Fighting Poverty: Assessing the Effect of Guaranteed Minimum Income Proposals in Quebec

Abstract

This paper analyzes the impact of a recent recommendation made by Quebec’s Comité consultatif de lutte contre la pauvreté et l’exclusion sociale to guarantee every individual an income equal to 80 percent of Statistics Canada’s Market Basket Measure (MBM). Workers with earnings at least equivalent to 16 hours at the minimum wage would be entitled to 100 percent of the MBM. We also investigate the impact of three alternative proposals: (a) a change in the above hours cut-off from 16 to 30 hours; (b) a guaranteed income equal to 100 percent of the MBM, irrespective of earnings; and (c) a $3/hour conditional wage subsidy. To do this, we first estimate a structural labour supply model using the existing tax code and predict the labour supply of a representative sample of individuals based upon the parameter estimates of the model. Simulations show that the original recommendation would have strong negative impacts on participation rates of low earners and that its cost would exceed $2 billion. Increasing the hours cut-off is predicted to have little impact beyond that of the original recommendation. Providing a guaranteed income equivalent to 100 percent of the MBM, on the other hand, would have a large impact. We find that contrary to what is usually assumed, guaranteed income schemes may increase the incidence of low income rather than decrease it.