A fun little story from a doctor friend comes from when he would make trips to the deep North for extra money. On one occasion they got a distress call from an Inuit woman who cried over the radio that her baby was going blind.
They jumped in a helicopter and raced out to her small village at a cost in the tens of thousands. The doc jumped off the plane and rushed to where the baby was, took one look, and calmly let the mother know that her baby had conjunctivitis — pink eye — and that it would clear up on its own.
Canada does not have a federal healthcare system. Instead, healthcare is a provincial responsibility, within the strictures of a set of national principals. Provinces must provide healthcare which meets highly egalitarian standards of universality and comprehensibility. Similar standards of care and access are expected to be achieved throughout the country, and to the extent that the fiscal burden of each province differs, federal health transfers — a per-capita based bloc grant — help to equalize health budgets.
As Sam Wilson points out, this kind of entitlement can lead to extremely tilted forms of implicit subsidization, as quantity-quality are in theory held constant, leaving only cost to vary. Of course theory does not exactly match reality. In the rural north of Canada, hospitals are more dispersed and offer fewer services and less qualified practitioners. Still, even these hospitals represent a far greater economic cost compared to ones based in more populated regions.
A significant part of the variation in cost comes from the healthy sums required to induce doctors and specialists to do northern tours of duty. For instance, Ontario offers a grant of up to $117,000 over four years to family physicians willing to work in under-serviced rural communities. These kind of subsidies don’t just risk locking workers in unproductive locations — often that’s their overt aim.
Yet despite this caveat I still by and large agree with Sam that a Basic Income risks locking people into unproductive locations. One example to consider comes from my home province of Nova Scotia, where seasonal workers in the fishery have for years been pilot tests of a guaranteed basic income.
Think of it as like a lobster trap. Lobsters enter the trap through the “kitchen,” enticed by the bait. Ultimately they exit into the “parlor” and the lobster is trapped. Likewise, fisherman settled in rural Nova Scotia enticed by the bait of a profitable catch. But in the winter, when fishing goes out of season, crew claim Employment Insurance and maintain their standard of living, given the dearth of “suitable work”. Over the years this and similar dynamics have helped stall the population transition to urban centers and contribute to a glut in lobster.
A basic income would have a similar effect. In many industries workers make a windfall for a season, like in fishing, but then face a choice for the remaining seasons. A basic income, all else equal, will allow workers to coast during the off season in unproductive if picturesque settlements. A better policy should be able to address the ‘living wage’/’living income’ concern without sacrificing production or discouraging labour mobility.
I spent the last year working for a rural development agency whose mandate was to “raise incomes and productivity”. In my region the big anxiety was out-migration, with some rural areas losing 5% of their prime-age working population every year. I wrote a brief pointing out that, if higher incomes and productivity was the goal, perhaps a plane ticket was indeed the lowest cost solution.
Needless to say, that didn’t go over well. Yet it proves the point that both cash and non-cash subsidies often end up favoring the welfare of abstract geographic divisions over their actual inhabitants, much less the “net social benefit”. This should not be a surprising result. It is in many ways the modus operandi of the nation state.