A Deeper Look at GLI: The evidence on work disincentives

This week’s web feature deconstructs some of the assumptions that underlie concerns about guaranteed livable income (GLI) and work disincentive. There is another good reason for not being scared off of GLI by work disincentive though – research demonstrates that the impact is actually rather small.

In the 1960s and 1970s, there was policy interest in a negative income tax version of GLI that led to multiple experiments in the United States and Canada. Among other things, these studies focused on the work disincentive.

In the US studies, the average reduction in hours worked annually was 6% for men, 19% for married women, and 15% for single female headed households.

In the Mincome experiment, which took place in Manitoba, the reduction in hours worked annually was 1% for men, 3% for women, and 5% for lone female households.

Each experiment included different levels of income security, so these are totals averaged out over an experiment which saw households receiving different treatment. The experiments also took place over 30 years ago, which means the results wouldn’t necessarily transfer today. The large differences for men and women are one example where we might see changes today.

It is also important to note that while a variety of behavioural impacts were studied, analyses of work disincentives did not take into account reasons people left the labour force. If participants took advantage of income security to go back to school and upgrade their skills so they could return to the work force at a higher wage level, that was still recorded as a work reduction. Staying home with small children or elderly parents was also considered work reduction.

Still, despite the caveats, the studies demonstrate that there is no reason to fear a large-scale withdrawal from the paid labour force as the result of an income security program.

For more information, a good summary article is “Whatever happened to Canada’s guaranteed income project?” by Derek Hum and Wayne Simpson, which appeared in Canadian Public Administration, Vol.6 (3), 1993.