I'm not sure how to address this, but I always wonder how much we can extrapolate the findings from these studies to a universal basic income situation. I feel like giving a small group of people an extra $12000 a year provides benefits for low income people because their yearly income is now higher compared to the median income. Someone who's income is in the 5th percentile may now be in the 10th or 15th percentile (no idea if those numbers are correct).
Once you give everybody an extra $12000 a year, the median income is now $12000 higher. I'm sure there's still some benefit, but relative to others their position hasn't changed. Someone who's yearly income is in the 5th percentile is still earning in the 5th percentile.
I'm concerned about a situation similar to college tuition in the US where easy, risk free money leads to price gouging. Once everyone has an extra $XXXXX how quickly does the market realize that the cost of goods can be raised by that amount.
With a progressive taxation, the gap between high and low income narrows. Low income people may not even notice a change in tax bracket, if any such thing happen, high income people will give back a substantial part of that additional income. I believe, up to 50+% in some US states.
Is UBI a necessary part of progressive taxation? Maybe I'm missing something, but it seems like that same thing can be accomplished without UBI. Am I thinking about that wrong?
I know what a progressive tax is and I don't believe UBI is a pre-req to be able to implement a more progressive tax structure.
I worded my response as a questions because this isn't an area that I have done a lot of research on and I'm not confident enough in my understanding to be sure of that. I'd rather ask a question than assert my uncertain belief.
It's also worthwhile to reduce taxation at the lowest end, as long as the extra taxes are used to provide basic human rights such as universal and comprehensive healthcare.
> Someone who's yearly income is in the 5th percentile is still earning in the 5th percentile.
Isn't this an intended feature of UBI? The idea of UBI is that some level of material support should be guaranteed. It's about bringing "up" the floor, not really re-arranging relative equal and unequal positions. Plenty of people dislike that about it, but it's an intended feature.
That said, this is basically inflationary pressure and we have a lot of tools to deal with inflationary pressure. It is a challenge, but I am always struck by how differently people speak about it in this context v.s. when average incomes rise because the labor market is doing better. On some level, average incomes going up across society is the most normal thing in the world for welfare state capitalism and is one of the challenges we are best-equipped to deal with.
> Isn't this an intended feature of UBI? The idea of UBI is that some level of material support should be guaranteed. It's about bringing "up" the floor, not really re-arranging relative equal and unequal positions. Plenty of people dislike that about it, but it's an intended feature.
Absolutely, but I guess I don't see how just giving everyone money brings that floor up. Maybe I'm looking at this naively, but I don't see what's preventing things from just costing more after UBI. If the government gives everyone $1000/mo so landlords raise rent by $1000/mo then the floor is unchanged. I realize it's not that simple and that type of inflation wouldn't happen over night, but it seems like that's the direction it would head. Just looking at the housing aspect of it, it actually seems like the people who would benefit the most from UBI would be the people at the middle to upper end of the wage scale since they are more likely to own a house which means their housing costs are more fixed than someone renting.
To me it seems like we need some way to control the cost of basic needs otherwise it's just a constant race between the government raising UBI and the market raising prices (although, admittedly, it seems like the same argument could be made about minimum wage).
This is definitely not something I'm super well versed in though, so I might be looking at it wrong and am very open to people showing me what I'm missing.
If A is making $1 and B is making $1000, A has to survive on 0.1% of what the economy produces.
If A is making $1001 and B is making $2000, A has to survive on 33% of what the economy produces.
Even if inflation could be exclusive to basic needs, causing A’s costs and B’s costs to both rise by $1000, the economy now heavily incentivizes more competition around satisfying basic needs. All rent going up equally regardless of unit size means it’s time to start building or converting luxury apartments to multiple low income apartments.
That's super fair and I think you are absolutely right that it's an obvious question. Generally when people get more money for some reason the people who they buy from don't know it - but in this case they would know it! It would be foolish to ignore it.
I don't have a pat answer to your concerns, but I also want you to think about what stops your landlord from raising your rent by $1000 / month right now. Like, why not just go for it? Unless there's rent control it's allowed. The classic "efficient markets" answer is that providing housing does have underlying costs and, though people having more money does tend to lead prices to go up, sellers are still competing for buyers. At least historically, even in boom economic times, housing costs did not 100% stay even with rising incomes (which is just what this is).
That said, us housing has been getting worse for most people for a long time. House costs have outpaced inflation for 60 years[1]. Rents are even worse[2]. Reporting suggests this is now being made worse by highly concentrated rental conglomerates[3]. That is to say that the cost of these services is not tied to how much money people have to pay for them - your scenario where landlords just raise prices to new income levels is actually optimistic. There's also practical evidence that local factors and competition will lead prices to go down under "the right" local conditions[4].
So I think my answer is that your concern is based on an idealized economic model, but the actual trends US in housing haven't really been following the economic ideal for some time. I don't think all gains from UBI would be snapped up by raising prices, but like all inflation we'd lose some! Overall, to me, the weakness here is that the study doesn't show that many benefits for a ~40% (!!) increase in income. Which seems WILD. Just not what you would expect at all.
> I also want you to think about what stops your landlord from raising your rent by $1000 / month right now. Like, why not just go for it?
Answering as a landlord (I have one property I used to live in that I rent out), the reason I don't just keep raising rent is mainly because I like my tenant and want to be fair to them. Having had bad tenants in the past, a good tenant is worth their weight in gold.
More relevant to your question though, the other reason is because I know there's a ceiling after a certain point where the number of people who have the money to rent my property starts to shrink and the time it would take to find a new tenant would cost more than the amount of money I would make by raising rent.
If rent is $2000/mo and raising it by $100/mo means it's going to take an extra month to find a tenant, then I need to believe that that tenant is going to stay for at least 20 months to break even.
If everyone all of a sudden has an extra $1000/mo I could be fairly certain that my tenant won't be priced out if I were to raise rent a few hundred dollars.
Thanks - I hadn't thought to mention the risk of trying to raise rent but it's a good note. I was mostly getting at how the conditions in the UBI scenario ("everyone could pay $1000 more in rent if I insisted") is often true now and the 1:1 rent raising wouldn't happen under UBI for similar reasons that it doesn't happen now.
I also think people tend to under-rate the softer side of landlord / tenant relationships[1]. It's better to have a tenant who you get along with and who cooperates with how you want to rent a place. It's nice not to fight with your landlord. There's some economic value there too, but it's hard to quantify. I'm kind of interested in housing interventions that ban large companies from holding too many units of housing. It mostly "puts a ceiling" on how much profit one company can derive from many rental units, but actually I'm not sure I care - and trying to maximize the human connection between the person who owns the building and the people who live in it seems sensible.
[1] To be fair, when push does come to shove, a reason to under-rate them is the landlord looses some months of rent while the tenant becomes homeless. It pushes people towards strategic thinking.
>Maybe I'm looking at this naively, but I don't see what's preventing things from just costing more after UBI. If the government gives everyone $1000/mo so landlords raise rent by $1000/mo then the floor is unchanged.
Natural competition is supposed to keep that in check: Supply and demand dictates that in a free market (which UBI does not implicitly change), a landlord with a vacancy will try to offer a better deal than their peers who also have vacancies, with the direct incentive of getting units filled.
The idea is that some money (a rented unit provides more income than a vacant unit does) is better than no money, which incentivizes landlords to get units filled and making money instead of not making money -- in large part by competing on price. That's how supply and demand works.
In a free market, landlords can't really say in unison "Hey, I heard everyone has an extra $1k every month! So guess what: Your rent just went up by $1k! Suckers!"
I mean sure, some might say that -- or at least try to do that.
But the way it is supposed to work is that one of their peers goes "Yeah? Well, rent with me! I only raised rent by $700!" and another goes "Hey, I've got lots of vacancies! My rent only went up by $400!" and this rinses and repeats until the ultimate lowball of "Rents are up? Not here! Save $50 compared to last year!"
That's not to say that the concept is without flaws: Collusion can happen[0], and collusion fucks up pricing in an otherwise-free market.
But this kind of collusion is already criminalized, and criminals will both exist and collude with or without UBI.
(In an ideal reality free of criminal acts, rents must increase a bit if for no other reason than a properly-profitable landlord's expenses must also increase a bit: UBI isn't free to fund, and the haves must fund it more than the have-nots do. That's unavoidable. But it also can't be an increase of precisely $1k/month or whatever a UBI might hypothetically be: That's hyperbolic nonsense even with criminal landlords colluding to victimize tenants.
Fortunately for the concept of UBI in this context, landlords are kind of small potatoes here in a sea of others who also need to extract their pound of flesh to pay for it.
This kind of broad-scale wealth redistribution can be good, I think, but it does not happen for free.)
> I'm concerned about a situation similar to college tuition in the US where easy, risk free money leads to price gouging. Once everyone has an extra $XXXXX how quickly does the market realize that the cost of goods can be raised by that amount.
Yeah, I'm convinced state backed student loans has led to the crazy rise in college tuition. student loans should be private (but should 100% be dischargeable via bankruptcy). Alternatively, public institutions shouldn't charge for tuition. The current state makes absolutely no sense.
Imo the biggest problem with student loans is that they don’t assess the credit worthiness of what they’re paying for in any way. Student loans and mortgages are the only two times that most consumers access huge lines of credit on very good terms. But unlike mortgages (which are already prone to creating the occasional credit crisis), student loans don’t assess the value of the “asset” they’re underwriting. You can’t get a $100,000 mortgage on a house that’s only worth $50,000, but you can get a $100,000 student loan on a degree that’s worth exactly $0 in potential future earnings. If you assessed student loan applications on that basis, the student debt “crisis” goes away.
> student loans should be private (but should 100% be dischargeable via bankruptcy)
While I mostly agree, how do you prevent basically every student from going bankrupt immediately after graduation? None of the downsides to bankruptcy really apply to students so it's logically the best course of action if students loans could be discharged.
I'm not convinced you would need to. "Students" cease to be students immediately after graduation, so they wouldn't really be "students" anymore, right? So "none of the downsides to bankruptcy really apply to students" doesn't really seem accurate, does it?
Even reading it more charitably, students and recent graduates still probably would like access to credit cards, or the housing rental market, or whatever. Bankruptcies stick with you for 7(?) years, so you'd also have to think about whether you'd be locked out of the mortgage market, auto loan market, what-have-you, while your peers are able to make those moves.
Bankruptcies are also like a whole legal thing with a judge and everything, so I doubt we'd see every single student getting their whole debt discharged instead of a judge just being like "Didn't you, like, just spend all this money on getting the training required to get a high-paying job? Seems like if you plan on working anytime soon you should make some payments."
Also lenders can just like, be more selective or restrictive in other ways? Higher interest rates, requiring more established co-signers, etc etc etc. Honestly the strangest part of this is that we've normalized saddling 18 year-olds with tens or hundreds of thousands of dollars of debt.
Bankruptcy stays on your credit report for 7 years, but doesn't lock you out of the credit market. Someone with a high paying job has relatively easy access to credit regardless of recent bankruptcies. At most it effects them for a year or two, but new graduates aren't really making any big purchases using credit immediately after graduation anyway.
That's part of the risk. It will downsize annuity present/future values so as to reduce the windfall payout of bankruptcy vs its credit score and process costs. It will help keep college cheap: if what they teach is worthless then students should welch. The investor has more money, let him eat the friggin' risk! The student is otherwise forced to delay family for a decade and take a 67%+ cut in fertility rate as a result, a really bad outcome if we don't let students welch.
Maybe put the school on the hook in some way too, forcing it to actually screen for talent (which would absolutely murder DEI lol), that way investor isn't totally SOL if the school was the useless party.
Wow, I just made education affordable again by murdering any safety in financially speculating in it. Change the game, change the outcomes!
> It will help keep college cheap: if what they teach is worthless then students should welch.
Just the opposite, presumably the best colleges that product the highest earning graduates cost the most, those high earning graduates would be might more incentivized to start over than someone with a lesser degree because at least they'd be part of a high paying field and immune from needing to use credit.
>Maybe put the school on the hook in some way too, forcing it to actually screen for talent (which would absolutely murder DEI lol), that way investor isn't totally SOL if the school was the useless party.
You're so wrongheaded there, I don't even know how to get you on the right track, but companies, and schools, with so called diversity hires do better overall. Schools already screen for talent and the ability to graduate, DEI initiates just have them look a little harder in an expanded pool.
If you make student loans dischargeable and private, wouldn't lenders would tighten up and only give loans to people with good odds of repaying the loans? IE, people from middle class+ could still get loans, but how about the smart kid from a very poor family? Wouldn't they be too risky to give a massive loan to?
There might need to be some regulations made so that lenders should discount family background, but only consider grades/earnings potential/etc.
But on the plus side, this should theoretically bring tuition costs down as there won't be effectively unlimited capital for tuition. It also encourages potential students to consider more carefully whether getting a degree makes sense.
Perhaps Pell Grants should also be expanded in eligibility (to make it so that more poor, but motivated kids can get access to higher education).
The goal of these changes would be to:
- Reduce the market distortions that are created by giving out federally backed student loans (reducing or at the minimum slowing the pace of growth of tuition costs)
- Reduce the burden on taxpayers by eliminating public student loans
- Makes it so that kids don't get stuck with student loans that are a drag on them for life, at worst, they'll have to deal with bankruptcy
Potential downsides:
- Reduces number of people studying potentially useful/valuable to society degrees that don't have much expected monetary return
- Potentially reduces average level of education in the population (could be untrue if it also sufficiently reduces tuition costs)
Once you give everybody an extra $12000 a year, the median income is now $12000 higher. I'm sure there's still some benefit, but relative to others their position hasn't changed. Someone who's yearly income is in the 5th percentile is still earning in the 5th percentile.
I'm concerned about a situation similar to college tuition in the US where easy, risk free money leads to price gouging. Once everyone has an extra $XXXXX how quickly does the market realize that the cost of goods can be raised by that amount.