A UBI stimulates the economy without inflation – it increases labor market flexibility, which avoids wage pressure

Conservative Case for a Basic Income The conservative case for a Basic Income centers on two economic propositions: (1) unemployment is caused by imperfections in the labor market; and (2) standard policies (Keynesian) designed to reduce poverty and promote full employment in- stead cause inflation. The best example of the first proposition is James Meade's work [1989]. His argument is as follows. Under the current system, wages are downwardly rigid during recessions. This downward rigidity prevents the labor market from reaching the market clearing price, thus causing mass unemployment. The sources of this rigidity are the rational choices of those who retain their jobs during the economic downturn and the lack of any mechanism for those without jobs to influence the labor market. By partially separating income from work, the incentive of workers to fight against wage reductions is considerably reduced, thus making labor markets more flexible.5 This allows wages, and hence labor costs, to adjust more readily to changing economic conditions. This increased efficiency in the labor market, particularly the responsiveness of wages to conditions of excess labor supply, would lead to full employment and greater economic growth. The second reason conservatives support Basic Income policies stems from Mil- ton Friedman's defense of a negative income tax. Friedman proposed a negative in- come tax as an alternative to Keynesian demand management policies. He argued that Keynesian policies cause inflation and large government bureaucracies, while a Basic Income policy would redistribute income directly to the poor without causing inflation or encouraging big government.6