Doesn't UBI reduce the economic productivity by both driving up the cost of labor through increased taxation and lowering the supply? Until (if) we are in a post-scarcity world how will lowering productive output ever increase the overall wealth?
I don't see how 1 Apple can offset 1 million unemployed, and really skeptical such a company could grow to that size/profitability under the necessary labor/tax system to support UBI.
No. First of all, there's no reason that basic income has to have any taxes associated with it. A common mistake people (including the government) make is to assume that government spending must be funded by taxation. It doesn't have to be.
If the government spends and the economy responds productively to that spending, then you're fine. Taxing is a separate issue. You should only really tax when you want to remove money from a specific part of the economy.
To put it succinctly, increasing taxes does not increase the amount of money the government can usefully spend unless you directly taxed the use of some resource and the spending is going to put that particular resource to use in a more desirable way.
> and lowering the supply?
Labor is a resource that goes into production just like any other resource. Depending on the context, labor can be substituted for various other resources (including foreign labor, automation, etc.).
So it's possible that some forms of labor could become more expensive under basic income. But it could just as easily go the other way. There are plenty of jobs people would love to do if only they could afford the low pay. These desirable potentially socially beneficial jobs might get cheaper.
It's hard to say exactly what the effect of basic income will be on the labor market. But, in aggregate, we do know that the economy is capable of producing at levels higher than current output levels. If we give more people the ability to spend money, we'll produce more stuff to meet the demand.
> I don't see how 1 Apple can offset 1 million unemployed, and really skeptical such a company could grow to that size/profitability under the necessary labor/tax system to support UBI.
I can understand why you're skeptical. Just keep in mind that we're currently introducing many inefficiencies into the system just as an excuse to provide people incomes through the labor market. And even then, we're still not maxing out the productive capacity of the economy.
I would encourage you to ponder what you think might happen if the government stopped trying to balance its budget and just spent as much money as the economy could absorb without causing inflation?
What amount should that be? How does the distribution of the spending affect the amount they can spend? Surely if they spent it by tossing it down a hole, there would be no limit. But there is a limit. Where does that limit come from? How do taxes factor in?
Or when you don't want your government to run a deficit. Or when you don't want to finance your government by printing money. That always ends badly, no matter how clever the mechanism is this time, or how many people say "it's different this time".
> To put it succinctly, increasing taxes does not increase the amount of money the government can usefully spend unless you directly taxed the use of some resource and the spending is going to put that particular resource to use in a more desirable way.
I don't think the economy works the way you think it works...
> Or when you don't want your government to run a deficit.
Why wouldn't you want to run a deficit? What do you feel is the downside? Are there times when it's appropriate to run a deficit and times when it's not? Which times are which and how do you tell the difference?
I have my own answers to these questions. But I'm asking for your opinion.
> Or when you don't want to finance your government by printing money.
What do you feel the difference is between deficit spending and printing money?
> That always ends badly, no matter how clever the mechanism is this time, or how many people say "it's different this time".
Does it? Why do you suppose it is that many developed nations are running budget deficits? Do you feel that this is a mistake? What do you think would happen if all governments balanced their budgets?
Again, I have my own answers to these questions and I'm looking for your opinion.
> I don't think the economy works the way you think it works...
How do you think it works?
The point is you can finance your government by just printing money. If the value of your expenditure raises the wealth of the nation by the same amount, there will be no inflation.
Though I would say it's just a hidden wealth tax.
Regarding the labor substitution:
a) Would you agree productivity per labor hour must go up under UBI to be successful? Sam believes this will come through automation / AI.
b) Actual labor hours will go down and wages up, due to decreased incentives to work.
Unless A outpaces B, productivity will decline. If it does outpace B, wages or taxes must capture all of the increase or inequality rises quickly as fewer "working" people are capturing the rewards. These wage/tax increases will then slow the growth.
I guess I don't see how UBI wouldn't decrease the labor participation rate, and then how a low participation rate economy would grow faster than a high rate one.
>Would you agree productivity per labor hour must go up under UBI to be successful?
No - the slack could come out of corporate/executive profit/compensation instead.
No. Keep in mind that labor is just one among many resources that we use in production. Our economy has a lot more resources (including labor) at its disposal than we're currently making the best use of. A successful basic income just gets the economy producing closer to its capacity by giving people more spending power to buy things.
I don't think that labor productivity is a super useful measure of economic performance. That being said, basic income would almost certainly increase labor productivity. That's because labor productivity is just a calculation of how much stuff we produced divided by the amount of labor we used. If the amount of stuff we're producing increases and the amount of labor we're using stays the same or decreases, then that's an increase in labor productivity.
I suppose you could imagine a scenario in which we have a basic income a lot more people are working. If the amount of additional labor we're using outstrips the amount of additional wealth that we're producing, it would be a decrease in labor productivity. But I think that's very unlikely to happen. And that's because the proportion of excess productive capacity in the economy is probably vastly greater than the proportion of labor we'll ever be able to activate.
Even if we had every man, woman and child working double time, we'd still probably see an increase in labor productivity under a basic income.
> Sam believes this will come through automation / AI.
It's true that technological advances increase our economy's productive capacity. But that's very different from saying that technology automatically increases our actual production levels, or our labor productivity.
In other words technological advancement allows us to produce more, but that increase in production doesn't happen on its own. We won't produce stuff unless people will buy the stuff. So automation and AI will only increase production levels (and therefore labor productivity) if there's someway to fund spending on products. That's where basic income comes in. Basic income allows people to buy things. Then that causes us to make the things for them to buy.
An interesting characteristic of the labor market is that it's generally where we expect people to get their incomes from. Technology allows resource utilization to be more efficient. Labor is no exception. So, on their own, technological advancements mean less money going toward labor, which leads to lower incomes, and hence lower levels of production.
Historically, we've come up with various ways to boost people's incomes to compensate. The biggest one is probably stimulating the private financial sector so people and firms can more easily borrow in order to spend. The firms, in turn, create jobs with that borrowed money and this distributes income to people. Basic income is a way to achieve a similar effect, but in a more stable way that doesn't create asset bubbles in the private financial sector.
Basic income can also get you further. There are only so many projects worth investing in and only so many jobs worth hiring people to do. Without a basic income, we have lots of people working at jobs that don't really contribute to the productive economy and labor productivity plummets.
> Actual labor hours will go down and wages up, due to decreased incentives to work.
It really depends. There are plenty of jobs that people would love to do, but they can't afford the low wages. Basic income would open up that possibility for people. So for those particular jobs, the wages would likely decrease. Furthermore, more people would be free to volunteer as well.
It also depends on what you count as labor. Does volunteer work count as labor? What about interning? How do you tell the difference between a hobby and volunteer work?
Certainly there are some undesirable jobs that basic income will give people the freedom to say no to. In order to get people to continue to work those jobs, you'd have to increase the wages or make that work desirable in some other way. Perhaps the costs are too high for the employer, so they decide to substitute some other resource for that labor. But is any of that a problem?
> Unless A outpaces B, productivity will decline.
Hmm. Are you calculating productivity per dollar spent on labor or productivity per hour spent on labor? I think we normally think of labor productivity as the amount of production per hour of labor.
> If it does outpace B, wages or taxes must capture all of the increase or inequality rises quickly as fewer "working" people are capturing the rewards. These wage/tax increases will then slow the growth.
I'm not following you here. Assuming that we're running an output gap (i.e. not using all the productive resources we could be using), basic income causes our economy to produce more. Its effects on wages would be complicated. Taxes are kind of separate issue.
Basic income doesn't do anything to directly address inequality, but it raises the income floor. If even the poorest among us is rich, will inequality be that big of a problem? Maybe it will still be a problem that we have to address. I don't know. But if inequality does end up being a problem, that's a separate issue and we can address separately from the problems that basic income addresses.
> I guess I don't see how UBI wouldn't decrease the labor participation rate
It could go either way. And part of it might depend on what we define as labor. If there's no minimum wage, for example, where do you draw the line between hobbies and labor? How much pay counts as a job? What does it mean to be self-employed? Does there have to be some kind of formal labor contract in place? Does any of this matter for determining the prosperity of our society?
> and then how a low participation rate economy would grow faster than a high rate one.
Economic growth isn't constrained by the amount of labor being contributed. It's constrained by the amount of spending in the economy. If labor were our limiting factor then less labor would mean less production, as you say. And at least in the developed world, except maybe in certain special cases (e.g. wartime), that hasn't been true for decades if not centuries.
