What happened to the tiny farming town where everyone got free money?

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    Interesting topic for non-textbook economics discussion

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    For four glorious years, poverty was eradicated in Dauphin, Canada. Picture: railsr4me Source: Flickr
    FORTY years ago, a tiny farming town in Canada was the stage for a groundbreaking social experiment.
    Everyone who needed it would get free money.
    The effect of the policy was astonishing. Dauphin, Manitoba thrived in almost every way.
    Doctor’s visits and hospitalisations declined, mental health improved and more teenagers completed high school. It seemed that everyone was happier.
    Now, policymakers around the world are again looking at the experiment to see if it could hold the key to our future.


    The scheme worked like this: everyone would have a guaranteed annual income, or “Mincome”, with monthly cheques supplementing the poorest people’s earnings and rewarding them for extra hours.
    Fears that a guaranteed income would disincentivise workers proved unfounded.
    The only substantial difference in workforce contribution was among new mothers, who tended to stay at home with their babies for longer, and teenagers who no longer had to work to support their families.
    It was the largest experiment of its kind, taking place over four years from 1974-79. But despite its success, the project was abandoned and never led to the kind of social change many had hoped it would.
    But the idea of a guaranteed income has extraordinary potential to rid society of the universal problem where low-income workers can slave away at several jobs but are unable to escape poverty, and more likely to spiral ever further into debt.

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    Many of the town’s residents, pictured at a 2013 festival, remember the experiment as improving their quality of life. Picture: Robyn Hanson Source: Flickr

    Switzerland is poised to vote on a monthly stipend for its citizens, while the Indian government is replacing aid programs with cash transfers.
    There have been other minimum income experiments, but Dauphin was a rare case in which everyone in town who was eligible would take part.
    Canadian social scientist Evelyn Forget wrote a paper on Mincome in 2011, called “The Town With No Poverty”.
    She found that the effects of the experiment extended beyond the eligible families (those with an income of below $12,000), describing it as a “social multiplier effect”in an interview with Vice.
    For example, if a student was afforded the ability to stay in school because of the minimum income, their friends whose family were not in the program might be influenced to stay in school too.

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    There were fewer visits to the doctor or to hospital, and fewer cases of mental health problems. Picture: Mike NowakSource: Flickr

    Despite the fears of a dip in labour, Forget says the beauty of the Dauphin experiment was that “there is always an incentive to work more hours rather than less.”
    Every dollar received from other sources would reduce benefits by only fifty cents, so if you worked another hour, you would keep 50 per cent of your benefit as well.
    The government at the time was left-wing and progressive, but the idea has strong support from conservative policymakers too. They prefer it to traditional welfare systems, and advocate its simplicity in replacing myriad other sources of benefits with a base income.
    The idea is also gaining traction as work becomes both more flexible and more precarious, education costs soar and wages stagnate.
    “A relatively modest GAI can improve population health suggesting the possibility of health system savings,” reads Forget’s persuasive paper.

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    The experiment on this isolated country town remains the largest of its kind. Picture: Mike Nowak Source: Flickr

    Some recipients used their money to pay for essentials; others to increase their earning potential, by buying a new car, for example.
    But one of the biggest benefits was an increased sense of wellbeing.
    Forget claims that many social services are based on connecting people with stable jobs, while in fact, young people are increasingly in part-time or contract work without any security.
    “Most important for an agriculturally dependent town with a lot of self-employment, Mincome offered stability and predictability,” writes Forget. “Families knew they could count on at least some support, no matter what happened to agricultural prices or the weather. They knew that sudden illness, disability or unpredictable economic events would not be financially devastating.”
    Almost everyone who spoke to Forget about living in Dauphin at the time said the experiment had been overwhelmingly positive, and had improved their quality of life.
    The world may still be some distance by accepting this sort of radical policy.
    Whether the world could accept it might depend on whether we agree with Dauphin’s motto: “Everything you deserve”.


    http://www.news.com.au/finance/econ...e-got-free-money/story-e6frflo9-1227209545071
 
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