Basic Income
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Basic Income

Wouldn’t Unconditional Basic Income Just Cause Massive Inflation?

An answer to the response to the answer to the growing question of the 21st century

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Not Printing Money

Now that we know more about what gives money its value, and how we actually want a small amount of inflation, we need to understand that basic income is not the idea of printing $3 trillion new dollars every year and dropping it on everyone from helicopters.

Exhibit A:

A is for Alaska

In 1982, Alaska began providing a partial basic income annually to all its residents. Until the first dividend, Alaska had a higher rate of inflation than the rest of the United States. But ever since the dividend was introduced, Alaska has had a lower rate of inflation than the rest of the United States.

Exhibit B:

B is for Basics

To further inform inflationary fears on a more academic basis, it’s also important to understand the basic variability of supply and demand and how it applies to various goods and services.

Exhibit C:

C is for Creation

Rising rent is a particularly worrisome fear for many when first introduced to the idea of basic income. However, two very important things in particular need to be understood when it comes to housing.

  1. Technology represents a major factor in future housing prices, especially a future where everyone has a basic income. Everyone will receive a monthly check to afford rent, and will want to spend as little of it as possible on rent. Meanwhile, owners will want to compete for this money with other owners. Those offering the lowest rents will win. One example of this would be Google deciding to create Google Homes and leasing them out to people for a fraction of what people are paying now. Another example would be super affordable WikiHouses.

Exhibit D:

D is for Depression

Two lesser known economic concerns among those who know of them, are possible differences in how we perceive the value of money depending on how it was received, and how quickly it is spent.

The Inflation Bogeyman

Inflation is not the unmanageable danger it is made out to be. It is a complex equation involving multiple variables, and in the context of evaluating the idea of a universal basic income guarantee, because a basic income will be set at a basic level, there is even less to fear.

Increased Wages and Salaries

Basic income could provide an upward force on wages through increased individual bargaining power and slightly decreased labor force participation rates, and businesses as a result of new higher labor costs could raise their prices so as to keep their profits unchanged.

Any basic income can and should be indexed to match or beat inflation.

Indexing Basic Income

Just as the minimum wage has eroded over time because of inflation and the political fight over ever raising it, a basic income should automatically rise each year to match inflation so that it doesn’t erode in the same way.

Source: http://www.cwa-union.org/news/entry/89_out_of_100_workers_dont_have_collective_bargaining#.VGu38sk--WI

So why again was I ever worried about inflation?

Good question.

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Scott Santens

Unconditional Basic Income (UBI) advocate with a crowdfunded monthly basic income; author of Let There Be Money; editor of Basic IncomeToday; scottsantens.com