Consequences Of Universal Basic Income

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UBI, or universal basic income, has many downsides that are not well recognized.  It seems without an understanding of economics, something public schools seems to fail to teach adequately, these downsides of UBI are not recognized.

In economics, price is determined based on supply and demand.  But, there is a lot of nuance to this.  Let's say that for someone making 100,000 shekels, a meal cost 10 shekels.  Then,  through inflation, later, that person makes 1,000,000 shekels, but a meal now costs 100 shekels.  The nominal income of the person is not important, what is important is purchasing power.  In both of these situations, the person is only able to purchase a total of 10,000 meals.

Price is determined by the amount of money chasing after the item being sold, which is based on how demanded that item is and the purchasing power of those demanding it.  For necessary things like rent, UBI would create a scenario where, the demand remains the same but the purchasing power of those demanding it goes up, and consequently, the price of rent would go up.  And, similarly, wherein UBI increases the momentary purchasing power of the lower class, the items that they purchase would go up in price to respond to this increased purchasing power.

And, apart from this low and middle class price inflation, UBI does something much more insidious.

If we look at welfare currently, there is a welfare trap that occurs wherein someone receiving welfare is incentivised not to get a higher paying job because the welfare would cease.  This effectively prevents upward mobility of those receiving welfare, creating a permanent lower class.

And, welfare also is used as a method for government control.  In order to get welfare, you must submit data to the government and you must act in certain ways.  Similarly, UBI would result in much more government control, and would result in people being afraid to offend government for fear of losing UBI.

If we look at the result of this lower-middle class price inflation, there is something else that is done.  For people who are just above the welfare line, they tend to demand the same products of those under the welfare line.  And, if these products go up in price because of the purchasing power increase of those below the welfare line, then those above the welfare line will be paying more for the products they buy without having an matching increase in income.  This would have the effect of moving some people that are currently above the welfare line to being below the welfare line.


In summary, UBI would cause low-middle class product price inflation, would create a much larger lower class, pulling people down from middle and low middle class.  It would keep people stuck in the lower class.  It would increase the control of government, both by giving government more information about people and by requiring people conform to rules for getting UBI.   It would create another government bureaucracy, both leaching off tax payers and creating avenues for exploitation by managers of the system.  And, consequently to all of these things, it would probably be the quickest way to have another mass death by something similar to the Mao cultural revolution.


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