices go down when the cheques go out.
Interestingly, with the introduction of this dividend in 1982, Alaska went from having the highest rate of inflation in the US to the lowest. (Source: Wouldn’t Unconditional Basic Income Just Cause Massive Inflation? by Scott Santens) For Alaskans, unconditional cash meant less inflation, not more.
One more reason Basic Income won’t cause inflation: it doesn’t reduce competition between sellers of goods and services. Businesses would continue to compete for our money by offering high quality at reasonable prices – with or without Basic Income.
In fact, Basic Income would actually increase competition in many sectors by fostering entrepreneurship. It would act as seed capital for countless entrepreneurs who would otherwise be stuck in dead-end jobs or unable to take the risk. Studies from around the world have shown that Basic Income increases people’s ability to start or expand a business, increases interest in starting a business, and boosts local business revenues.
As Scott Santens wrote: “where basic income experiments have been actually tried and studied, the result in each case is increased entrepreneurship…This means more people competing for basic income dollars, with better goods and services and lower costs.
All of this represents real evidence to counter any fear of inflation."
There are many factors causing life to become increasingly unaffordable – global supply chain shocks, inadequate housing policy, and automation melting wages, to name a few. Basic Income has been shown to help ease the pain of inflation, reducing poverty and helping with affordability when jobs are no longer enough.
So the next time you hear the false rumour that Basic Income causes inflation, remember that the data has already proven the opposite: Basic Income makes life more affordable, not less.
Our founder, Floyd Marinescu on why Basic Income won’t cause inflation:
Former Scotiabank VP and Deputy Chief Economist, Brett House on why inflation is not an issue with Basic Income:
Leading Basic Income expert Scott Santens: Would UBI Just Cause Massive Inflation?
To shift the conversation about basic income to recognize it as an economic need and economic opportunity, with the goal of seeing UBI implemented in Canada.
We want a Canada where everyone can pursue their potential and not be held back by basic material constraints or unsafe environments.
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