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Comment by AnthonyMouse | Hacker News Reader

> b) have a business so close to the brink of shutting down that an additional $20-50 an hour will shutter you.

This is the default state of businesses in competitive markets. If you could do with less then you could charge less, and one of your competitors will start doing that to take your customers, so you have to do the same.

Of course, the alternative is to pay more and then raise prices. Which you might not be able to do if the additional cost is imposed only on you, but when your competitors have to pay it too, you all raise prices without losing business to each other.

But the overall industry would still lose some business to customers not being able to afford its products, and some of the suppliers still go out of business.

Unless the labor costs increase generally instead of only for that industry. Because then your customers can afford the higher prices. If labor becomes a higher percentage of operating costs overall, they may even be able to afford more than before. This is why a UBI is good for businesses -- customers have more money in their pockets.

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This is a purely economic argument which if fine, but misses the vital non-economic side-effects. More money could lower the stress of the employees (given they now no longer have to worry about paying their bills) which may lead to higher quality products. Increased wages may attracts better talent or more exploitation conscious consumers. Hell, it may even more the owner more likely to listen to his staff, given that they become a significant expense. That could increase efficiency.

We should be careful not to make wage depression some sort of abstract "logical" natural state. Wages are low for a reason and active effort has to be expended to keep them as they are.

Cost reduction is not a "state", it's a process. And it is a natural process that will always occur. In any endeavor, humans will find ways to reduce the amount of inputs needed for outputs.

The problem is that it IS a purely economic problem. It's just math - supply, demand and competition. Small business in particular is captured by these forces. It cannot increase prices because people will go to the competition. And it has no margin to absorb people's desire to earn enough to live a middle-class life doing a job that you can hire anyone to do.

All of that said, what you could reasonably hope would happen is that all businesses raise their prices because of the labor shortage (already happening around me), but then you have another problem which is that the increased wages are offset by the increased prices.

At the current click, all that's going to be left are the corporations with enough wiggle room to absorb the increase, but they will also pass on prices. I would just prefer not to live in that world. I think corporations increase inequity (Walmart could pay a living wage and full health care, but doesn't) and small business puts the power back with the individual.

It's not just amortized supply and demand.

We ask, why don't workers go on general strikes? Well small businesses refusing to even try raising wages and prices amounts to a capital general strike.

Employers and employees simply have radically different market power, and that is as fundamental a fact in all economies remotely like ours as any econ 101 supply and demand.

A lot of people just have habits or preferences for particular shops, regardless of a price premium when prices get raised

and a lot don't. this is all captured by simple supply/demand curves

Economics is the junction of mathematics and human behavior. I'm not going to travel half a mile to a different taco shop if the closest to me increases burrito prices $1-2 (in an area that reliably has at least 1 taco shop every half mile). In some sense, I'm a captive audience. I'm hungry and I don't want to walk an additional 15 minutes to save a few dollars.

People on HN tend to be way less price sensitive than average. People living paycheck-to-paycheck would totally walk an extra 0.5 mile to save $2 per meal.

Especially families with children- now we are talking $8+ a meal at a time in life when people are very price sensitive.

Yeah, I regularly do this.

My girlfriend will walk 30 minutes to save 50c on bananas. She is financially well now, but grew up without much, so those habits still stick. I would pay 5 dollars more to not move from my couch and get bananas on my doorstep.

The thing is, a lot more people are like my gf than me (I grew up middle-upper class and am 'financially' well upper class for my country).

> "More money could lower the stress of the employees (given they now no longer have to worry about paying their bills) which may lead to higher quality products."

Except businesses then raise their prices to cover the increased wages so the "more money" is almost instantly eaten away by having to pay those increased prices. You can't get something for nothing.

> which may lead to higher quality products.

Or a lower quality products, because what you'd do if I slack off, fire me? No problem, I'll live off UBI for a while, then go to somebody who didn't fire me yet, there are a lot of places around.

> may attracts better talent

A lot of minimum-wage positions won't benefit from better talent - once minimal level of competency is reached, it's enough. Surely, a waiter could be a rockstar, probably - but most people, and most businesses, expect just not forgetting the orders, not dropping the food on the floor and not cursing out the customers, once it's there, there's not much monetary upside for the business from the better talent (of course, there are tips but that's different story).

> given that they become a significant expense.

Payrolls are already a very significant expense, especially in restaurant, etc. business. I don't think making them more expensive would change much.

But competitors are already in the same boat. Demand for business is high.

I really think that some of this is about class solidarity among business owners (especially small business owners). I say this as a political centrist, too.

There are a bunch of reasons why wages are "sticky" (i.e. they don't go up--or down--when you'd expect that to be the rational decision in an efficient market), and this is probably one of them.

Also, there are ways to seek out higher efficiency. Hire at higher wage but expect and prepare for higher productivity. Operate the business for longer hours to make the most of money paid for rent, etc. Unfortunately, I think small businesses where I live (in southeast Virginia) are much worse at this than larger businesses.

The dirty open secret about development is that in highly developed countries with low inequality, human labor is just horrendously expensive, and since dining out has costs dominated by human labor, even relatively wealthy people dine out rarely.

Ask the Swiss or Danes. Cooks can have a living wage, but fancy meals are comparatively much more expensive than their equivalents in the US, given their lack access to underpaid immigrants for that kind of work.

Dining out is also a very localized industry, so this hits highly-productive areas within countries even more. Of course, the other side of the coin is that highly-productive areas are also constrained by real estate costs, regardless of prevailing wages. More rural areas don't have that factor, so people can afford to dine out more and still pay their cooks quite well.

That sounds like a good thing that human labor is properly valued.

Speaking of dirty secrets. There was a time not so long ago when there was not so much demand for dining out. Healthy food was generally prepared at home from fresh raw ingredients. Perhaps there was a small veggie garden in the back yard. There was plenty of time for shopping and cooking, and people didn't have to somehow squeeze these activities between the long commute back home from the second job and sleep time, while balancing an infant on their knees.

Thankfully we progressed out of those dark times and we are empowered today to enjoy the bounty of rice, factory farmed meat, salt and sugar slapped together by strangers on minimum wage.

> Healthy food was generally prepared at home from fresh raw ingredients. Perhaps there was a small veggie garden in the back yard.

Yup, that's called a subsistence economy. It's a very good thing that we can spend our time doing something better than back-breaking agricultural work and general housekeeping. That's what progress is all about.

False dilemma. There is a state of being between subsistence farming and outsourced meals, and it's characterized by frugality and patience.

It's perfectly possible to have good meals on the go, as evidenced by the fact that Italians, Spaniards, French and Peruvians can get simple lunch fares with high-quality ingredients and affordable prices, and it's not necessarily about home-cooked meals either.

So can I, but I have frugality and patience.

> “To sum up, I may say that if the taste of our people [in France] for possessing land, and our habit of cultivation on a small scale, have singularly facilitated our progress towards equality, it is probable that the excess of opposing causes will drive the English in the same direction”

Alexis de Tocqueville, 1861, cited in https://www.independent.org/pdf/tir/tir_12_02_01_choi.pdf

That the French (still) have access to good meals (not sure what you have in mind specifically) might have quite a bit to do with a history of small scale farming. That and a climate conducive to small scale farming. It remains to be seen how long this will last. The forces of globalization are rapidly eroding local culture everywhere around the world.

This is the only possible future and the best possible future. Progress is intrinsically a very good thing. The disappearance of the home-cooked meals can't possibly be anything but a great liberation. We have better things to do than feed healthy food to our children.

We have the results to show for it:

> In the 1960s and 1970s only 13 percent of U.S. adults and 5 to 7 percent of U.S. children were obese.

> The US obesity prevalence was 42.4% in 2017 – 2018.

> For children and adolescents aged 2-19 years in 2017-20181 the prevalence of obesity was 19.3%.

https://www.apa.org/pi/families/resources/newsletter/2012/07...

https://www.cdc.gov/obesity/data/adult.html

https://www.cdc.gov/obesity/data/childhood.html

I cannot feed myself off a probability that a veggie garden exists. It clearly is not a "subsistence economy" whatever that even means.

I know what you mean, most Americans can't afford enough real property for a garden of any kind themselves. Fewer and fewer every generation.

Depending on how you do the math that's an even less-than-subsistence level.

Especially when it was such a prosperous nation merely 60 years ago, in spite of productivity being statistically much lower then.

Most people spend that time doing a job they hate so they can afford someone else for services to meet basic needs.

Not a good deal IMO.

Sure, it "was prepared" - but by whom? For example, by the wife - for whom it would be a full-time job, together with another full-time job of raising the kids and another one of cleaning the house and maintaining it. Or, in richer homes, by a servant - who would often work for little more than home and food, and certainly wouldn't have such benefits as mandatory vacation, sick leave, pension fund, unemployment insurance and workers comp. You can argue a lot about which model is preferable - and people certainly do all the time - but you have to take the model in its entirety here. You can't have people working full time jobs and then have plenty of time for shopping and cooking things from scratch. We'd have to choose one or the other. And we'd have to choose having a backyard vegetable garden, feeding one person, or industrial farming, feeding 7 billions people. If you're rich enough, you can still afford the former - along with a servant to cook your healthy meals - but the whole 7 billions still can't.

I have a full time job and cook my own meals from raw ingredients. It doesn’t take a lot of work.

If everyone's wage goes up, the economy is probably running hotter and there is more growth. Don't forget the macro side if things!

A lot of well-credentialed people will say "bu- but the 1970s", but the fact of the matter is the wage share of income could also change, and rather than knee-capping unions to control inflation, we could have done price controls (as was done in the 1950s), profit controls (which would limit dividends and buy backs, not reinvestment to boost supply) or other such things.

Claims like this about UBI are simply unknown. You can't say it with any certainty, not even close. To begin to have UBI you'd have to increase taxes substantially, and you'd have to prove that doing that would actually lead to better results for businesses and the people.

> To begin to have UBI you'd have to increase taxes substantially

These would be far less of a burden than the implied taxes arising due to existing means-tested welfare. The incentive distorting effect from that sort of means-testing is extremely high, and the whole point of the UBI/NIT is to dispense with that.

You don't have to pay for UBI. You can just print more money. There are many things in between. Getting rid of reserve requirements and zero interest rates loans vs UBI can be viewed as points in a larger continuous space.

We know there are aggregate demand issues, and we now know that simply issuing more credit "the normal way" seems to cause asset bubbles before boosting demand for labor, so we should be open to trying other things even if we don't know exactly what will happen.

Or read Kaleki in 1943 https://delong.typepad.com/kalecki43.pdf, who predicted all of this (UBI resistance, direct gov investment resistance, The keynesian collapse in the 1970s, trying to boost employment by boosting private investment alone not working....). Incredible and saddening.

"It is true that profits would be higher under a regime of full employment than they are on the average under laissez-faire; and even the rise in wage rates resulting from the stronger bargaining power of the workers is less likely to reduce profits than to increase prices, and thus adversely affects only the rentier interests. But 'discipline in the factories' and 'political stability' are more appreciated than profits by business leaders."

That is is just plain corruption. Leaders (whether in governments or businesses) would rather have power for themselves than well-being for the country. Honestly, I had a hunch that developed nations didn't have less corruption, rather, the impact of corruption has been softened. Each individual industry leader might be corrupt but given enough competing industries their power diminishes. This is why government corruption is primarily associated with oil countries (or other resources) because controlling that single industry is the same as controlling the entire country.

You can clearly see it in Germany as well. Merkel and her party have close connections with specific industries commonly associated with Germany, the most prominent examples are car manufacturing because it is an export industry and the coal industry because Germany is resource poor (coal is all we have). If you work at VW CDU is the party you vote for...

It's selfish, but the funny thing is it probably isn't corruption by western definitions!

If you own a business and extract as much profits as possible --- not corruption. If you own a business and install your kid as middle manager to extract more money to your family -- corruption!

There's a quip that corruption is a term to penalize regions with larger extended families and kinship groups --- because the most galling corruption to the west is helping that 3rd cousin or clan member or whatever. But that is a real cop-out when in the west few know their 3rd cousin or are in a clan --- easy avoid nepotism when you don't know of the person!

The taxes thing confuses people mostly because they don't understand how existing phase outs work.

Right now the government pays benefits that are already close to what a UBI would pay, but in food/education/housing/other assistance. Then those benefits aggressively phase out.

The phase outs are crazy. First, they invert what you want from a progressive tax system, because lower income people are paying the highest marginal rates. You might be paying a "10% tax rate" but if you're also losing $0.50 of every dollar to benefits phase outs, your marginal rate in practice is 60%.

Worse, because the benefits phase outs are individual to every program, they overlap randomly to nonsensical effect. Someone making $20,000 might have a marginal rate of 80%, at $24,000 it's 110%, at $28,000 it's down to 40% but at $30,000 its back up to 60%. This is obviously very stupid and creates bad incentives.

Now suppose we align all the phase outs so that a) the phase out rate is uniform across all programs and b) we don't have lower income people paying higher marginal rates than higher income people.

Then you might have something this. Everyone pays a 10% tax rate from $0 to $60,000 and a 30% tax rate after, and benefits phase out at a rate of 20% from $0 to $60,000 and are fully phased out by $60,000.

Well, it turns out this is mathematically equivalent to paying the benefits to everyone unconditionally and having a flat 30% tax rate starting from $0. And if you convert all the benefits to cash instead of food vouchers and such then you have a UBI.

On paper eliminating the phase outs costs a ton of money -- everyone making $60,000 would have to pay $12,000 more in taxes! But then they all receive a $12,000 UBI and it just cancels out.

The primary transfer effect is really in not having such aggressive phase outs, i.e. not putting such high marginal rates on lower income people. The effect is that they have more money, and higher income people have to pay higher taxes to pay for it. But not by the full amount of the UBI, only by the difference between the status quo of aggressive phase outs and the less aggressive ones that make the marginal rate curve not so silly. You end up with a modest transfer from higher income people to lower income people, vs. the status quo.

And then, because lower income people are more likely to spend what they receive than higher income people, you get more consumer demand, which is good for businesses.

You also have a greater incentive to work for lower income people, because they get to keep 70% of what they earn instead of 40% (or -10%).

>they overlap randomly to nonsensical effect.

Lots of the nonsensical stuff is not exactly random.

Still the finances could be balanced like this and you could end up with an equal number of recipients receiving the same average benefit. Perhaps some efficiency through consolidation.

There is serious consensus that this amount has not been enough for a while which is one of the things that sparks the discussion about UBI more often.

Walmart & McDonalds might presently be employing the most noticable share of present recipients, but that is far from universal. Yet.

Just like with health care, to get anywhere near universal you're going to have to tax something having deeper pockets than mere income no matter how many of the top wage-earners get high brackets and have loopholes closed.

You're going to have to tax commerce.

If that could be done plus phase out the income levies, that would be the best thing for a consumer economy in over 100 years.

> This is why a UBI is good for businesses -- customers have more money in their pockets.

I'm a proponent of UBI and I think this claim needs a citation for the level of certainty that you expressed. I have always viewed that UBI will likely be bad for small businesses, but that by the time that we need UBI there won't be many small businesses left.

There are two pilots of UBI worth paying attention to: Finland and Ontario. Finland proposes paying the unemployed (this differs slightly from unemployment benefits in the US) while Ontario proposes paying anyone below the poverty line.

Source: https://hiring.workopolis.com/article/universal-basic-income...

UBI-like concepts, like what was implemented by the US and other countries during COVID, do help recover us from a recession.

Source: https://www.businessnewsdaily.com/9649-universal-basic-incom...

That said, it was not enough to impact small businesses in a positive way. Over 50% of small businesses reported having a large negative impact. There's lots of questions to be answered there, like the availability of non-extractive technology for small businesses to use to compete, and where the income levels where UBI-like income disbursements were centered actually spend their money.

> Estimates from the weekly U.S. Census Small Business Pulse Survey indicate that roughly 50% of businesses report having a large negative effect from the COVID‐19 pandemic and that only 15%–20% of businesses have enough cash on hand to cover 3 months of operations (Bohn, Mejia, & Lafortune, 2020; U.S. Census Bureau, 2020).

Source: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7461311/

> Finland proposes paying the unemployed (this differs slightly from unemployment benefits in the US) while Ontario proposes paying anyone below the poverty line.

Neither of these is a UBI. Paying only people who are unemployed is in particular quite the opposite of what you want, because it discourages people from taking a job since they'll lose the money. Moreover, you need more of the middle class to be receiving some of the money (they'll pay some but not all of it back in taxes), because that's what increases consumer demand.

> Neither of these is a UBI.

They're considered quasi-UBI: https://en.wikipedia.org/wiki/Universal_basic_income#Quasi-U...

I do agree there are better implementations to be had, and that the implementation probably makes all the difference in outcomes. That said, I wouldn't say they're expressly not UBI.

I also just learned about this: https://en.wikipedia.org/wiki/Universal_basic_income#Alaska_...

Quasi expressly means not really.

Google claims under 9,000 results for quasi UBI. Some use it to highlight how actual UBI would be better. Some use it to describe programs like basic income for everyone in rural regions. Not expanded unemployment benefits.

It's also a good expression for something that doesn't perscriptively follow UBI but accomplishes the net effect or intended outcome. I'm willing to admit that there's more than one way to accomplish what UBI wants to accomplish.

But you're then using evidence from the not-UBI to claim that a UBI doesn't do something (benefit businesses), when the difference between the UBI and the not-UBI is that the not-UBI wouldn't be expected to do that thing.

Right, because that's the only evidence I have to draw from when UBI in the form you're referencing doesn't exist yet.

I also didn't say it can't, but I think the choice to make it optimal for SMB's, middle class, and upper middle class is an intentional one. I don't think that'll happen just by doing UBI. Hence I said, if you think it will then citation needed.

This is the same form of argument people use against building newer nuclear power plant designs.

A: "Newer designs are safer."

B: "There is no evidence of that because they haven't been built yet."

A: "We're talking about the design here. You can see that it has these passive safety features which..."

B: "But there is no evidence of that because they haven't been built yet."

A: "Okay, then let's build them so that we can see the evidence."

B: "No, we can't build them because there is no evidence that it works."

That's not what I'm doing and I don't appreciate you misrepresenting what I said like that, intentional or not.

UBI is purely theoretical. It does not exist anywhere on the planet in the form you're describing.

The US has engaged in UBI-like systems for quite a while, as have other countries.

UBI ascribes that everyone must get the benefit in order for the effects to be felt.

COVID incurred UBI-like payments, how these were used is worth studying, but they don't prove or disprove UBI. They certainly didn't improve the situation for small businesses, which is my point - if it takes a holistic UBI system to prove UBI and you're unwilling to figure out how to decompose it, then we'll never get it, and we're all doomed. That to me seems rather silly.

It is not a given that UBI will be a boon for businesses (big or small). Personally, I do think it will benefit large corporations, but it remains to be seen how small and medium businesses will fare -- and I think that largely depends on implementation details that need to be discovered. That much needs to be proven.

In order to prove some of the claims of UBI, countries are doing experiments and looking at specific effects that their implementations have in order to gauge UBI. Nobody is going to look a the monumental cost of UBI and fire a hope-driven-missile in terms of policy and economic risk, which is absolutely understandable. Finland and Ontario are putting out some tests, the inference they draw will largely depend on the questions they set out to answer. This is probably also informing them on how they could roll out UBI progressively.

What I was contesting was the absoluteness of this statement:

> This is why a UBI is good for businesses -- customers have more money in their pockets.

Nothing says that because people have money that they will spend it, much less where you want them to spend it. That has to be incentivized and we have to experiment with how to incentivize it.

It's a lot closer to UBI than existing systems. The Finnish case is an experiment where a random sample of unemployed folks can be paid for some time even after taking a job. It explores the impact of the very incentives you're talking anout.

(And yes, the lower-middle class will probably still be net UBI recipients if only barely, because this helps with smoothing out incentives at the lower end. You don't want to have a sudden benefit cliff, or else a breakeven point that's infeasibly high.)

If UBI is implemented we may be able to do away with minimum wage, at which point small businesses could possibly offer better (more interesting, less stressful) working conditions for less money, it’s possible people might go for that.

Right now companies must make $X per employee per hour. If their business cannot do that it’s deemed that it’s not productive enough and should not exist.

Agreed, that is a possible future, but it also depends on not raising taxes for already cash strapped SMB's and bankrolling those efforts with large corporations and high income earners who have lots of capital to fight those initiatives.

Not to mention your competitors may be switching to robots, greatly reducing their labors to the point it might not be competitive if you're using humans and don't have the capital for the robot.

Why is that everyone else's problem? No one is entitled to not be out competed by a more efficient business.

"Why is that everyone else's problem?"

Where did I say that? But now that you brought it up... the problem isnt from competition, but from the paradigm shift that prevents low skill labor from supporting themselves (or trying). There is a lot of debate about how mass automation will affect macroeconomics and labor.

I have always hated the idea of UBI in any for it has been presented so far. Money means nothing if the price of everything shoots through the roof. Just yesterday I paid $9.50 for bacon where a year ago it was closer to $5. Let’s not even get started on shrinkflation of items. Back to my point though we don’t need a ubi but a right to food shelter and water. Anyone who has been poor knows something will eat up this check and you will be no better then before. It may not happen right away but there are too many predators looking for your money. I don’t know how you could give everyone the right to food, shelter and water but that is what we need.

UBI doesn't linear scale all incomes and wealths, so we shouldn't expect it to linearly scale all prices either.

The flip curse of the curse of high dimensionality is that adjusting interest rates or UBI has so wide and rich a space of possible effects, good or bad. We really need to try these things before jumping to conclusions.

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