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UBI is implemented tomorrow. Every citizen gets $1000 per month.
Landlord now knows you have an extra $1000 that you never had before. Why wouldn't the landlord raise prices?
Now you have an extra $1000 a month and instead of eating rice and beans for a few meals you go out to a restaurant. The restaurant owners know everyone is eating out more so why not raise prices and maximize shareholder profit as always. The restaurant/corporation is on TV saying, "well, demand increased and it is a simple Economic principle that prices had to increase. There's nothing we can do about it".
Your state/country has toll roads. The state needs money for its deficit. UBI is implemented and the state/country sees it as the perfect time to incrementally raise toll prices.
Next thing you know UBI is effectively gone because everything costs more and billionaires keep hitting higher and higher all time net worth records.
You'd increase taxes along with UBI, so most middle class people would end up neutral (or slightly positive). You can't just dump tons of money into the economy without turning other dials to keep it stable.
A wealth tax would essentially be redirecting money from the top 1% and guarantee a stable monetary floor for everyone.
Probably there's a dozen other changes, along with bankruptcy protections, interest rates, and anti scam protection would also need to be implemented.
You identified an obvious problem, which has been considered by intelligent UBI advocates that have studied this for a long time.
It's the same argument behind stimulus checks tbh. You give people money so that they can spend it on necessities and that money goes right back into the economy. Since our economy is based on growth and spending, more people spending money overall helps the economy, not hurts it. In addition, you're spending less money on solving societal issues. Well fed sheltered people cause less problems.
UBI will cycle in the bottom of the economy.
When you give a rich person more money they buy assets and increase their wealth, it does not impact their spending activity and has no measurable impact on economic activity.
When you give a middle income person more money they buy something new or pay down debts. Buying something new stimulates economic activity, but paying down debts is really just another wealth transfer to the banks which are owned by rich people.
When you give money to low income people they spend it. They have unmet needs and always have something they can spend that money on. That money then generates economic activity.
Increasing economic activity is what all of the interest rate and inflation talk is about. If you get people spending money that generates activity which increases wages, increases income, and decreases wealth inequality.
A good example is during the GFC the Australian government gave low income people $750AUD, about $350USD. The prime minister asked people to spend this money rather than save it. People bought a bunch of things, in the people I knew it was mostly TVs and new clothes, things you can put off for ages but benefit from whenever you buy them. All of this purchasing stimulated the economy, leading to Australia being less impacted than almost any other G7 nation. We recovered very quickly and boomed from there.
If you want a more long term example look at any welfare. If you have extremely poor people they just die. They are underfed, have weak immune systems, and they face imminent death. They can't access housing so they end up on the street. They have tonnes of inteactions with police and end up in the criminal justice system. They end up having their lives ruined and being purely a drain economically. They suffer.
If you give them enough money to have housing and food they are not going to be as costly to manage. They won't require policing, they won't get sick as often, and they will suffer less. Will this increase the competition for the lowest cost housing? Yes, but the answer to that is to build more housing. Even with the impact to housing cost this will not result in 100% of that payment going to landlords. People don't pay their whole income for rent, they will buy food and other needs first, so if they are faced with too high a rent cost they will remain unhoused but at least tbey will eat.
Landlords only have control over you, because you have to find a place where there are good income sources. If you have an UBI, you have a lot less pressure to move to a city with high-paying jobs.
All of a sudden, you have a bunch of new options. You can move to a rural town. You can move to places with lower average incomes. Hell, you can just buy a lot of land in the middle of nowhere and build a house.
With consumer goods, it's a bit different, because their prices are less about artificial scarcity and more about production costs. However, as noted in some of the other comments, if you just don't print money but finance it with taxes, it won't be that much of an issue.
No, because having money is power. The more money you have, the more leverage you have, in general. This argument comes up a lot and I think it's mostly coming from a widespread attitude of learned helplessness about money. Especially a UBI that is funded by some form of redistribution would mean a lasting shift in wealth inequality that could not be undone just because some businesses would like it to be.
If my landlord raises my rent to match the UBI I'm getting then I'm going to move to the Apartment down the street that DIDN'T raise their rents because I FINALLY can afford to do that! Or are you saying that Landlords are ILLEGALLY colluding with one another to ensure Rent remains high? If that's the case why are you bringing up UBI?
I’ve been saying this for a while, and that’s why I think a complex problem like this needs a more complex solution than UBI.
Essentially I think successful UBI would need to be something like UBS instead (Universal Basic Support). Instead of only being money it needs to consist of free services. That way it’s harder for third parties to leech it away.
So instead of “Here’s $1000 a month, do whatever you want” it would need to be more like “You can get free healthcare here, free electricity through this company, free food rations from this grocery store.” Then if you want things above UBS you need to have some source of income.
Formally, market efficiency makes this impossible without price fixing.
Practically, UBI does result in mild inflation of consumer prices in most models, but it’s because the market changes shape slightly to meet new consumer demand, as opposed to a blanket price increase of everything.
No, because you could choose to spend it elsewhere, and you might not even feel obligated to live at or work at where it's most expensive anymore. The real problem with UBI are the way speculative investors (meme stocks, crypto, penny stocks, casinos, any gambling addiction, etc) would prey on the vulnerable people, and there's a lot of ways to handle that but only if there is a will.
But the real reason UBI won't happen is because getting people to die is much cheaper than paying them to live so they have to pay even more for future generations. UBI can't happen without proper future planning for entire societies. It works great in the short term and in test cases, as a lot of charitable ideas do until the predators come in.
My understanding is that UBI would benefit the impoverished the most, allowing them to get out of debt, put food on the table, or maybe even put a roof over their head, finally opening the door for them to live a prosperous life. This significant change and opportunity for them outweighs the inflation they may face. Food, water, shelter, and healthcare are a human right and UBI is one way to deliver that, so we should probably commit for that reason alone. With no other changes, worst case scenario, those of us that are better off can begrudgingly cope with the inflation potentially created. But besides the potential price hikes it’s worth mentioning that we will all see a return on investment as a society when our weakest are made stronger.
As for where the money should come from and how to fight the potential inflation so us in the middle class don’t lose the quality of life we’ve become accustomed to, we need to make the ultra wealthy finally pay their fair share, break up monopolies to create competition, and properly punish exploitation.
There will be some changes in prices, but I don't think it is going to even out to everyone ending up even.
You'll probably see some inelastic demand goods increase in cost, but I don't see that taking up the whole paycheck.
If anything, I think the largest impact will be the unskilled labor market, as the threat of starvation will no longer be as real.
Plenty of arguments given here for why it's unlikely to happen, but I'd like to provide a slightly different perspective of how I think UBI would ideally be implemented.
I think UBI should come with abolishment of minimum wage and a uniform decrease in everyone's income from work (e.g. if UBI is 1k per month, then reduce everyone's income by approximately 1k/month), so there wouldn't be an obvious overall increase in everyone's income. Workers now have more leverage to negotiate wages because they don't need to worry about dying if they lose their job, and that should push up their wages to wherever is appropriate for their line of work. So overall, it'll probably lead to a bit of inflation, but through the the same mechanism that inflation has always occurred rather than telling your landlords that everyone has an extra 1k for you to take now.
Does this make sense? Good or bad idea? Discuss.
In a properly regulated functional market they couldn't. Their renter would move to a place the owner didn't do that. The same would apply to any other market.
In reality there would be temporary inflation, since there is a bunch of new money to drive demand. But again with a well regulated market working as it should, supply would eventually increase to meet the new demand and everything would reach equilibrium again.
That could be mitigated, by slowly increasing the UBI from 0 to 1000 incrementally. The slower it is, the more time the market has to supply the increasing demand.
With what leverage? If you have no-strings-attached income, you are not facing destitution at the loss of your job, and it becomes a lot less risky to walk away from a job and move somewhere else. If all the landlords in one area do that, employers in that area will probably have to pay more.
But imo, some type ubi system should be paid for with a vat tax that just pulls it's income directly out of economic activity, which would make it harder to avoid paying for. The result would be higher prices anyway which would probably offset the income, but new situation would be that workers have a lot more leverage in their employment and living situation.
My other hot take is that with a ubi, minimum wage should be abolished. Basically, with ubi the need for it would be lessened and more people might be willing to work jobs that they might not have been able to live off of without a ubi. But again, these are basically my hot takes
Social housing is the solution. Why invest in ubi without investing in social housing. Break the renter class.
It's still a free market, rent doesn't really seem linked to income at all, but to demand and competition. Same with restaurants, it's complex, but income of the patrons is the least of the concerns.
In my country we don't even have minimum wages so I don't have to worry about this! 🤣🤣🤣 tsk... first world problems...
Yes. Inflation is when billionaires think you've got a few dollars they haven't fucked you out of. You have to sneak welfare past them already, so full UBI would be sniffed out by their snouts immediately.
One of the easiest ways to resolve this problem is artificially increasing supply. The government can subsidize the production of food, housing, medical care, and education. It doesn't matter if people have more money if the supply of a good is always high. Having the government be a provider of these goods in monopolistic or inelastic markets would also be a good idea.
I don't think UBI should be implemented tomorrow. Subsidizing things today would be a much better first step. Several years of increasing supply and then starting UBI is a better bet.
This is why you also need government/public housing. When rents went up here the government had more houses built.
OP is arguing for more government involvement in the economy but doesn’t know it. The government can set prices and subsidize certain things, at least they do that here.
I mean... kinda?
I think you're putting too much evil intent behind the motivations though. Supply and demand isn't some made up excuse. If the prices were to stay the same and everyone had more money, then there would be shortages. It's not as if a factory can instantly increase production and the supply chain can instantly get the products on the shelves over night. There are real world factors involved in increasing production.
So what happens is prices increase for many products and this results in inflation. Nobody wants inflation, not even the wealthy. So the central bank will want to tamp down that inflation and the lever they use for that is increasing interest rates. So you wanted to put that UBI towards a mortgage or a car payment? Well a lot of it will be going towards the increased interest on the money you're borrowing.
And the thing about inflation is that it doesn't really get reversed. So the inflation from the initial shock to the economy would take a bite out of UBI (and also the income besides UBI). Your employer may be less likely to give you a raise to offset that inflation because you have UBI. and the fix for the inflation will mean paying more interest on a mortgage.
So yeah, UBI wouldn't gain people much. It's mostly just a poison pill promoted to kids by wealthy people like Andrew Yang so you don't push for an increase in minimum wage. An increase in minimum wage would be a direct transfer of wealth from businesses to employees. They don't want this so they promote UBI which isn't actually feasible to distract from minimum wage increases (which almost everyone supports) and make taxing the wealthy less likely (which is also supported by most, but not when it's to pay for UBI).
Many countries aren't that far from UBI. When you add all the welfare programs, People alrcadx get money When not working or When notgettimg a fair wage (yeah wage are so low that in today's economy minimal wages workers alrcadx need some welfare benefits tolive)
UBI is about generalizing it and making it a livable amont. This would be a taxable income, it would allow working class to work less (letting works for others) whiletaxes won't let the rich get tricher zithouthaving to work
I believe in UBI, but the Captain Laserhawk show made me aware of how much it could get twisted in fucked up ways. “Don’t watch this show? -$100 from your stipend this month.” I used to think things like that were fear mongering, but the world is all kinds of weird today.
Corporations and landlords already jack up prices as much as they can. This is a problem of lack of competition. If there is proper competition then you should be able to buy/rent cheaper things, which would drive downward pressure on prices. The problem is maintaining competition because once one entity gets big enough then it tends to buy out the rest. There is also the issue of collusion, especially collusion through software that recommends pricing based on "market" i.e. average price + extra to drive upward pressure in prices. If multiple entities are using that software to determine prices then they are colluding by proxy.
If a competitive environment is maintained, then companies will drive down prices to capture those UBI dollars since people most dependent on UBI would be looking to spread their UBI as far as they will go, so they'll look for the lowest prices.
They probably would. As the value of a dollar drops disproportionate to the value of goods/services, the cost in dollars for the same good/service goes up.
Some would but then immediately lose the competitive edge to those that don't, and there's enough of them that some will break ranks even if they tried to form a trust over it
This is where windfall taxes come back into basic utility. Also it becomes the basis for antitrust action on price collusion if all the sellers coordinate
That only works if literally every landlord is conspiring together. If they're not, then people will flock to the landlords that don't increase the price, or only increase a little. Meanwhile, you think car salesmen will see an extra $1000/mo and not try to take advantage? Why do you think landlords will successfully take all $1000 and nobody else will get a penny?
Everyone will try to get that $1000/mo, but they will have to compete with each other and the people with the money are rational actors who will pick the best use for their funds.
Meanwhile, the question of whether it's inflationary will depend on where the money comes from. If it's matched by a tax that pulls money out of the system at the same time the UBI puts money in, then it won't be inflationary it will just redistribute wealth from the taxed (in every plan I've seen, the wealthy) to everyone else.
No because the entire tax system would be rebalanced so the average person is no better off.
The point of UBI is to raise the income of the very bottom of the ladder and take it from those at the top, while simultaneously dismantling all the other benefits systems.
But build more houses anyway because that's the root of all issues.
Yes, but the idea is that UBI money still spends, and there's still overall much more money than that in the economy, so there should be a floor for the housing and food that a UBI will buy you, even if housing and food use up most or all of it.
Kind of like how increasing a rocket's size increases its fuel need increases its size some more, anyone implementing UBI needs to make logical guesses about the amount of inflation and knock-on effects and try to accommodate them, but the idea is to make sure no one is flat broke and starving even if it doesn't really lift people out of poverty directly. SOMEBODY will fill the market niche for people seeking housing and food on UBI, and it will be up to the government to ensure they meet minimum health standards and to incentivize/mandate enough of it. Also, any UBI system probably also needs to have a very graceful downward curve (if you have one at all) as other income increases, so that people will be willing to work to supplement it rather than fearing that they have to choose between UBI and backbreaking labor in exchange for "UBI plus a dollar."
UBI is not a magic bullet, but it is a sort of quick and dirty social safety net that inserts the government's money into the system without the political and administrative overhead of running housing etc. programs itself. Theoretically that might mean things happen more efficiently, and if it's more than the literal bare minimum to live then it also affords a certain amount of agency to the people on it to use their remaining resources how they see fit, but it could go really wrong too. You still need regulation and the power to adjust amounts to ensure that the UBI people receive is adequate for the intended purpose, and a bad UBI program could be run in a way where a government uses it as an excuse to simply abdicate any further responsibility for its people's well being.
Yes. That is correct.
The fact that the landlord is also getting an extra 1000 a month means they'll be less incentivised to put up the price. Also market forces, it'd just take a couple of landlords to have some morals, or prioritise having their properties filled to keep prices down.
With the restaurant example market forces again. If the shitty big chain restaurant put up their prices and the nice local restaurant didn't then suddenly they'll see more people going to them. It would also make it really easy for shitty chain B to undercut shitty chain A.
Then you also have the backup of government regulations and using tax systems to make it not viable to price gouge that way.
I can see that being very possible. You see this when taxes are levied to "improve something" and then that money doesn't go to that something in a directly helpful way. And then the budget that is the main staple of survivability of that something is kept static because of the "new influx."
For example, say that you have a toll road increase to help the infrastructure of your roads. Say your Annual Budget for Transportation is $50mil for 2021. In 2022, you requested $60mil. You decide to implement tolls in new ways and increase tolls in other ways (like fines, mileage taxes, and so on) to make up that shortfall. This brings in an additional $10mil, let's say, in 2022. The revenue is forwarded to 2023. But in 2023, you actually need $80mil because of the two years of shortfalls where it stayed at $50mil, yet costs continued to increase. That $10mil from 2022 now puts you $10 mil behind in 2023. The fact that the previous budget needed steady increases were ignored because "well, we'll just make things more expensive to make up 2022's shortfalls of the $60mil request."
That's IF that $10mil isn't siphoned for other things. Fresh money brings fresh ways to spend it. Grifters via backroom contracts to "fix roads" that go over budget with nothing to show for it. So these new fees and increases actually made things worse due to no oversight.
So yeah, I could totally see UBI being siphoned off by similar things.
Eventuallly energy will become so inexpensive that trade and commerce as we think of it, is like comparing trade and commerce of 50, 100 or 200 years ago, completely changed tech. So it is likely to be a different system than owners and workers. One solution is everyone gets a share in X portfolio of their choosing, then they are the owners and can get the UBI or own shares in the company(ies) they think will be profitable. If you can't manage equities, you get a lower UBI to get some soap and raman noodles and a tent.
Hot take here and I would love discussion- but this is a small reason why I am against a full UBI in cash, but want UBI in voucher form with only a small portion in cash. Vouchers limit potential inflation spill over from sectors and you can now control how much people are getting depending on factors to better and more fairly suit their situations. This is also why I am a huge fan of "food stamps" or food welfare programs. This is essentialy what they are doing already, just make it universal. Then we look at things like housing vouchers, another great program that we can now just scale up and make universal as well. Then you only need to give a smaller cash handout for incidental spending. You know people are going to have to spend money on housing and food, so make those the priorities for funding vouchers and you can put rules in place to minimize inflation within those industries. Then if you have people who are well of enough to not need the full voucher, let them convert the voucher over to cash at a penalty rate, say 2 to 1 for cash, or some progressive scale for remaining money. They don't need the money as much, but you also don't want them to be completely left out unfairly and have them resentful of the system. This could even expand into other industries or normal costs. Transportation, cable/internet, cell service, even some insurance (like car, rental, umbrella- assuming that if you are at a level of providing UBI, you are already providing universal health care). Now for each voucher you can make it needs and situation based and evaluate a fair amount for each person through an automated system depending on some quick metrics of their life. Each voucher system is also industry specific with its own oversight and regulations and inflation reductions built into it. I think it would be a better system and am open to others thoughts.
Yes they would, that is why I am for UBI however not without harsh restrictions on rental or mortgage costs in regards to the UBI. I'm not concerned for normal prices but, I know rental and housing costs will rise in comparison. Needs restrictions before implementation
One thing that shouldn't be ignored is most UBI proposals remove the current means-based welfare in the USA. So, as many people go on the UBI list, many others would disappear off the welfare lists, which means there probably wouldn't be as much disruption as you are expecting. If the UBI is implemented as a negative income tax, some people's net may change even less.