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Basic Income: Unintended Consequences

jonthewang.com

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Re: Basic Income: Unintended Consequences

#11

Post by jjxw »

andraganescu wrote: post #4

Would basic income still register in the collective mindset as “help”? Because if it registers as “free money” I fear prices will go up. I understand that since BI correlates with income tax no inflation should be created. Yet people have particular ways to understand how welfare happens. In a poor community, when you know for sure that everyone there can afford some stuff, wouldn’t that be an incentive to collective…

My understanding of most implementations of Basic Income is that the funds would come from taxes or budget cuts in other parts of the government rather than printing money which would reduce inflationary pressure. The problem with raising prices is that collective coordination would be difficult for goods which operate in a competitive market.

Re: Basic Income: Unintended Consequences

#12

Post by jjxw »

bsbechtel wrote: post #10

I feel like there would be a number of arbitrage opportunities that would become available as well, though it's late and I can't think of any off of the top of my head. How it affects the currency exchange markets would be interesting as well. IMHO, a better option would be to provide Tax credits to employers for each employee's pay up to the poverty line. If employers don't pay poverty level wages, the government is…

The EITC has got you covered:

https://en.wikipedia.org/wiki/Earned_income_tax_credit

Re: Basic Income: Unintended Consequences

#13

Post by bsbechtel »

merpnderp wrote: post #9

The whole point of these unintended consequences are easily corrected by allowing penalty free (for the basic income at least) defaults. Just like the student loan issue would be solved overnight by allowing defaults, basic incomes would never have a problem in the first place with them.

So in addition to $12,000 a year from the government, someone could borrow from lenders and never pay it back?

Re: Basic Income: Unintended Consequences

#14

Post by plaid_hatter »

drcode wrote: post #7

The main unintended consequence is that nobody is going to want to be a grocery store clerk for minimum wage if they get BI. Hence, salaries for menial jobs will go through the roof... All of a sudden a gallon of milk will have to cost $20 to pay grocery store salaries... Now salaries will need to go even higher so that employees can afford food, themselves... And now you've got hyperinflation.

Actually, I think you'll find a lot of people will opt for part time lower income jobs than before as they are just supplementing the guaranteed income which means that there is net total more than before.

Re: Basic Income: Unintended Consequences

#15

Post by dllthomas »

drcode wrote: post #7

The main unintended consequence is that nobody is going to want to be a grocery store clerk for minimum wage if they get BI. Hence, salaries for menial jobs will go through the roof... All of a sudden a gallon of milk will have to cost $20 to pay grocery store salaries... Now salaries will need to go even higher so that employees can afford food, themselves... And now you've got hyperinflation.

The salaries for jobs that nobody is going to want to do are going to have to climb, or we're going to need to automate those jobs. But if that's unsustainable and we approach hyperinflation, we quickly get to a circumstance resembling no basic income - at which point, people will start to be (economically) forced into doing those jobs again.

This is assuming we don't raise the BI in response to inflation. We shouldn't do that. (Matching or slightly exceeding targeted inflation seems a good idea; raising in response to observed or expected inflation seems potentially disastrous).

Re: Basic Income: Unintended Consequences

#16

Post by TrevorJ »

merpnderp wrote: post #9

The whole point of these unintended consequences are easily corrected by allowing penalty free (for the basic income at least) defaults. Just like the student loan issue would be solved overnight by allowing defaults, basic incomes would never have a problem in the first place with them.

Really not following this line of reasoning.

Re: Basic Income: Unintended Consequences

#17

Post by dagw »

bsbechtel wrote: post #13
merpnderp wrote: post #9

The whole point of these unintended consequences are easily corrected by allowing penalty free (for the basic income at least) defaults. Just like the student loan issue would be solved overnight by allowing defaults, basic incomes would never have a problem in the first place with them.

So in addition to $12,000 a year from the government, someone could borrow from lenders and never pay it back?

If they could find a lender stupid enough to lend to them on those terms, then sure why not?

Re: Basic Income: Unintended Consequences

#18

Post by bsbechtel »

jjxw wrote: post #12
bsbechtel wrote: post #10

I feel like there would be a number of arbitrage opportunities that would become available as well, though it's late and I can't think of any off of the top of my head. How it affects the currency exchange markets would be interesting as well. IMHO, a better option would be to provide Tax credits to employers for each employee's pay up to the poverty line. If employers don't pay poverty level wages, the government is…

The EITC has got you covered: https://en.wikipedia.org/wiki/Earned_income_tax_credit

Not the same thing. The tax credit I'm talking about goes to the employer. Right now, we just tax the employer (or the wealthy owners of the business) and redistribute. Let's cut out the middleman that's the government, and not tax employers who pay their employees up to the poverty level.

Re: Basic Income: Unintended Consequences

#19

Post by andraganescu »

jjxw wrote: post #11
andraganescu wrote: post #4

Would basic income still register in the collective mindset as “help”? Because if it registers as “free money” I fear prices will go up. I understand that since BI correlates with income tax no inflation should be created. Yet people have particular ways to understand how welfare happens. In a poor community, when you know for sure that everyone there can afford some stuff, wouldn’t that be an incentive to collective…

My understanding of most implementations of Basic Income is that the funds would come from taxes or budget cuts in other parts of the government rather than printing money which would reduce inflationary pressure. The problem with raising prices is that collective coordination would be difficult for goods which operate in a competitive market.

Yes, indeed it's not inflation I fear, but the collective mentality people have. Markets in poor communities are not as competitive as we'd think. Not to mention big retailers who are not that many to make coordination impossible.

Re: Basic Income: Unintended Consequences

#20

Post by TheOtherHobbes »

bsbechtel wrote: post #10

I feel like there would be a number of arbitrage opportunities that would become available as well, though it's late and I can't think of any off of the top of my head. How it affects the currency exchange markets would be interesting as well. IMHO, a better option would be to provide Tax credits to employers for each employee's pay up to the poverty line. If employers don't pay poverty level wages, the government is…

The UK does something like this. It's a disaster, because it gives employers an excuse to cut wages knowing that the government will cover the rest - effectively a handout to employers, who don't usually need the money, not to employees, who do.

It's also a disaster because the UK gov is famous for changing payment rules, sometimes retrospectively. The most recent changes leave some of the poorest people owing between a quarter and twice a year's income in supposed overpayments - which they accepted in good faith, with no suspicion that the government would change its mind about them later.

Any tax credit scheme is going to be open to similar abuse - whether accidental, because of incompetence, or deliberate because of political malice.

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