Minimum Wage versus Universal Basic Income (UBI)

Would you prefer to keep increasing the minimum wage, or would you prefer a minimum guaranteed incom

  • Keep increasing the minimum wage

    Votes: 4 66.7%
  • Implement a guaranteed minimum income

    Votes: 2 33.3%

  • Total voters
    6

AlexanderH

Waiting for 2028
#1
My state, Nevada, is increasing the minimum wage to $8.00 starting next month (1 July 2020), so I had a thought:

We should eradicate the minimum wage and implement a UBI so people have the breathing room to partner with employers who will treat them properly. We should eradicate the minimum wage and implement a UBI so small and medium businesses can survive even if business slows.

Please discuss below!
 
#2
Hi Alexander,

I'm sorry this hasn't gained any traction, because I think it's an interesting topic and one that's particularly pertinent in light of recent circumstances.

I personally favor minimum wage increases, for now. Eventually we will reach a point where UBI is necessary, because there won't be enough work for everyone. We're not there yet. When plague ends, there are going to be plenty of minimum wage type jobs that need doing. That minimum wage should be tied to the cost of living, such that anyone working 40 hours a week can comfortably support themselves and at least one dependent without additional government support, and should be adjusted on a yearly basis. 8 dollars is clearly not enough, especially in a country where healthcare is not considered a right. 8 dollars a week times 40 hours a week times 52 weeks is 16,640 dollars a year pre-tax. In most locations, we need to be much closer to that magic 15 dollar mark, with frequent increases, as necessary, until automation renders UBI necessary.

I do also take issue with the most mainstream UBI proposal put forth by Andrew Yang, as it replaces other welfare programs such as food stamps and housing assistance, and is funded largely by what is effectively an increased sales tax. Because the poor spend a greater percentage of their income than the rich, sales taxes are proportionally harder on them. Given that fact and the proposed removal of current welfare programs, I don't believe Yang's UBI proposal would be as effective in the necessary redistribution of wealth as living wage legislation. When UBI is implemented, and we will eventually need it, I would hope that it would be primarily funded by taxes on wealth, capital gains, and estates.
 
#3
Hi Alexander,

I'm sorry this hasn't gained any traction, because I think it's an interesting topic and one that's particularly pertinent in light of recent circumstances.

I personally favor minimum wage increases, for now. Eventually we will reach a point where UBI is necessary, because there won't be enough work for everyone. We're not there yet. When plague ends, there are going to be plenty of minimum wage type jobs that need doing. That minimum wage should be tied to the cost of living, such that anyone working 40 hours a week can comfortably support themselves and at least one dependent without additional government support, and should be adjusted on a yearly basis. 8 dollars is clearly not enough, especially in a country where healthcare is not considered a right. 8 dollars a week times 40 hours a week times 52 weeks is 16,640 dollars a year pre-tax. In most locations, we need to be much closer to that magic 15 dollar mark, with frequent increases, as necessary, until automation renders UBI necessary.

I do also take issue with the most mainstream UBI proposal put forth by Andrew Yang, as it replaces other welfare programs such as food stamps and housing assistance, and is funded largely by what is effectively an increased sales tax. Because the poor spend a greater percentage of their income than the rich, sales taxes are proportionally harder on them. Given that fact and the proposed removal of current welfare programs, I don't believe Yang's UBI proposal would be as effective in the necessary redistribution of wealth as living wage legislation. When UBI is implemented, and we will eventually need it, I would hope that it would be primarily funded by taxes on wealth, capital gains, and estates.
Thank you for your response airham.

You make fair-minded points; however, I believe it is important to note that:

  • The nature of work today such that people work hourly and their pay is tied to time rather than output is a relatively new thing, likely as a result of the trend of increasing government oversight over our country's history. I hold the opinion that it is a flawed concept for several reasons, including that it separates the economy from output. It causes tension between employers and workers when business is slow, and both parties suffer as a result. Businesses pay people despite there not being enough income, and people lose hours. While they can apply for welfare programmes, they are placed under stressful scrutiny, and circumstances change faster than our overly-bureaucratic government can respond.
  • Increases in the minimum wage incentivise companies to automate. In many cases today, robots can do work that costs pennies per hour in electricity. They do not get tired, and are more accurate than their human counterparts. This trend is already increasing as our minimum wage stays mostly the same, and will do so even more if it is increased. More simply put, many businesses either cannot afford or are not willing to pay people something like $15 an hour.
  • Andrew Yang's UBI proposal does not replace any welfare programmes, but, if implemented, it would certainly put less burden on them. With some programmes, UBI would stack on top of whatever other benefits someone is receiving. For others, people could decide on whether they wish to receive the UBI, or continue receiving their current benefits.
  • Everyone who spends less than $120,000 yearly on nonessential goods would objectively benefit from a UBI based on the math relating to the 10% VAT and the amount the dividend would be. For those who spend more than that amount on nonessential goods, they are already doing fine.
  • A UBI at $1,000 monthly would put people at what is just below the poverty line. Anyone still in poverty after UBI is implemented still has plenty of options for government support. UBI would decrease the need for government support because it is not really the government handing out money, but rather money being recycled in an effectual way.
  • Wealth taxes seem like a good idea on paper and have been tried in the past; however, they have not generated the expected funds. It would be better to encourage people to be as well-off as possible, rather than punishing them for their success.

What are your thoughts?
 
#4
I don't buy the argument that government intervention is the reason for low wages. The implementation of the minimum wage in the United States was directly related to the fact that capitalism without government intervention is serfdom. Back when the "free market" was allowed to set the cost of labor, people worked 70 hour weeks in dangerous conditions and still lived in extreme poverty. Industrialized countries without government intervention in the labor market have sweatshop economies, without exception. The real problem is that corporations own government to a substantial degree (at least in the United States), and so the minimum wage has not kept pace with productivity or with the cost of living. To be clear, I'm not saying that going to a UBI as opposed to an increased minimum wage would produce a sweatshop economy. But I am saying that low wages are the result of insufficient government intervention.

I'm not particularly worried about a minimum wage increase incentivizing automation. I hope that it would incentivize automation. I don't see any particular value in having a human waste 8 hours a day doing mindless repeatable tasks that a robot could do just as well. When automation gets to the point where there is no longer enough work for people to do, at that point UBI will become necessary. Given that there's currently more than enough work to go around (especially if we add in all of the jobs that could be created by a Green New Deal type of program), it seems prudent to further incentivize work rather than make it easier to get by with little-to-no employment income.

Andrew Yang's UBI proposal does effectively eliminate government programs. Few, if any, people receive over 1000 dollars in government assistance from programs that don't stack with UBI. Which sounds good at first glance - that means low income people get more assistance than they're currently getting. But let's say you have two people. One makes 20,000 a year, has 300 dollars in government assistance replaced by UBI, and pays an additional 100 dollars a month in VAT. The other makes 80,000 a year, has zero dollars in government assistance replaced by UBI, and pays an additional 200 dollars a month in VAT. In that example, UBI has a 600 dollar a month benefit to the 20,000 dollar earner, and an 800 dollar a month benefit to the 80,000 dollar earner. In order for wealth to be effectively redistributed by a UBI program, it needs to stack with all government assistance and/or it needs to be funded in a way that affects the wealthy proportionally more than it affects the poor. In fairness, it is possible that the second point could have been true under the Yang plan, depending on the VAT rates on staple goods vs. luxury goods. That would complicate the MATH, potentially in a good way, but I don't think the proposal ever got that specific.

I don't really see how a wealth tax punishes people for success any more than any progressive tax. As you say, people who spend 120,000 dollars on VAT eligible goods are fine. It strikes me as inconsistent, given your apparent understanding of VAT as a tax that would disproportionately affect the rich, that you don't consider that a punishment of success. Beyond the inconsistency, it's a matter of objective fact that wealth distribution in the United States is insanely inequitable. Wealth must be redistributed downward, which means that, for the benefit of everybody else, the extremely wealthy have to get used to sitting on slightly less treasure.
 
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