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Something terribly cool happened in Canada during the 1970’s.

For four years Dauphin was a place where anyone living below the poverty line could receive monthly cheques to boost their income, no questions asked. Single mothers could afford to put their kids through school and low-income families weren’t scrambling to pay the rent each month.

For Amy Richardson, it meant she could afford to buy her children books for school. Richardson joined the program in 1977, just after her husband had gone on disability leave from his job. At the time, she was struggling to raise her three youngest children on $1.50 haircuts she gave in her living room beauty parlour.

The $1,200 per year she received in monthly increments was a welcome supplement, in a time when the poverty line was $2,100 a year.

“The extra money meant that I was also able to give my kids something I wouldn’t ordinarily be able to, like taking them to a show or some small luxury like that,” said Richardson, now 84, who spoke to The Dominion by phone from Dauphin.

Unfortunately the experiment was ended early due to political reasons. The original researchers took excellent notes, though, and some retrospective analysis suggests this has great effect with few side-effects.

These results suggest that healthcare utilization declines when subjects are presented with a [Guaranteed Annual Income]. Hospital separations for Dauphin subjects fell 8.5% relative to the controls during the MINCOME period. This decline was significant at the 1% level.

Indeed, the actual hospitalization rates per 1000 people graphed over time show the decline in hospitalization coincident with the introduction of MINCOME.[1]

But a second, much more recent attempt at guaranteed minimum income… sorta-kinda.

The 20 percent raises [Dan] Price implemented in 2012 were supposed to be a one-time deal. Then something strange happened: Profits rose just as much as the previous year, fueled by a surprising productivity jump — of 30 to 40 percent. He figured it was a fluke, but he piled on 20 percent raises again the following year. Again, profits rose by a like amount. Baffled, he did the same in 2014 and profits continued to rise, though not quite as much as before, because Gravity had to do more hiring. […]

But Price worried that employees with money troubles would fail to provide the top-notch service that had made Gravity successful. He also believed that low starting salaries were simply wrong — contrary to his values, which his father had always taught him to respect. “I just decided I’m gonna do $70,000,” he says. “I don’t care if I have to stop paying myself or I have to work 20 hours a day. I’m going to do it.”

The plan will eventually double the salaries of 30 workers and give raises to 40 more making less than $70,000. Phased in over three years, this will cost $1.8 million. The minimum jumped to $50,000 immediately and will climb by $10,000 in each of the next two years; those who earn $50,000 to $70,000 will get $5,000 raises. Price has vowed not to raise prices, lay off staff, or cut executive pay. […]

Six months after Price’s announcement, Gravity has defied doubters. Revenue is growing at double the previous rate. Profits have also doubled. Gravity did lose a few customers: Some objected to what seemed like a political statement that put pressure on them to raise their own wages; others feared price hikes or service cutbacks. But media reports suggesting that panicked customers were fleeing have proved false. In fact, Gravity’s customer retention rate rose from 91 to 95 percent in the second quarter. Only two employees quit — a nonevent.

Six months is nowhere near enough time to measure the true impact of minimum income, and of course this is a very limited form of it. Still, this experiment is worth keeping an eye on.

 

[1] Forget, Evelyn L. “New questions, new data, old interventions: The health effects of a guaranteed annual income.Preventive medicine 57.6 (2013): 925-928.

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