Universal Basic Income puts society under tremendous inflationary pressure – only a Federal Jobs Guarantee can subdue inflation

Whilst both the Universal Basic Income and the Job Guarantee seek to resolve the same problem the macroeconomic consequences of each would be very different. The Job Guarantee is a public sector option for employment paid at a living wage to anyone willing and able to participate. Funded by central government and locally administered as a permanent scheme, it provides the non-profit sector with additional labour, acting as a buffer stock in either the standard public sector or private sector. See GIMMS’ factsheet on the Job Guarantee. Whilst MMT establishes that the government has the ability to finance both the UBI and the JG as stand-alone programmes, the UBI is an income for doing nothing, whereas the JG is a participatory income in exchange for contributing one’s time to public purpose. This is important as a mechanism for the government to preserve the value of its currency, as ultimately, the currency is worth, at the margin, what one must do to obtain it from the government. If a UBI were to be paid at a high enough rate for people to live on and pay their taxes, directly or indirectly, it would introduce moral hazard as it removes the monetary need for anyone to work. This would mean that the government would no longer be able to use its currency to provision itself with the workers it desires to provide the public services necessary for it to fulfil its mandate to provide public infrastructure to serve the public purpose. Nor would the economy be able to hire workers to produce goods and services for people to purchase with that currency or, said another way, if supply capacity in the economy were to decrease due to a lack of workers and incomes increase it would create hyperinflationary pressures. Firms would raise wages (and prices) in an attempt to attract workers who have no immediate need to work. The universal basic income would not ultimately give the desired standard of living and would instead erode the value of that income. As Warren Mosler says, ‘If you (the economy) don’t have to do anything to earn the currency, it’s worth nothing.’ A JG, on the other hand, serves two very important macroeconomic functions; it acts as a price anchor to subdue inflation as it promotes the transition from unemployment to private sector employment and also provides a wage floor for the labour market, below which nobody can fall. It sets a conversion rate for what the labour is worth in currency. For example, a JG paid at £10 an hour would provide six minutes of labour time per £1, connecting the power of the currency and the power of labour thus anchoring the value of the currency in people. Furthermore, whereas the JG resolves the problem of involuntary unemployment and disciplines inflation, a country that had a UBI at a living wage would risk facing the need to either reduce its spending or raise taxes to control inflationary pressures which translates into reducing the UBI income to a level sufficiently below a living wage. This would create unemployment, so that some of those who want to work would have to be unable to find employment (and thus have a reduced income) in order to keep inflation under control. In contrast to the UBI which doesn’t help control inflation, the JG also provides a counter-cyclical mechanism for maintaining total demand for goods and services in the economy in response to changing economic conditions. It helps to smooth out demand over time and enables nations to weather the cyclical downturns which are an unavoidable feature of modern economies. The societal cost of unemployment and low incomes is already substantial and damaging. A UBI has the potential to increase those costs as it would put families under tremendous pressure to find additional income from precarious part-time work. The empirical evidence of the advantages of having a job are well researched and charted and are also not just related to having an income.