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Comment by jasonjei | Hacker News Reader

Frankly, I think UBI is a much better solution than increasing federal minimum wage. I think the problem with increasing minimum wage is that employers will be less likely to hire or more likely to look to automation to decrease human hiring needs. McDonald’s has already rolled out self-service kiosks, replacing cashiers entirely.

UBI, on the other hand, can supplement wages.

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Seattle is not a good sample of the country as a whole, but I think it's still worth reading the various studies that have been done on our minimum wage increase.

https://www.washington.edu/news/2019/02/06/two-new-studies-p... is a good place to start.

If I'm skimming this properly, it seems that:

1. Minimum wage increase results in basically insignificant price increases, except for...

2. Businesses with high labor costs like daycares are affected and have to either increase prices or reduce staff.

In my opinion, the businesses in #2 are instances where the customer isn't paying the true cost of the service. Rather, the service is being subsidized by providing inadequate wages for its employees based on the fact that the labor is in much higher supply than demand.

#2 can be handled by government subsides. I doubt the feds would be able to do it but the states should absolutely do it. My prior employer used to provide stellar day care but they shut it down the day after their state tax break for the daycare ended.

Overall the employer daycare subsidy solution just seems absolutely terrible to me.

It favors large corporate employers over small businesses and self-employed, favoring the upper middle class employee who's got an employer providing extensive benefits already (similar to how you're completely hosed in this country if your employer doesn't provide a good healthcare.

If we want to use subsidies, it needs to be a lot less regressive than that.

And we need to seriously get away from quality of life benefits being tied into one specific employer.

> the customer isn't paying the true cost of the service

How would you determine the "true cost" in this case?

Isn't that obvious? The cost of doing business plus profit while the company's employees are making a living wage.

If you want a tangible metric, let's just say that someone working 40 hours a week making minimum wage shouldn't need to receive government safety net benefits, because that is basically a transfer of wealth from the taxpayer to the company employing that person.

I have yet to see any evidence that UBI would accomplish any of the things its proponents think it will. The first unintended consequence I predict would be increases in rent, food, and other basic things. I believe a better solution to helping the lower end of the economic ladder would be things that reduce the basic cost of living.

I'd be interested in an answer to this too. We've seen a similar phenomenon in college costs - more government loan money available, higher tuition, repeat. Why would UBI not result in a general uptick in costs that would mean the "purchasing power" of the consumer is the same? I think providing the basic services themselves would be more effective and efficient, even with the bureaucratic overhead.

Im sure Im wrong, but wouldnt it make sense to start with like "all rice, bean, potatoes, and broccoli consumption at the personal level is free" and start with a food stamp / ebt that buys unlimited of something very specific? It wouldnt be a currency thats worth trading to other people, landlords couldnt collect ebt credits in lieu of rent, because everyone would already have unlimited.

Instead of subsidizing agriculture at the production side, you can combine farm subsidies, food stamps, and ubi into one consumer credit, designed to persuade people to consume mostly free food over luxury food.

Whats the next thing it would make sense to subsidize for everyone without creating some kind of cyclical purchasing power loop?

Why would it result in an increase in inflation?

As economists say "inflation is a monetary phenomenon". So if you pay for UBI by printing money, then of course it would increase inflation. But Friedman's original proposal and most others pay for it by having the rich pay for the poor through taxes and the middle class pay for themselves.

And on the demand side, the poor in America are generally obtaining food and housing somehow. The food's not nutritious and the housing might be a shelter, but only a small fraction of the homeless let alone the working poor are actually sleeping outside.

On the housing side, proponents hope that UBI will encourage people to move out of the expensive areas where jobs are to areas that are cheaper to live in. So a good argument could be made that housing costs will go down.

On the food side, food is a commodity. The price of a commodity is the marginal cost. So as long as the producer costs are similar between producers, demand has very little effect on the price of food.

> But Friedman's original proposal and most others pay for it by having the rich pay for the poor through taxes and the middle class pay for themselves.

It would increase inflation in this example not because the government is printing money, but because the source of the money (the "rich") are not in the market for low-end housing, but the recipients of the taxes are.

For food, goods, and services, for much of the market there is both sufficient competition and means to increase supply, that I do not think prices can be raised unilaterally with an UBI. If you raise your prices, but I don't, I get your customers. Basic free market ideas.

However, for rent, there is real scarcity in supply AND limited ability to raise production. I expect that UBI will be an inflation ratchet for rent, unless it is paired with a policy that somehow increases housing supply.

UBI could help more inland cities become more attractive to business as their economies would grow with UBI, but have more land to build housing on.

I know someone who lives in subsidized housing. Rent is a percentage of income. Barring additional changes, that percentage of UBI would go directly to rent as a matter of law. That might be less of it than normal unregulated rents.

There's a response to the parent comment that has real data on increasing the minimum wage. It's only two papers on one location, but until we see at least the same kind of thing on UBT, it's all wild speculation.

I don't want to be in the location that passes UBT only to see it fail wildly, but we need that data. I would certainly argue an economy the size of the U.S. or China (as if...) shouldn't experiment without better data.

Personally, I seriously doubt UBT will fail wildly, and I want to see it move forward, responsibly.

Doing both is useful as otherwise UBI subsidizes inefficiency and reduces automation.

Basically, replacing people with machines is a long term gain and should be encouraged with a high minimum wage.

Why does UBI reduce automation? Whenever I read an article, about, say, Amazon, everyone says that it's evil to make people pack packages all day. With UBI, these employees can say "screw this!" and not do that, meaning automation is the only way Amazon can stay in business.

There are lots of jobs nobody wants to do, but have to to stay alive. UBI removes the "have to to stay alive" part. If we still need the economic value that those tasks generate, there is no choice but to have machines do them. That, to me, sounds like automation.

I have yet to see any UBI proposal that would wholly replace someone's income, so no, I don't think low skill workers would be any more likely to just up and quit. People often live to the extent of their means, so they'll still need a job.

>I have yet to see any UBI proposal that would wholly replace someone's income

Agreed, but partially replacing someone's income would result in a net reduction of hours worked (if UBI is equivalent to half my full-time salary, then why not just work half the hours?) This would still result in a net loss in human productivity and therefore still spur investment into automation.

That assumes employers are fine with employing twice the number of people. Who says you're going to be able to chose your hours?

Nobody would agree to a UBI threshold that is equal to the median income. UBI proposals are far lower, closer to $10k/yr than $45k. It should be enough to cover the bare necessities of survival, like not starving. 10k won't be enough to cover housing in many markets.

I'd argue for something around $20k-30k/year. Don't index it to the median income; index it to the cost of living in around 80% of cities (ignoring outliers like Silicon Valley and Manhattan). High enough that you can absolutely live on it, including housing.

It may be better to index it to the percentage of total income tax paid by everybody to prevent feedback loops, when higher ubi increases cost of living, increasing ubi and eventually driving the whole economy off the cliff. Something like a tax return but calculated not as a percentage of the persons tax but of mean tax. It can start as a very small percentage at the start (1% ~ 1K/year) and then grow as other social payments are folded into it.

That still produces a feedback loop. When the economy goes down, people recieve less UBI and therefore spend less, slowing down the economy more.

Over the short/medium term, ww want UBI inversly correlated to total income tax (which I would expect is correlated with total economic health), so it can serve a dual purpose as an economic stimulus.

Setting the UBI should be a matter of monetery policy set by the Fed, within parameters set by Congress.

If economy goes down and you keep printing money not backed by anything, the value of the money goes down and you end up with hyperinflation like in Venezuela or Zimbabwe.

So that's a very useful feedback loop: if too many people decide that they want to do art instead of driving trucks, the total income tax will go down, decreasing ubi and making more people to work. If someone invents self driving trucks and starts to get huge profits, ubi goes up, helping the drivers to live while they learn new useful skill.

Over the long term, maybe.

Over the short term, recessions are still not going to be caused by changes in aggregate behavior; they will continue to be caused by business cycles, so we want to have counter-cyclic forces.

I believe with fixed 20k UBI, that is increasing when income tax decreases, the hyperinflation would happen very quickly (1-2 year) much quicker than the business cycles. But even if i am wrong it is better to start with small and conservative UBI scheme to be safe.

Ignoring the trillions of dollars that would cost, what makes you believe that housing costs wouldn't inflate dramatically? Supply isn't magically going to boom and people all of a sudden have more spending power.

> Ignoring the trillions of dollars that would cost

(Most reasonable proposals I've seen for UBI include an assumption, stated or unstated, of drastically reduced administrative costs and costs of numerous other more specific programs for both aid and employment. And that also ignores other secondary effects. For the moment, let's treat that as a tangent, please, though.)

> Supply isn't magically going to boom

Not overnight, no. And not without some fixes in housing regulation. (That's also another reason to avoid indexing it to ridiculously-high-cost-of-living areas.) But in general there's no fundamental reason supply can't increase to match demand.

Also, right now supply has a massive constraint created by "proximity to work". If people have a lot more flexibility about where and how they work, the economics of "where do people live" changes drastically.

Okay, I'll propose it.

We should have UBI that is at least sufficient to wholly replace the income of low-paid workers. I think $20,000 a year is a nice round number to start a discussion at.

Next we need to figure out how to replace the low-paid workers who just retired.

Pay them medium wages, or make the job suck less. If a job sucks to work at, you should pay the workers more.

Giving low-paid workers the freedom to not work levels the playing field. In the classic supply/demand curve, the supply of labor is relatively fixed under the "you must work to live" model. With UBI, the supply of labor and the demand for labor will act in concert to determine a new, fairer price.

As a business owner, I will tell you that the cost of the higher wages will not be paid by my business. It will get passed on to customers who can spend a little extra UBI to help support the "you don't have to work to live" populace.

My chief complaint with that argument is the 50-year olds that are replaced by automation are unlikely to find new jobs, especially if the price is artificially raised. In other words, it doesn’t solve the transitional issues.

Most UBI proposals do not seek to be an income replacement. The bigger question then is what do we do with the 50-year olds that can’t find jobs due to reduced demand if they can’t live solely off UBI and have years before retirement age? I agree we should discourage reliance on labor that can be automated, but there’s also the empathy and humanity side that isn’t being addressed.

Why do we need 50 year olds to work in the first place? We're automating more jobs than ever, and I don't even think I've ever held a job that actually had 40 hours of work to do per 40 hour work week.

We seem to be maintaining the idea that full time employment is necessary for life long after that's no longer been the case. We've arrived at a point and time where the productivity of every able bodied person is not needed to sustain us, so when do we start reaping the rewards of that?

> We've arrived at a point and time where the productivity of every able bodied person is not needed to sustain us

One of the lowest unemployment rates in history and not enough people picking crops seems to disagree with your premise.

The percentage of total people employed is fairly low in the US. Retirement, Education, Prison, Disability, etc all remove many people from the workforce.

That's a very small subset of the total labor pool to focus on with which you deliver a point that is, at best, muddy.

I kinda thought your point above was pretty muddy:

> We seem to be maintaining the idea that full time employment is necessary for life long after that's no longer been the case.

That’s why I prefer negative income tax as a solution that disproportionately supports the lower class without universally raising the cost of living by the exact amount of UBI nationwide.

UBI does not create any money and thus has zero long term impact on inflation.

Remember even 2.5% inflation still means money is worth 1/2 as much every 30 years. That can only happen if either the economy is smaller every 30 years or new money is created every 30 years.

It doesn’t as long as you’re financing it without using debt/printing new money

Debt and printing money are two different things with very different impacts on inflation. Critically debt requires the money to already exist in circulation. Government bonds can act like currency, but can’t cycle endlessly. EX: Government in 2525 may need to borrow more money each day than currently exists, if they never print any money nobody can lend that much to them on a given day.

PS: The velocity of money is one of those odd things that seems irrelevant in simple models but turns out to be really critical.

If you pay for UBI with a progressive tax, it works out basically the same.

> otherwise UBI subsidizes inefficiency and reduces automation.

If someone has a UBI that pays enough for them to live, why would someone do work they don't enjoy for a few bucks an hour? I'd suggest that UBI would encourage efficiency and automation, precisely because it raises the pay threshold necessary to make someone willing to take a job at all. (Effectively, it raises the coefficient of static friction.)

Why do young kids get a babysitter job below minimum wage when their living expenses are already paid? They still want pocket change and it’s the best available job they can get.

But there will be fewer people taking such jobs if everyone taking them wants them rather than needing them. That pressure would in turn push salaries up and encourage automation.

Because its smart to pay someone to do something for you if what you pay them for it is less than what you earn yourself in that same amount of time.

I've heard the opposite quite often. With a UBI you can eliminate minimum wage. Employers would be encouraged to offer fair wages: nobody is going to work for peanuts because they won't starve without the job.

The problem is that instituting UBI will require a political fight that will make the fight over Obamacare look positively cordial, and there's no way that fight can even begin until 2020 at the earliest anyway because of who currently holds the White House and Senate. Whereas bumping up the minimum wage is a much smaller lift, since it's just an incremental adjustment to a program that already exists.

If I were working for minimum wage, and I was offered a choice between a small wage increase right now and a possible shot at a completely new compensation regime whose details have only begun to be worked out, I know which one I would take.

If I were working for minimum wage, I'd be looking for a better job and not pinning my improvement in financial status to a political pie in the sky.

Are we worried that raising the minimum wage will cause companies to do a thing they are already doing?

I assume you mean automating away any job that they can figure out how to automate?

Raising the minimum wage might accelerate that somewhat, but I don't think that is the main concern.

Let's consider only jobs that there will be no good way to automate for the foreseeable future.

The existing minimum wage already eliminates some jobs that cannot be automated but just are simply not worth $7 per hour to the would-be employer. Not many people would be interested in holding such jobs, but probably a few who kind of like that sort of work and only need a very small income. The number of such people could be expected to increase in the presence of a UBI scheme.

There may be a lot more jobs that currently pay $12 per hour, but that the employers will simply forgo rather than pay $15. (Imagine an old man who pays a worker $12 per hour to mow because it makes him happy to have a nice lawn, but whose budget has no room for a $3 raise. If the minimum wage rises to $15, he has to pay nobody, let his lawn go to hell, and live a slightly-less-satisfactory life. Meanwhile, the worker has to find a new gig, if he can.)

A nitpick, but the old-man paying someone to mow his lawn is not subject to Fair Labor Standards Act [1]. Specifically: "The FLSA only applies if you pay your employee more than $1,900 in a single year or works more than eight hours a week."

On your broader point, I'm not sure that those are viable "jobs" if they can't be done for ever $7.25/hr. What are the jobs going undone today because they are only worth $7.24/hr? Why isn't anyone wringing their hands over that injustice?

The real question is, what would the impact be. Isn't it possible that raising the minimum wage lifts more people out of poverty than it pushes into poverty through joblessness? If yes, it is likely worth trying.

[1] https://blogs.findlaw.com/law_and_life/2015/06/hire-a-kid-to...

edit: had the minimum wage wrong.

> Isn't it possible that raising the minimum wage lifts more people out of poverty than it pushes into poverty through joblessness?

Yes. It's possible. Probable even. But not certain.

It will accelerate automation if the math makes sense. McDoanld’s are going cashierless, and grocery stores will increase self-service checkout (requiring only sentries and stockers at the store). Retailers will shut down brick and mortar stores (30% of malls will shut down in the next 5 years).

I’m all for automation, but the greater question is transitioning people gracefully.

The cost of technology falls faster than wages rise.

Again, these things are already happening. Hurting today's minimum wage workers in order to save these industries from something they are already doing seems like a fool's errand. The minimum wage hasn't changed in a decade and the math is already making sense. What's the point in waiting longer?

I believe replacing minimum wage with a UBI would effectively cause a net rise in peoples earnings - no one will take a job for 3 dollars an hour even if they have UBI.

Federal minimum wage should be increased BUT probably not to something like $15, simply because the economies and costs of living of rural Kentucky are nothing like the economies of urban Seattle. Raise the Federal minimum wage in an amount that the poorest state can manage, but then give States room to implement any further increases to what best fits their circumstances. Edit: Or some formula that takes into account costs of living and size of economy.

I also think UBI is a good solution. For example Andrew Yang "Freedom Dividend" $1k per month UBI plan is like getting paid for working an additional 67 hours a month at $15/hour.

UBI is fine so long as you tax companies to recover the money.

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