We should be careful not to make wage depression some sort of abstract "logical" natural state. Wages are low for a reason and active effort has to be expended to keep them as they are.
All of that said, what you could reasonably hope would happen is that all businesses raise their prices because of the labor shortage (already happening around me), but then you have another problem which is that the increased wages are offset by the increased prices.
At the current click, all that's going to be left are the corporations with enough wiggle room to absorb the increase, but they will also pass on prices. I would just prefer not to live in that world. I think corporations increase inequity (Walmart could pay a living wage and full health care, but doesn't) and small business puts the power back with the individual.
We ask, why don't workers go on general strikes? Well small businesses refusing to even try raising wages and prices amounts to a capital general strike.
Employers and employees simply have radically different market power, and that is as fundamental a fact in all economies remotely like ours as any econ 101 supply and demand.
The thing is, a lot more people are like my gf than me (I grew up middle-upper class and am 'financially' well upper class for my country).
Or a lower quality products, because what you'd do if I slack off, fire me? No problem, I'll live off UBI for a while, then go to somebody who didn't fire me yet, there are a lot of places around.
> may attracts better talent
A lot of minimum-wage positions won't benefit from better talent - once minimal level of competency is reached, it's enough. Surely, a waiter could be a rockstar, probably - but most people, and most businesses, expect just not forgetting the orders, not dropping the food on the floor and not cursing out the customers, once it's there, there's not much monetary upside for the business from the better talent (of course, there are tips but that's different story).
> given that they become a significant expense.
Payrolls are already a very significant expense, especially in restaurant, etc. business. I don't think making them more expensive would change much.
Except businesses then raise their prices to cover the increased wages so the "more money" is almost instantly eaten away by having to pay those increased prices. You can't get something for nothing.
I really think that some of this is about class solidarity among business owners (especially small business owners). I say this as a political centrist, too.
There are a bunch of reasons why wages are "sticky" (i.e. they don't go up--or down--when you'd expect that to be the rational decision in an efficient market), and this is probably one of them.
Also, there are ways to seek out higher efficiency. Hire at higher wage but expect and prepare for higher productivity. Operate the business for longer hours to make the most of money paid for rent, etc. Unfortunately, I think small businesses where I live (in southeast Virginia) are much worse at this than larger businesses.
Ask the Swiss or Danes. Cooks can have a living wage, but fancy meals are comparatively much more expensive than their equivalents in the US, given their lack access to underpaid immigrants for that kind of work.
Thankfully we progressed out of those dark times and we are empowered today to enjoy the bounty of rice, factory farmed meat, salt and sugar slapped together by strangers on minimum wage.
Yup, that's called a subsistence economy. It's a very good thing that we can spend our time doing something better than back-breaking agricultural work and general housekeeping. That's what progress is all about.
We have the results to show for it:
> In the 1960s and 1970s only 13 percent of U.S. adults and 5 to 7 percent of U.S. children were obese.
> The US obesity prevalence was 42.4% in 2017 – 2018.
> For children and adolescents aged 2-19 years in 2017-20181 the prevalence of obesity was 19.3%.
https://www.apa.org/pi/families/resources/newsletter/2012/07...
Not a good deal IMO.
Alexis de Tocqueville, 1861, cited in https://www.independent.org/pdf/tir/tir_12_02_01_choi.pdf
That the French (still) have access to good meals (not sure what you have in mind specifically) might have quite a bit to do with a history of small scale farming. That and a climate conducive to small scale farming. It remains to be seen how long this will last. The forces of globalization are rapidly eroding local culture everywhere around the world.
Depending on how you do the math that's an even less-than-subsistence level.
Especially when it was such a prosperous nation merely 60 years ago, in spite of productivity being statistically much lower then.
A lot of well-credentialed people will say "bu- but the 1970s", but the fact of the matter is the wage share of income could also change, and rather than knee-capping unions to control inflation, we could have done price controls (as was done in the 1950s), profit controls (which would limit dividends and buy backs, not reinvestment to boost supply) or other such things.
Right now the government pays benefits that are already close to what a UBI would pay, but in food/education/housing/other assistance. Then those benefits aggressively phase out.
The phase outs are crazy. First, they invert what you want from a progressive tax system, because lower income people are paying the highest marginal rates. You might be paying a "10% tax rate" but if you're also losing $0.50 of every dollar to benefits phase outs, your marginal rate in practice is 60%.
Worse, because the benefits phase outs are individual to every program, they overlap randomly to nonsensical effect. Someone making $20,000 might have a marginal rate of 80%, at $24,000 it's 110%, at $28,000 it's down to 40% but at $30,000 its back up to 60%. This is obviously very stupid and creates bad incentives.
Now suppose we align all the phase outs so that a) the phase out rate is uniform across all programs and b) we don't have lower income people paying higher marginal rates than higher income people.
Then you might have something this. Everyone pays a 10% tax rate from $0 to $60,000 and a 30% tax rate after, and benefits phase out at a rate of 20% from $0 to $60,000 and are fully phased out by $60,000.
Well, it turns out this is mathematically equivalent to paying the benefits to everyone unconditionally and having a flat 30% tax rate starting from $0. And if you convert all the benefits to cash instead of food vouchers and such then you have a UBI.
On paper eliminating the phase outs costs a ton of money -- everyone making $60,000 would have to pay $12,000 more in taxes! But then they all receive a $12,000 UBI and it just cancels out.
The primary transfer effect is really in not having such aggressive phase outs, i.e. not putting such high marginal rates on lower income people. The effect is that they have more money, and higher income people have to pay higher taxes to pay for it. But not by the full amount of the UBI, only by the difference between the status quo of aggressive phase outs and the less aggressive ones that make the marginal rate curve not so silly. You end up with a modest transfer from higher income people to lower income people, vs. the status quo.
And then, because lower income people are more likely to spend what they receive than higher income people, you get more consumer demand, which is good for businesses.
You also have a greater incentive to work for lower income people, because they get to keep 70% of what they earn instead of 40% (or -10%).
Lots of the nonsensical stuff is not exactly random.
Still the finances could be balanced like this and you could end up with an equal number of recipients receiving the same average benefit. Perhaps some efficiency through consolidation.
There is serious consensus that this amount has not been enough for a while which is one of the things that sparks the discussion about UBI more often.
Walmart & McDonalds might presently be employing the most noticable share of present recipients, but that is far from universal. Yet.
Just like with health care, to get anywhere near universal you're going to have to tax something having deeper pockets than mere income no matter how many of the top wage-earners get high brackets and have loopholes closed.
You're going to have to tax commerce.
If that could be done plus phase out the income levies, that would be the best thing for a consumer economy in over 100 years.
These would be far less of a burden than the implied taxes arising due to existing means-tested welfare. The incentive distorting effect from that sort of means-testing is extremely high, and the whole point of the UBI/NIT is to dispense with that.
We know there are aggregate demand issues, and we now know that simply issuing more credit "the normal way" seems to cause asset bubbles before boosting demand for labor, so we should be open to trying other things even if we don't know exactly what will happen.
Or read Kaleki in 1943 https://delong.typepad.com/kalecki43.pdf, who predicted all of this (UBI resistance, direct gov investment resistance, The keynesian collapse in the 1970s, trying to boost employment by boosting private investment alone not working....). Incredible and saddening.
That is is just plain corruption. Leaders (whether in governments or businesses) would rather have power for themselves than well-being for the country. Honestly, I had a hunch that developed nations didn't have less corruption, rather, the impact of corruption has been softened. Each individual industry leader might be corrupt but given enough competing industries their power diminishes. This is why government corruption is primarily associated with oil countries (or other resources) because controlling that single industry is the same as controlling the entire country.
You can clearly see it in Germany as well. Merkel and her party have close connections with specific industries commonly associated with Germany, the most prominent examples are car manufacturing because it is an export industry and the coal industry because Germany is resource poor (coal is all we have). If you work at VW CDU is the party you vote for...
If you own a business and extract as much profits as possible --- not corruption. If you own a business and install your kid as middle manager to extract more money to your family -- corruption!
There's a quip that corruption is a term to penalize regions with larger extended families and kinship groups --- because the most galling corruption to the west is helping that 3rd cousin or clan member or whatever. But that is a real cop-out when in the west few know their 3rd cousin or are in a clan --- easy avoid nepotism when you don't know of the person!
I'm a proponent of UBI and I think this claim needs a citation for the level of certainty that you expressed. I have always viewed that UBI will likely be bad for small businesses, but that by the time that we need UBI there won't be many small businesses left.
There are two pilots of UBI worth paying attention to: Finland and Ontario. Finland proposes paying the unemployed (this differs slightly from unemployment benefits in the US) while Ontario proposes paying anyone below the poverty line.
Source: https://hiring.workopolis.com/article/universal-basic-income...
UBI-like concepts, like what was implemented by the US and other countries during COVID, do help recover us from a recession.
Source: https://www.businessnewsdaily.com/9649-universal-basic-incom...
That said, it was not enough to impact small businesses in a positive way. Over 50% of small businesses reported having a large negative impact. There's lots of questions to be answered there, like the availability of non-extractive technology for small businesses to use to compete, and where the income levels where UBI-like income disbursements were centered actually spend their money.
> Estimates from the weekly U.S. Census Small Business Pulse Survey indicate that roughly 50% of businesses report having a large negative effect from the COVID‐19 pandemic and that only 15%–20% of businesses have enough cash on hand to cover 3 months of operations (Bohn, Mejia, & Lafortune, 2020; U.S. Census Bureau, 2020).
Source: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7461311/
Neither of these is a UBI. Paying only people who are unemployed is in particular quite the opposite of what you want, because it discourages people from taking a job since they'll lose the money. Moreover, you need more of the middle class to be receiving some of the money (they'll pay some but not all of it back in taxes), because that's what increases consumer demand.
They're considered quasi-UBI: https://en.wikipedia.org/wiki/Universal_basic_income#Quasi-U...
I do agree there are better implementations to be had, and that the implementation probably makes all the difference in outcomes. That said, I wouldn't say they're expressly not UBI.
I also just learned about this: https://en.wikipedia.org/wiki/Universal_basic_income#Alaska_...
Google claims under 9,000 results for quasi UBI. Some use it to highlight how actual UBI would be better. Some use it to describe programs like basic income for everyone in rural regions. Not expanded unemployment benefits.
I also didn't say it can't, but I think the choice to make it optimal for SMB's, middle class, and upper middle class is an intentional one. I don't think that'll happen just by doing UBI. Hence I said, if you think it will then citation needed.
A: "Newer designs are safer."
B: "There is no evidence of that because they haven't been built yet."
A: "We're talking about the design here. You can see that it has these passive safety features which..."
B: "But there is no evidence of that because they haven't been built yet."
A: "Okay, then let's build them so that we can see the evidence."
B: "No, we can't build them because there is no evidence that it works."
UBI is purely theoretical. It does not exist anywhere on the planet in the form you're describing.
The US has engaged in UBI-like systems for quite a while, as have other countries.
UBI ascribes that everyone must get the benefit in order for the effects to be felt.
COVID incurred UBI-like payments, how these were used is worth studying, but they don't prove or disprove UBI. They certainly didn't improve the situation for small businesses, which is my point - if it takes a holistic UBI system to prove UBI and you're unwilling to figure out how to decompose it, then we'll never get it, and we're all doomed. That to me seems rather silly.
It is not a given that UBI will be a boon for businesses (big or small). Personally, I do think it will benefit large corporations, but it remains to be seen how small and medium businesses will fare -- and I think that largely depends on implementation details that need to be discovered. That much needs to be proven.
In order to prove some of the claims of UBI, countries are doing experiments and looking at specific effects that their implementations have in order to gauge UBI. Nobody is going to look a the monumental cost of UBI and fire a hope-driven-missile in terms of policy and economic risk, which is absolutely understandable. Finland and Ontario are putting out some tests, the inference they draw will largely depend on the questions they set out to answer. This is probably also informing them on how they could roll out UBI progressively.
What I was contesting was the absoluteness of this statement:
> This is why a UBI is good for businesses -- customers have more money in their pockets.
Nothing says that because people have money that they will spend it, much less where you want them to spend it. That has to be incentivized and we have to experiment with how to incentivize it.
(And yes, the lower-middle class will probably still be net UBI recipients if only barely, because this helps with smoothing out incentives at the lower end. You don't want to have a sudden benefit cliff, or else a breakeven point that's infeasibly high.)
Right now companies must make $X per employee per hour. If their business cannot do that it’s deemed that it’s not productive enough and should not exist.
Where did I say that? But now that you brought it up... the problem isnt from competition, but from the paradigm shift that prevents low skill labor from supporting themselves (or trying). There is a lot of debate about how mass automation will affect macroeconomics and labor.
The flip curse of the curse of high dimensionality is that adjusting interest rates or UBI has so wide and rich a space of possible effects, good or bad. We really need to try these things before jumping to conclusions.
This is the default state of businesses in competitive markets. If you could do with less then you could charge less, and one of your competitors will start doing that to take your customers, so you have to do the same.
Of course, the alternative is to pay more and then raise prices. Which you might not be able to do if the additional cost is imposed only on you, but when your competitors have to pay it too, you all raise prices without losing business to each other.
But the overall industry would still lose some business to customers not being able to afford its products, and some of the suppliers still go out of business.
Unless the labor costs increase generally instead of only for that industry. Because then your customers can afford the higher prices. If labor becomes a higher percentage of operating costs overall, they may even be able to afford more than before. This is why a UBI is good for businesses -- customers have more money in their pockets.