The employer response to the guaranteed annual income

Abstract

How do firms react when the whole labor force has access to a guaranteed income? One view argues that the guaranteed income is an employer subsidy, facilitating low wages and a ‘low-road’ industrial strategy. The second view suggests that in providing an alternative to work, the guaranteed income tightens labor markets and pulls wages up. This article examines the impact of an understudied social experiment from the late 1970s called the Manitoba Basic Annual Income Experiment, or Mincome. This research focuses on Mincome’s ‘saturation’ site, the town of Dauphin, Manitoba, where all residents were eligible for unconditional payments. Using an archived survey of local firms that inquires into wage rates, applications, hiring, and work hours, I find support for the second view. I close by examining the mechanisms behind the employer subsidy argument and considering the conditions under which a variety of income-support policies might increase or decrease wages, and more broadly, foster compromise or conflict in the labor market.