UBI or the minimum wage?
previous year, and 2/3rds of minimum wage workers receive a pay rise within a year (Sherk, 2009). Whilst increasing the minimum wage improves the short-term welfare of some employees, putting people out of work prevents their career progression, making the potential long-term impacts of the minimum wage much more severe to those who lose their jobs (Sherk, 2009). The minimum wage is clearly not perfect, but most people would agree that a society has a duty to help all its members maintain a decent standard of living. I have shown that the minimum wage likely boosts growth in the UK, but also comes at the cost of slightly increased unemployment, and I can conclude that despite these impacts on employment it is an effective policy with no material side effects. However, it is not perfect, and this dissertation will now analyse whether it is the best option we have available or whether a UBI would be an improvement.
3.
A UBI as an alternative?
Whilst initially a UBI scheme may not seem an equivalent to a minimum wage, both policies have the same objective of reducing inequality in society by redistributing wealth towards the poorest. Much like the minimum wage, the theory behind a UBI scheme can point to both benefits and drawbacks. However, there are very few case studies to support any of these claims: no country has ever implemented a fully-fledged UBI scheme and experiments around UBIs tend to suffer from a short lifespan – people are a lot less likely to quit their jobs or make other life changes if they know that the UBI money will dry up in a few years. This makes proving the effects of a UBI challenging. However, there are some cases with similarities to UBI schemes from which economists can gather strong evidence on the impacts the policy would have. This section of the dissertation will look at both the theory behind a UBI and the empirical evidence that supports it before concluding that whilst it would make a better alternative to the minimum wage, it is currently not financially viable in the UK.
3.1
The social and human effects of a UBI
UBI supporters claim that a UBI would improve the mental health of citizens, decrease crime and generally improve the quality of life for people in a country. This section of the dissertation will look at the truthfulness of these claims.
Unlike a minimum wage, a UBI could prevent families with just one breadwinner being disadvantaged and ensures that small businesses reliant on unskilled labour do not suffer. By allowing everyone over the age of 16 to qualify for the UBI, families that were previously surviving on one salary would benefit from that salary plus possibly multiple sets of UBI payments (Mani, 2019). Furthermore, while for the sake of this essay I have modelled the UBI as being available for over 16s only, some economists have even proposed a smaller income (paid to the parents) for children that would further help lower income families. The cost of the UBI is also placed on the government, meaning that small businesses do not have to worry about paying their employees higher wages, but employees can still benefit from the higher incomes (Mani, 2019).
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