"Minimum wages and basic income policies all do the same thing -- raise the floor at which most folks can enter into productive trade with others."
Can you elaborate on this? Because it looks to me (only minimally educated in economics) that minimum wage and basic income work in completely opposite directions here.
With a minimum wage, a person may be willing to do some work for $X, and another person may be willing to hire him to do that work for $X, but the law prevents them from entering into an agreement to actually do it. Thus, anyone not able to produce at least as much value as the minimum wage simply does not work at all.
With a basic income, you no longer need a minimum wage. If a person is willing to work for a penny an hour, let him. The floor drops, not rises, because people can engage in very poorly-paid work if need be, and still be able to survive. A person whose labor is only worth $2/hour won't have a job today, but could very well have a job in a system with a basic income.
Well said, but I'd like to add that he is then also capable of working for himself at less than a "living wage", for reasons like "higher purpose" (charity), expected future returns (ie startups), or simple enjoyment.
This sounds like a huge win for mankind in general. It seems like it would be extremely difficult to get there from here, but if software and robots do indeed have the capacity edge out traditional scarcity, it looks like we should start planning the trip.
If I'm selling apples, I'm selling them at whatever the market can bear. Beats me what that is. I label the price 1-for-a-dollar, and they sell out. So tomorrow I charge $2. And so on. There is no certain "price" -- price is something that's determined by the reaction of the buyers to the offers the sellers make.
That's the way it is with everything: food, rent, insurance, car repairs, drugs, services, and so forth. Everything is negotiable, and it's all dynamically determined. So if everybody in town now has an extra 10K -- or even if the poor people now have a lot more free cash, then my apple pricing experiment will yield a higher result. So I'll charge more. I'm not trying to screw over anybody, that's just the way pricing works.
The only thing you get with giving everybody a new floor for the amount of cash they have is a new floor for how much the cheapest items cost.
This is tricky to see at 5-10K, because our minds don't take into account the thousands of tiny transactions each person makes in a year and the very small amount of difference it would make with each one. So just pretend that it's 100K, or 500K. What would happen?
And that's just pricing pressure for purchasing. The same pressure would exist for employment, dramatically increasing unemployment.
It just doesn't do anything, except cause economic chaos, make all the dollar figures higher for everything, and increase unemployment. And punish those folks who don't want to participate in society. That's not a lot to be proud of.
You seem to be conveniently ignoring the 5 other apple sellers in you hypothetical town, all who will gladly undercut your business. Or the fact that everyone in town now has a basic income, so starting a competing apple selling business is much less riskier, as they have the BI to fall back on if their venture fails.
More demand can raise prices, that is fair. But implementing a BI does not necessarily mean that we are getting rid of capitalism, a system that tends to keep the costs of goods close to the cost of production. Also, it's worth noting that BI would most likely replace current welfare systems, so the 'net' amount of money that is put back into the system would be smaller than you are probably expecting.
You seem to be confusing a basic income with minimum wage, which is a completely different thing. The apple sellers are also receiving the basic income, so whilst you are free to raise your prices, others will not, and you will lose out.
Did people like Milton Friedman and Friedrich Hayek, who were proponents of a basic income, overlook this basic point, or is it in fact you who "doesn't understand capitalism" and is "smoking crack" (your words).
(I don't mean to be hostile, but your tone really doesn't help your argument.)
No, stop pretending that labor supply is adjustable outside some narrow range. Wage earners at the bottom don't withdraw from the labor force in order to help those left in it earn a higher wage. They work for less, until a floor is reached. Then they work another job, driving wages down further, unless there are none, in which case they eat less. And when there are fewer jobs still, they subsist in other ways (charity, crime), or fail to subsist. Almost no one is moral enough to starve.
I agree that price is simply a measure of what the market will bear, but I don't see how a basic income results in exhausting the additional supply of disposable income through inflated prices.
To continue with your apple market example, you could try to charge $2 or more per apple, but pretty soon other people will realise that they can employ their own staff to run an orchard and deliver apples to the same market at a marginal cost far less than that, and competition will drive the market price back down.
With a basic income, people's basic needs would be met and any additional income earned would be a supplement. If they agree to work for $1 an hour picking apples, then that is the price the market will bear for that particular skill and the price for a single apple will be reflective of this.
A minimum wage on the other hand works in the opposite direction. If it is set to $50 an hour, then sure, the costs of apples, along with most other things, will skyrocket, but there will also be a huge amount of deadweight loss as people simply choose to forgo employing others for many skills in the first place.
"To continue with your apple market example, you could try to charge $2 or more per apple, but pretty soon other people will realise that they can employ their own staff to run an orchard and deliver apples to the same market at a marginal cost far less than that, and competition will drive the market price back down."
Unless I reinvent the market and brainwash you that my Apple is like no other and it's worth selling your kidney for it. This way I'll grow my Apple company to record high stock prices and I'll sue any other kind of vegetable sellers. You'll think you'll figure out a way to beat us in the end, but the truth is that pretty much everything (even the Jobs) will be ours eventually and everything you ever dreamed to afford will be ours to give.
I don't understand how you get to "dramatically increasing unemployment" at the end there.
Taking your apple-seller analogy, if you map that onto the labor market, then the apples are job-seekers, and when an apple is purchased, that's somebody getting a job. Unemployment is left-over apples that you don't sell.
I understand that with a bunch more money floating around, the price of your apples will increase. That's basic inflation. But what you're saying is that not only will the price increase, but it will increase so much that you will end up with a lot of leftover apples you can't sell.
But why? The price isn't set by magic, it's set by you. You'll make the most money if you can sell more or less all of your apples, so you'll set a price that results in people buying them all. That price will likely be higher than it would be in the world without a basic income, but you're still going to sell all of your apples. If you don't, you'll lower your price until you do.
I don't see why labor would be any different. Yes, prices (wages) probably get pushed up there. But where's the pressure to push prices up to the extent that a large number of people can't find jobs? Just like the apple-seller, people make more money when they set a price where they actually find work. If a lot of people are out of work at $X/hour, then those people will generally accept wages at $(X-1)/hour, or less, until they all manage to find jobs. The minimum wage puts a floor on this, but I don't see how the basic income does.
I can see an increase in voluntary joblessness, where people's labor can only produce a small amount of value, and they don't see the point in working for that small amount of value when they can stay at home and watch TV and survive on their basic income. But I don't see how there would be an increase in involuntary joblessness a.k.a. unemployment if you created a basic income and simultaneously did away with minimum wage.
Very interesting thoughts. IMHO the basic income will have the opposite effect. A business may currently be able to find a loo cleaning employee for $X/h, but with a basic income that rate will go to say $5X/h.
Can you elaborate on this? Because it looks to me (only minimally educated in economics) that minimum wage and basic income work in completely opposite directions here.
With a minimum wage, a person may be willing to do some work for $X, and another person may be willing to hire him to do that work for $X, but the law prevents them from entering into an agreement to actually do it. Thus, anyone not able to produce at least as much value as the minimum wage simply does not work at all.
With a basic income, you no longer need a minimum wage. If a person is willing to work for a penny an hour, let him. The floor drops, not rises, because people can engage in very poorly-paid work if need be, and still be able to survive. A person whose labor is only worth $2/hour won't have a job today, but could very well have a job in a system with a basic income.
Did I miss something?