Universal basic income improved lives in rural Canada when they tried it in the '70s. Here's why the program got scrapped.

Story by khawkinson@insider.com (Katie Hawkinson ) 

A rural Canadian town gave all its residents a guaranteed annual income for three years. It improved their educational and health outcomes, one expert says. Denis Balibouse/Reuters© Denis Balibouse/Reuters

• A rural Canadian town gave its residents a type of universal basic income for three years.
• The program improved residents' health and educational outcomes.
• The study can still teach us lessons about the benefits of universal basic income, an expert says.

For four years in the late 1970s, Canada's Manitoba province ran a program called the Manitoba Basic Annual Income Experiment, or MINCOME.

It was a guaranteed annual income program, which typically channels funds to people based on their income. In many cities throughout Manitoba, only a certain number of people could participate in the program.

MINCOME was different, however, in the small rural town of Dauphin, Manitoba. There, every single resident could participate. Families with no income from other sources received payments that put them at 60% of the annual income, considered the cut-off for being low-income. That cut-off varied by family size.

If a family was bringing in money, each dollar reduced the benefits by 50 cents.

An expert who studied the Dauphin experiment for decades says we can still glean lessons from MINCOME nearly 50 years later.

Evelyn Forget, a Canadian health economist, told Insider she's been interested in the Dauphin experiment since its inception when she first learned about it in an economics class.

Forget went on to spend the next several years studying the relationship between healthcare and poverty as a health economist.

"When you're a health economist," she said, "people keep asking you one question: how are we going to pay for healthcare?"

That central question inspired Forget to revisit the Dauphin case over 30 years later. To better understand how poverty impacts health outcomes, she published a study on the impacts of MINCOME on Dauphin residents 2011.

Forget said those impacts demonstrate the positive outcomes that lifting families out of poverty can have.

"But I think one of the things that this project does is to ask us to think a little bit about the downstream consequences of ensuring that people have enough money to care for themselves," Forget told Insider.

UBI led to higher graduation rates and longer maternal leave

One of Forget's key findings pushed back against the idea that guaranteed annual income, or universal basic income, will mean people stop working.

Forget found that only two demographic groups worked less when they participated in the MINCOME program.

The first group that worked less was young unattached males, or unmarried boys, between 15 and 19 years old. Their rate of work went down, Forget said, because their families no longer relied on them as much to find jobs while still in high school to support the family.

So, while fewer of them worked, their high school graduation rates went up, Forget said.

The second was mothers of newborn children. That's because, at the time, Canada offered mothers just a few weeks of paid maternity leave, so they used their MINCOME funds to extend the time they could spend with their newborn, according to Forget.

Forget's study also revealed that hospitalization rates went down by 8.5%.

"That's a huge impact," Forget said, noting that several people in the community were finding themselves in the hospital because they were living in poverty.

An economic crisis forced MINCOME to end

Critics of guaranteed annual income often cite its cost as a barrier, but for Forget, the communal cost of poverty outweighs that of a universal basic income.

"We pay for it through the school system, for classes for kids who fall behind because their parents can't pay the rent and they move too often," Forget said. "We pay for it through the health. We pay for it through criminal justice systems."

Despite its success, the program ended after just three fiscal years. Manitoba officials cited economic concerns when they shut it down.

"I think the lack of enthusiasm had to do with things like inflation and unemployment," Forget said. "The standard line was: 'These are bad economic times. This basic income thing sounds like a good idea, but let's wait until times are better.'"

They were indeed bad economic times: Canada faced a devastating economic crisis throughout the 1970s that coincided with the MINCOME experiment.

Inflation rates spiraled upwards throughout the decade, with interest rates hitting double digits in the early 1980s, the Toronto Star reported.

Interest rates peaked at 21 percent in August 1981, which then sent the country into a recession, CTV News reported.

Unemployment also skyrocketed during this period, and home ownership in the early 1980s became unattainable for many.

Inflation during that period was driven by rising energy prices and rising agricultural prices, according to CTV News. Several experts last year told both the Toronto Star and CTV News that economic patterns in 2022 echoed that of the 1970s inflation crisis.

For Forget, guaranteed annual income is a key tool for improving health outcomes for low-income families.

"I find very heartening is that every time you run one of these experiments and you follow up with people about what they spend the money on, they spend reasonable things," she said. "They pay down debt, they invest in education, they make lives better for themselves."