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Comment by lordlic | Hacker News Reader

If the jobs really need to get done, then the working conditions and wages offered will improve until someone's incentivized to do them. Usually people's objection to this is "but this will raise the prices of consumer goods!" And the answer is yes, yes it will. Better-off people used to cheap goods/services will no longer be able to fuel their consumption on the backs of people getting paid very little for work under dehumanizing conditions, and will end up with a net loss. Lower-class workers will see their incomes increase much more on a proportional basis and end up with a net benefit.

On a more meta note, this is an incredibly common and obvious answer to your question, and I wonder if it's even asked in good faith. If you've "yet to hear an UBI proponent explain" this to you then you really don't understand it at all.

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> Better-off people used to cheap goods/services will no longer be able to fuel their consumption on the backs of people getting paid very little for work under dehumanizing conditions, and will end up with a net loss. Lower-class workers will see their incomes increase much more on a proportional basis and end up with a net benefit.

This is totally backwards. Better-off people have more disposable income and are less sensitive to price increases than lower-class workers are. For example, suppose your favorite restaurant raises its prices from $10 to $15 per meal. If you're a tech worker, you probably won't care and will continue eating there as often as ever. If you're an unskilled worker, there's a good chance you'll never go there anymore.

If you're an unskilled worker, you probably didn't go there to begin with and so long as you're net ahead when going to Food City it seems like a net positive.

I don't know if you've ever worked with people in low socioeconomic strata, but I've been a camp counselor with some kids who's socioeconomics were such that eating off the dollar menu at McDonalds on their birthday was a big deal. I don't think Chipotle being more expansive is a material concern so long as actual purchasing power goes up.

I tend to think the minimum wage should be regarded as a moral concern - if you can't make enough to live decently then the line between effective indentured servitude and freedom is eroded, and this is dangerous in a society premised on the general welfare being such that each citizen has enough leisure time to be educated and vote.

Okay, a slight change to my example: what if instead of a meal at a restaurant, it was the price of broccoli at grocery stores that went up 50%?

The food supply chain is already mostly automated. Food is not cheap because of the service economy. It's cheap because it only requires work from a very small percent of the population to feed everyone else.

Yup. And some foods are unbelievably automated. There are GPS-guided, self-driving combine harvesters that will harvest an entire field of grain with essentially zero input of labor. Higher labor costs might somewhat increase the cost of some of the more labor-intensive crops, but your basic staples will still be cheap. If anything it's the cost of truck drivers that might have the biggest effect.

I don't think broccoli would matter unless it were already the cheapest vegetable with no substitute good and common to the cuisine of specific person.

But if you're trying to generalize the idea that increasing minimum wage would lead to an inflation death spiral because labor is too high a percentage of cost of staple goods... I'm not sure I buy it, though agriculture is definitely one of the industries most impacted by low cost labor (I don't know what they pay the folks crossing the border at 3 AM to pick lettuce in Yuma in 100+ degree heat, but it's not a lot). But my general sense is that the labor to harvest isn't most of the component cost of lettuce, there's transport, refrigeration, irrigation, pesticides, etc., so you can probably assume doubling minimum wage doesn't do anything like double the price of lettuce. If you believe that the labor to pick lettuce is 50% of the cost of lettuce, your worst case for a 2x wage increase is a 1.5x gain in the price of lettuce, which means the low end of the economy is getting net purchasing power growth, but more realistically, I can't imagine that picking lettuce is 50% of the cost, meaning low-end labor wage increases can't have near that much impact on prices.

My assumption is that the issue with higher labor costs is foreign competition at lower cost with lower standards causing a competitive issue and net less business more than it's an "wages increasing the price and causing an inflation issue." (IE the general "US must have 3rd world wages because otherwise it can't compete with the 3rd world" idea.)

But in my view so long as the increase in minimum wage creates an increase in overall purchasing power greater than any follow-on cost of inflation, it's probably net positive, and should be more efficient because the more normalized wages and living conditions are circa median income, the greater benefit to economies of scale and services and such for that group. Having too many poor and too many distinct socioeconomic bands is bad for the market because it means that the next model-T type product will be more likely to fail. So dealing with the issue caused by competing with lower-wage producers outside our boarders should be addressed separately. (For example, subsidizing US labor's wages by how deficient the living standards of competing labor is, or some other, smarter, plan, someone smarter than me comes up with.)

That just doesn't add up. Even without progressive taxation, if you give everyone a flat increase in income then lower-income people come out ahead relative to where they were before wrt the average. It's directly a wealth transfer from classes paying more taxes per capita to those paying less taxes per capita. There's no hand-wavy economic argument about how, actually, lower-income people would be worse off if we gave them money.

I'm not saying giving money to lower-income people hurts them. I'm saying the price increases will hurt them more than the money they get will help them.

In other words, you're saying that it hurts them...

> I'm not saying giving money to lower-income people hurts them. I'm saying the price increases will hurt them more than the money they get will help them.

For that to be true, the price increase of goods purchased by the poor induced by the additional income would have to be a greater multiple than the additional income of the poor; this doesn't make any kind of sense.

Logically speaking, this doesn't make any sense.

> Lower-class workers will see their incomes increase much more on a proportional basis and end up with a net benefit.

Except their goods are going to cost more too now. Unless you're going to start proposing price controls.

I can't really see UBI doing anything except inflating itself away.

Their goods will cost more, but they'll also have more income, both from employers paying more for labor and from the direct payments from UBI.

And even if the benefits are entirely "inflated away" in aggregate (which is extremely dubious given that UBI produces real economic value in terms of stability), that's just the aggregate effect. To take an extreme example, if the Fed prints 1,000,000 exadollars and distributes them equally, then yeah it's pure inflation, but it also massively redistributes wealth to the point where everyone is practically identical. Hopefully that example demonstrates that the effect isn't zero even if it's just "inflating itself away."

Finally, I object to treating this question in pure economic terms. We shouldn't be overly concerned with optimizing aggregate economic outcomes for society. Those at the top end can more than afford to give up some wealth, and those at the bottom are struggling to a heartbreaking degree. The utility function of holding wealth is not linear and if you're interested in increasing everyone's well-being then that's a fact you have to address.

How will printing money lead to redistributing wealth? The wealthy will still have their properties, their stocks, their personal connections, their education, ... . When the water level rises, all boats will rise together.

Because the proportions change. OP used exadollars in his/her example to show that giving money equally to everyone evens things out.

Governments don’t generally do it that way. Usually they just seize assets.

That is because if you print exadollars then either the assets rise in value in proportion or beyond a certain point, implode, making the country as a whole poorer. That is because companies can no longer make money. Suppliers demand more anticipating further inflation. You then need to pass it on but may not be able to pass it on fast enough. Cycle builds upon itself.

Pretty soon, your currency is completely devalued and there is a robust underground economy. You run into shortages for essentials and have to introduce price controls. The poor get poorer. The rich get poorer. Good job.

Lebanon. Venezuela.

https://www.linkedin.com/pulse/money-credit-debt-ray-dalio

I remember seeing interview on TV with a McDonalds worker in Switzerland. She said, They are paid about 35 Euro/hour. and they are happy to work at McDonalds ! One of comments from the reporter was that higher salaries increase the price of BigMac by some cents( I remember that it was about 50cents) due to higher salary comparing to cost of BigMac in US. I wonder, Could this be a way to fix the lack of employees? /s

1. Switzerland is a lot more wealthy than the US

2. The wage of the burger flipper at mcdonalds might not contribute much to the overall price of a big mac, but the wage of the burger flipper plus the wage that was factored into the cost of the ingredients might.

Fwiw, when I was there four years ago the meal prices were in the $13-15 range, so quite a bit more than I was used to. But if that makes for a more equitable society, good.

Where? I still remember that $60 that google gave me for food was barely enough for one meal in zurich ~10 years ago

Then swiss mcdonalds massively lowered their prices since, you ate at a special mcdonalds or you eat huge meals consisting of many burgers. Or you remember wrong. Last time I ate there a big mac didn't cost more than $7. It is expensive, but not that expensive.

That would've been in Geneva, with prices similar to Zurich. There's no way you couldn't feed one person on $60.

If you ever gone to mcdonalds in switzerland you’d know that minimum bill is like $50 (that was still basically at least 50% cheaper than the next inexpensive place I found in Zurich) so I’m not sure that statement about the price is correct.

If the cost of labor goes up, increasing the consumer cost of goods (inflation) is only one way of offsetting that labor cost. That cost can also be offset by A) Reducing shareholder profits B) reducing management profits C) government subsidies D) reducing capacity.

Companies in America are incredibly top-heavy, and a more stable economy could emerge if those resources at the top are distributed down to the worker. If implemented properly, UBI could push companies to share more of those profits with their workers without affecting the buyer.

Additionally capital generates more social value when it circulates (when its being spent) vs when it is stagnant (when it sits in a bank). Even if things are more expensive, more people having access to things allows local economies to grow

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