Ontario is testing a basic income in which a randomly selected group of people will receive $16,989 with no strings attached per year for a single person, less 50% of any earned income. So, for example, someone who earned $20,000 in a year would receive $6,989 to top up their earnings.
Critics of basic income have suggested that this will have harmful effects on people’s work ethic. Why would anyone put in a day’s labour, they ask, when they could just collect “free money”?
It remains to be seen what impact basic income will have on productivity, but we could learn from the one group who already receives a great deal of money for doing no work: the richest 1% of Canadians.
In order to understand this, it’s important to clarify the distinction between two types of income. The first is labour income. This is what most people are familiar with. You do work and in exchange you get a wage or salary. The second type of income is capital income. This is money you make from things you own, like stocks or rent. Capital income is basically passive. It flows to owners of capital whether they work or not.
In 2015, the bottom 99% of income earners made an average of $42,200 in labour income and $1,000 in capital income. If you are a normal Canadian, this probably sounds accurate to you — the vast majority of your income comes from working, and you may collect a little bit extra through mutual funds or stocks.
But for the richest 1%, the story is very different. In 2015, the top 1% collected $81,100 in capital income, twice as much as those in the bottom 99% make in a year. Or put another way, the richest 1% make as much doing nothing as everyone else does working for two years.
And the further you ascend the income ladder, the more money you make for doing nothing. The richest 0.1% collect a whopping $375,000 each year in capital income. The average Canadian would have to work for more than 8 years to make what the richest 0.1% make lounging around the pool in just one year.
So when people suggest that cash supports for normal Canadians — like basic income — would damage work ethic, just remember that the richest Canadians already collect a great deal of money for doing nothing. And they seem to be doing just fine.