Fallacy - Universal Basic Income Will Reduce Poverty

A universal basic income will do nothing to reduce poverty. It will most likely increase it. The reason for this is that it will tend to reduce the overall production of goods and services in the economy.

If the state ever starts handing out money to the public, everyone at the lower margin of income will stop working, or demand vastly higher salary. People who are currently barely scraping by with two full time jobs will naturally decide to stop working if the basic income matches what they are currently making. In the process, they will go from having virtually no leisure to having an abundance of leisure. This moves them from the bottom of society, to the lower ranks of the independently wealthy. Who wouldn't want such a transformation?

However, if the entire lower end of the income spectrum suddenly disappeared, all sorts of services would stop, and the only way to re-start them would be to jack up salaries, and hence the price of these services. All sorts of things would become much more expensive.

Handing out money to people does nothing to increase production. It merely increases the money supply. With more money chasing a steady or decreasing supply of goods and services, prices will go up. People will quickly discover that the checks handed out by the state are insufficient, and increasing the size of the handouts will not help.

The only way to reduce poverty is to increase the production of goods and services. This requires freedom to do this. It requires investments and free access to resources. Giving people incentives to do nothing will make us all poorer, not richer.

By Thomas Rowlandson - Brown University, Public Domain, Link