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

This paper analyzes the impact of a recent proposal made by Quebec's Comité consultatif de lutte contre la pauvreté et l'exclusion sociale to guarantee every individual an income equivalent to 80% of Statistics Canada's Market Basket Measure (MBM). Workers with earnings at least equivalent to 16 weekly hours paid at the minimum wage would be entitled to 100% of the MBM. These proposals are the focus of the paper because the had there potential to become official policy. We also investigate the impact of three alternative proposals: 1) A change in the cut-off from 16 to 30 hours; 2) a guaranteed income equivalent to 100% of the MBM; 3) 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 proposal would have strong negative impacts on participation rates of low-earners and that its cost would exceed $ 2 billion. Changing the cut-off is predicted to little impact beyond those of the the original proposals. Providing a guaranteed income equivalent to 100% of the MBM, on the other hand, would have a huge impact. We find that contrary to what is often assumed, guaranteed income schemes may increase poverty rates and the incidence of low-income rather than decrease them