More on Basic Income Guarantee: Minimum Wage is Not a Longterm Solution

On Monday I posted about looking for a Research Assistant primarily to look into questions around using Basic Income Guarantees as a way to deal with what I believe is the end of work as we know it. Then yesterday Fred wrote a terrific post on the Limits of Capitalism and linked to my earlier post driving more traffic to it. The net result is that I now have many wonderful folks interested in helping out and will be sorting through that over the weekend.

In the meantime though I wanted to address an important point that came up in several of the comment threads where people asked about minimum wage. While the motivation behind a minimum wage is to help people make enough money to be able to live it winds up causing distortions that effectively reduce rather than increase the work that can clear in the market. That’s of course a known problem but at a time when automation is becoming a real alternative the distortion effect of a minimum wage is going way up.

Basic Income Guarantee (assuming for a moment that it can be made to work, this is what my research project is about) is a much more elegant solution. Why? Because it shifts the bargaining position for *all* labor as it gives everyone a credible walk away point. Yet it still allows for the labor market to clear effectively. For instance, if someone wants to do an unpaid internship (e.g., at a startup) because they value what they will learn this can now happen, whereas a minimum wage requirement will effectively eliminate a whole bunch of these internship opportunities.

The same is true for many other jobs, such as say bicycle messenger. A good friend of mine spent a year between college and graduate school as a bicycle messenger in Manhattan. He loved to cycle, loved the adrenaline rush of doing so on busy city streets. A minimum wage may eliminate a bunch of these jobs entirely whereas a Basic Income Guarantee makes it an individual choice.

This becomes especially interesting in the context of a potential migration of work into marketplaces such as Postmates. Without a Basic Income Guarantee these might quickly become a race to the bottom. But applying a minimum wage approach here would easily result in essentially arbitrary price floors. One of the arguments against a Basic Income Guarantee ist that it would reduce the labor supply so much that these marketplaces collapse entirely – I will have more to say about this in future posts.

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#economics#basic income#wages