There’s been a lot of discussion of UBI—Universal Basic Income—over the last few years, especially with the presidential primary run of Andrew Yang. The concept is seductive in its simplicity: gut the welfare state and its behemoth apparatus of bureaucratic pencil pushers and middlemen, and just cut every adult citizen a monthly check.
For fiscal conservatives, it’s a particularly toothsome Devil’s Bargain: streamline an inefficient and wasteful bureaucracy and simply direct deposit a grand every month into Americans’ checking accounts. Of course, it’s a siren song: we’d just get the payments and still suffer with an entrenched bureaucracy, claiming $1000 a month isn’t enough to meet the specialized needs of whatever community they pretend to support.
Even if the deal were struck and every redundant welfare program were eliminated, there UBI would still be a bad idea. Besides the absurdity of merely paying people to exist, it’s inherently inflationary: if you give everyone $1000 a month, prices are going to go up. Just as college tuition has soared because universities realized they could jack up the price and federal loans would expand to cover the costs, UBI would cause a similar rise in prices. Sure, it’d be great at first, but the inflationary effects would kick in quickly.
The three stimulus payments that have been doled out so far seem to be priming Americans psychologically for UBI. Those have been scattershot payments of varying amounts, and seem to be stimulating the economy, without (to my knowledge) massive inflationary impact yet. However, the program UBI purports to replace—unemployment payments—has caused economic disruption that, given enough time, could prove very inflationary. What is unemployment, after all, but a form of UBI?
The starkest illustration of this effect so far is in the restaurant industry. Anecdotally, several local restaurants in my neck of South Carolina have had to cut hours or close due to a lack of available staff. The problem: after the initial wave of lockdowns battered the restaurant industry, workers are finding generous unemployment payments preferable to bussing tables and hustling for tips.
A McDonald’s franchisee in Tampa, Florida, is offering $50 to potential job applicants just for showing up to an interview. The franchisee, Blake Caspar, is also considering raising starting wages to around $12 or $13 an hour, substantially higher than Florida’s minimum wage.
The problem, again, is that workers understandably prefer to loaf around at home on the dole than to slave over a hot fryer. Workers should be paid a decent wage, but wages factor into the cost of production. That means a McDouble might cost McDouble what it did before.
Another problem is that unemployment eventually runs out; when it does, there will be a correction in wages as workers return to work—if jobs are still there. With facing paying burger flippers $13 an hour, one has to imagine franchisees are considering as many automation options as possible to cut down on wages.
The UBI supporter would counter here that UBI never runs out. That’s perhaps true (until the government can no longer get away with printing money indefinitely), but the basic price of a burger is still going to skyrocket, perhaps even more so under UBI. Without the potential for UBI running out, would-be wage monkeys stay at home playing video games, forcing owners to raise wages—and pass the costs on to customers.
Sure, paying more for a Big Mac isn’t a civilizational issues. But McDonald’s feeds more people more affordably than any government relief program ever conceived. The days of the Dollar Menu, however, won’t be long if owners have to pay $20 for a surly teenager to ring up your Shamrock Shake (and, very likely, the surly teen will be a surly middle-aged person, as employers will want to get the most experienced workers possible for their precious labor dollars).
It’s all to say that we can’t legislate our way to wealth. To those fast food and restaurant workers pulling down some good wages, sock that money away while you can. Once the unemployment bennies dry up, the good times will come crashing to an end, like a soggy McNugget in a carafe of barbecue sauce.